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Assignment
Group Members
Acknowledgment……………………………………………………………………..
Executive Summary…………………………………………………………………..
Introduction…………………………………………………………………………..
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ACKNOWLEDGEMENT
In the name of Allah, the most Gracious and Merciful who gave us the strength and
determination to complete this project within due time.
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We feel great pleasure in expressing our deepest appreciation and heartiest gratitude to Mr.
Arshad, the former employee of Polka for his time and corporation through out our project and at
the same time our respected Professor Mr. Zia Ur Rehman for his guidance and great help
during the course.
We would also like to express gratitude towards our families for their never-fading and constant
support; and appreciate and acknowledge the patience, understanding and love provided by them.
It is of course the reward of their good wishes and kind blessings.
The acknowledgement will remain incomplete without special thanks to our friends for their
excellent cooperation and nice companionship. With out this bolster it was impossible to ever even
conceive a completed project.
EXECUTIVE SUMMARY
The main Focus of this report is on the Ice-cream. The current objective of product is
to expand its market, to strengthen and position and to capture new markets. We
conducted market survey by using different research methodologies The strategy of
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Organization Hierarchy
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Company profile:
Contact Information
Address: Bund Road, Lahore-Pakistan
Phone: 111-007-007
Fax: 111-007-008
Key People
• Chairman:
• President, and CEO:
• Directors:
Industry Information
Top Competitors
• Wall’s
• Yummy
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We are introducing for the very first time great variety novelty
sticks of sugar free ice creams.
Introduction of Marketing
A market-focused, or customer-focused, organization first determines what its potential
customers desire, and then builds the product or service. Marketing theory and practice is justified in
the belief that customers use a product or service because they have a need, or because it provides a
perceived benefit.
Two major factors of marketing are the recruitment of new customers (acquisition) and the
retention and expansion of relationships with existing customers (base management). Once a
marketer has converted the prospective buyer, base management marketing takes over. The process
for base management shifts the marketer to building a relationship, nurturing the links, enhancing the
benefits that sold the buyer in the first place, and improving the product/service continuously to
protect the business from competitive encroachments.
Definition:
“Marketing is a total system of business activities
designed to plan, price, promote and distribute want
satisfying products to target markets in order to achieve
Organizational objectives”.
Marketing can occur anytime a person or organization strives to exchange something of value with
another person or organization. Thus, at its core Marketing is a transaction of exchange. In this broad
sense, marketing consist of activities designed to generate and facilitate exchanges intended to
satisfy human or organizational needs or wants.
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Evolution of Marketing
Marketing as we all know it today began in the 1970s with the birth of the "marketing
orientation"
During the first stage of capitalism business had a production orientation. Business was
concerned with production, manufacturing, and efficiency issues.
By the mid 1950s a second stage emerged, the sales orientation stage. Business's prime
concern was to sell what it produced.
By the early 1970s a third stage, the marketing orientation stage emerged as businesses came
to realize that consumer needs and wants drove the whole process. Marketing research
became important. Businesses realized it was futile putting a lot of production and sales
effort into products that people did not want.
Some commentators claim that we are now on the verge of a fourth stage, one of a personal
marketing orientation. They believe that the technology is available today to market to people
on an individual basis (see personalized marketing, permission marketing, and mass
customization). They feel it is no longer necessary to think in broad aggregated terms like
market segments or target markets. Marketing has become an academic discipline in itself,
with tertiary degrees in the field now routinely awarded. Masters and Doctrinal degrees can
be obtained in numerous subcategories of marketing including: Marketing Research,
Consumer Behavior, International Marketing, Industrial Marketing (also called b-to-b
marketing), Consumer Marketing (also called b-to-c marketing), Product Management, and
e-Marketing.
Managers who adopt a market orientation recognize that Marketing is vital to the success of their
organizations. This realization is reflected in a fundamental approach to doing business that gives the
customer the highest priority. Called the marketing concept, it emphasizes customer orientation and
coordination of marketing activities to achieve the organization’s performance objectives.
Marketing is the activity of creating a product/service, packaging it, and selling it over and over. One
hopes that one is marketing something that is useful to society — that way society improves or
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survives better. Things go better for everyone, and you personally feel better about yourself because
you obtain customers and gain friends — and are helping society to grow.
If you are marketing something that is not so good for society, things don't get better, society does
not survive so well, and things get worse. And things get worse for you, too. One loses customers
and gains enemies. There are laws that had to be written and put into effect in society in order to
right the wrongs caused by those who produced and sold products/services that did harm. The harm
was actually too much! And thus the laws.
Ideally, it is best if you ask yourself if the product or service you offer is something that will
improve things or improve society. If it does, that will certainly help when you go to sell it to
society.
If you try to sell a product or service to society that is harmful, or try to sell it by deception or
misrepresentation, or if you have to destroy your competition in order to try to dominate by way of
the false premise of "survival of the fittest" — or if you hire a company to do the above actions for
you — you reap a whirlwind of trouble from society.
Importance of Marketing
Domestic marketing:
A company marketing only within its national boundaries only has to
consider domestic competition. Even if that competition includes companies from foreign markets, it
still only has to focus on the competition that exists in its home market. Products and services are
developed for customers in the home market without thought of how the product or service could be
used in other markets. All marketing decisions are made at headquarters.
The biggest obstacle these marketers face is being blindsided by emerging global marketers.
Because domestic marketers do not generally focus on the changes in the global marketplace, they
may not be aware of a potential competitor who is a market leader on three continents until they
simultaneously open 20 stores in the Northeastern U.S. These marketers can be considered
ethnocentric as they are most concerned with how they are perceived in their home country.
Export marketing:
Generally, companies began exporting, reluctantly, to the occasional
foreign customer who sought them out. At the beginning of this stage, filling these orders was
considered a burden, not an opportunity. If there was enough interest, some companies became
passive or secondary exporters by hiring an export management company to deal with all the
customs paperwork and language barriers. Others became direct exporters, creating exporting
departments at headquarters. Product development at this stage is still focused on the needs of
domestic customers. Thus, these marketers are also considered ethnocentric.
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International marketing:
If the exporting departments are becoming successful but the
costs of doing business from headquarters plus time differences, language barriers, and cultural
ignorance are hindering the company’s competitiveness in the foreign market, then offices could be
built in the foreign countries. Sometimes companies buy firms in the foreign countries to take
advantage of relationships, storefronts, factories, and personnel already in place. These offices still
report to headquarters in the home market but most of the marketing mix decisions are made in the
individual countries since that staff is the most knowledgeable about the target markets. Local
product development is based on the needs of local customers. These marketers are considered
polycentric because they acknowledge that each market/country has different needs.
Multinational marketing:
At the multi-national stage, the company is marketing its
products and services in many countries around the world and wants to benefit from economies of
scale. Consolidation of research, development, production, and marketing on a regional level is the
next step. An example of a region is Western Europe with the US. But, at the multi-national stage,
consolidation, and thus product planning, does not take place across regions; an egocentric approach.
Globally:
Today, businesses around the world, both large and small, cannot ignore the impact that
the global economy is having on their performance. Globalization, the internet, and information
transparency have led to an increasingly mobile workforce, ever more fickle customers, and rapidly
changing technologies and business models. One result of this seemingly inexorable trend is that
companies are less able to predict - let alone control - the short-term shape of their own markets.
As a result, more and more organisations are choosing to adopt a marketing-led philosophy to enable
them to win market share and capture and retain the hearts and minds of current and prospective
customers. Marketing is becoming more important as organisations around the world strive to
develop products and services that appeal to their customers and aim to differentiate their offering in
the increasingly-crowded global marketplace.
These complex issues heighten the need for effective marketing whilst expanding its scope
beyond the ‘marketing function’. Put simply, marketing is no longer the sole prerogative of a single
‘function’, even if the leadership on marketing comes from that function, together with the
framework within which marketing strategies are conceived, developed, planned, executed, reviewed
and improved.
It used to be that a company could rise to the top of its industry and deliver superior
shareholder returns by doing one thing well. Not anymore. Marketing’s perceived ability to
orchestrate collaboration across an organisation (and its role in driving demand in markets that suffer
from low rates of consumption) indicates that marketing is becoming increasingly important, even in
organisations and sectors where it has, perhaps, traditionally taken a back seat.
Environmental scanning:
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Definition
Environmental Scanning refers to the organizational practice of scanning, identifying, analyzing the
external environmental (e.g. issues, trends, threats, opportunities) as part of a larger process of
strategic decision making. The practice can be compared to horizon scanning, which focuses more
explicitly on longer-term, less immediate issues.
Methods:
Most commentators feel that in today's turbulent business environment the best
scanning method available is continuous scanning. This allows the firm to act quickly, take
advantage of opportunities before competitors do, and respond to environmental threats before
significant damage is done.
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Economic
conditions
Demo-
graphics Competition
Companies
Marketing
Program
Social and
cultural Technolog
forces y
Political
and legal
forces
Market segmentation
Market segmentation is the identification of portions of the market that are different from one
another. Segmentation allows the firm to better satisfy the needs of its potential customers.
The Need for Market Segmentation
The marketing concept calls for understanding customers and satisfying their needs better than the
competition. But different customers have different needs, and it rarely is possible to satisfy all customers by
treating them alike.
Mass marketing refers to treatment of the market as a homogenous group and offering the same
marketing mix to all customers. Mass marketing allows economies of scale to be realized through mass
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production, mass distribution, and mass communication. The drawback of mass marketing is that customer
needs and preferences differ and the same offering is unlikely to be viewed as optimal by all customers. If firms
ignored the differing customer needs, another firm likely would enter the market with a product that serves a
specific group, and the incumbent firms would lose those customers.
Target marketing on the other hand recognizes the diversity of customers and does not try to please all of them
with the same offering. The first step in target marketing is to identify different market segments and their
needs.
Requirements of Market Segments
In addition to having different needs, for segments to be practical they should be evaluated against the following
criteria:
Identifiable: the differentiating attributes of the segments must be measurable so that they can be
identified.
Accessible: the segments must be reachable through communication and distribution channels.
Substantial: the segments should be sufficiently large to justify the resources required to target them.
Unique needs: to justify separate offerings, the segments must respond differently to the different
marketing mixes.
Durable: the segments should be relatively stable to minimize the cost of frequent changes.
A good market segmentation will result in segment members that are internally homogenous and externally
heterogeneous; that is, as similar as possible within the segment, and as different as possible between segments.
Bases for Segmentation in Consumer Markets
Geographic
Demographic
Psychographic
Behavioralistic
Geographic Segmentation:
The following are some examples of geographic variables often used in segmentation.
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Demographic Segmentation:
Some demographic segmentation variables include:
Age
Gender
Family size
Family lifecycle
Generation: baby-boomers, Generation X, etc.
Income
Occupation
Education
Ethnicity
Religion
Social class
Many of these variables have standard categories for their values. For example, family lifecycle often is
expressed as bachelor, married with no children (DINKS: Double Income, No Kids), full-nest, empty-nest, or
solitary survivor. Some of these categories have several stages, for example, full-nest I, II, or III depending on
the age of the children.
Psychographic Segmentation:
Psychographic segmentation groups customers according to their
lifestyle. Activities, interests, and opinions (AIO) surveys are one tool for measuring lifestyle. Some
psychographic variables include:
Activities
Interests
Opinions
Attitudes
Values
Behavioralistic Segmentation:
Behavioral segmentation is based on actual customer behavior toward
products. Some behavioralistic variables include:
Benefits sought
Usage rate
Brand loyalty
User status: potential, first-time, regular, etc.
Readiness to buy
Occasions: holidays and events that stimulate purchases
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Behavioral segmentation has the advantage of using variables that are closely related to the product
itself. It is a fairly direct starting point for market segmentation.
Bases for Segmentation in Industrial Markets
In contrast to consumers, industrial customers tend to be fewer in number and purchase larger
quantities. They evaluate offerings in more detail, and the decision process usually involves more than one
person. These characteristics apply to organizations such as manufacturers and service providers, as well as
resellers, governments, and institutions.
Many of the consumer market segmentation variables can be applied to industrial markets.
Industrial markets might be segmented on characteristics such as:
Location
Company type
Behavioral characteristics
Location:
In industrial markets, customer location may be important in some cases. Shipping costs may be a
purchase factor for vendor selection for products having a high bulk to value ratio, so distance from the vendor
may be critical. In some industries firms tend to cluster together geographically and therefore may have similar
needs within a region.
Company Type:
Business customers can be classified according to type as follows:
Company size
Industry
Decision making unit
Purchase Criteria
Behavioral Characteristics
In industrial markets, patterns of purchase behavior can be a basis for segmentation. Such
behavioral characteristics may include:
Usage rate
Buying status: potential, first-time, regular, etc.
Purchase procedure: sealed bids, negotiations, etc.
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Research Validity:
This problem with data gathering represents several concepts that to the non-
researcher may be quite complex. But basically validity boils down to whether the research is really
measuring what it claims to be measuring. For instance, if a marketer is purchasing a research report
from a company claiming to measure how people prefer the marketer’s products over competitors’
products, the marketer should understand how the data was gathered to help determine if the
research really captures the information the way the research company says it does.
While research validity is measured in several ways, those evaluating research results should
keep asking this simple question: Is the research measuring what it is supposed to measure? If the
marketer has doubts about the answer to this question then it is possible the results should also be
questioned.
Research Reliability:
Reliability is chiefly concerned with making sure the method of data gathering leads to
consistent results. For some types of research this can be measured by having different researchers
follow the same methods to see if results can be duplicated. If results are similar then it is likely the
method of data gathering is reliable. Assuring research can be replicated and can produce similar
results is an important element of the scientific research method.
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Doing research right shows that good marketing research, especially when it involves
formal research projects, requires strict controls in order to produce relevant information. Being
relevant means the probability is high that the research results reflect what is happening now or
might happen in the future. But following the right procedures to produce a relevant study does not
insure the results of research will be 100% correct as there is always the potential that results are
wrong.
Because of the risks associated with research, marketers are cautioned not to use the
results of marketing research as the only input in making marketing decisions. Rather, smart
marketing decisions require considering many factors, including management’s own judgment of
what is best. But being cautious with how research is used should not diminish the need to conduct
research. While making decisions without research input may work sometimes, long-term success is
not likely to happen without regular efforts to collect information.
Additionally, risk in research extends to research produced by others, the research process
often includes using information initially gathered by other sources, such as market research firms.
However, in many instances the methods for collecting this information is not be fully disclosed,
thus questions exist regarding research validity and reliability. Marketers using research collected
by third-party sources should do so with a reasonable level of skepticism. In fact, it is wise for
marketers to always make an effort to locate multiple information sources that address the same
issue (e.g., two or more sales forecasts reports). A good rule-of-thumb for all marketers is never to
rely on one source for making definitive statements about a market.
What is a Customer?
Definition:
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For most organizations understanding customers is the key to success while not
understanding them is a recipe for failure. It is so important that the constant drive to satisfy
customers is not only a concern for those responsible for carrying out marketing tasks; satisfying
customers is a concern of everyone in the entire organization.
Whether someone’s job involves direct contact with customers (e.g., salespeople, delivery
drivers, telephone customer service representatives) or indirect contact (e.g., production,
accounting), all members of an organization must appreciate the role customers play in helping the
organization meets its goals. To ensure everyone understands the customer’s role, many
organizations continually preach a “customer is most important” message in department meetings,
organizational communication (e.g., internal emails, website postings), and corporate training
programs. To drive home the importance of customers, the message often contains examples of how
customers impact the company. These examples include:
Source of Information and Ideas - Satisfying the needs of customers requires
organizations maintain close contact with them. Marketers can get close to customers by
conducting marketing research (e.g., surveys) and other feedback methods (e.g., website
comments forms) that encourage customers to share their thoughts and feelings. With this
information marketers are able to learn what people think of their present marketing efforts
and receive suggestions for making improvements. For instance, research and feedback
methods can offer marketers insight into new products and services sought by their
customers.
Affects Activities Throughout Organization - For most organizations customers
not only affect decisions made by the marketing team but they are the key driver for
decisions made throughout the organization. For example, customer’s reaction to the design
of a product may affect the type of raw materials used in the product manufacturing process.
With customers impacting such a significant portion of a company, creating an environment
geared to locating, understanding and satisfying customers is imperative.
Needed to Sustain the Organization - Finally, customers are the reason an
organization is in business. Without customers or the potential to attract customers, a
company is not viable. Consequently, customers are not only key to revenue and profits they
are also key to creating and maintaining jobs within the organization.
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For our purposes we define a “good” customer as one who holds the potential to
undertake activities that offer long-term value to an organization. The activities performed by
customers not only include purchasing products, these also include such things as:
offering feedback on company performance
making prompt payment
offering suggestions for new products
voluntarily promoting the company’s products to others
These activities along with many others (including profit from product sales) represent the
value (i.e., benefits for costs spent) an organization receives from its customers. In the case of
“good” customers their potential for providing value should be a signal for marketers to direct
additional marketing efforts in building, strengthening and sustaining a relationship with these
customers.
The fact that we place the descriptive term “good” in front of customers should not be
taken lightly. Not all customers who currently have relationships with an organization (i.e., Existing
Customers) should be treated on an equal level. Some consistently spend large sums to purchase
products from an organization; others do not spend large sums but hold the potential to do so; and
still others use up a large amount of an organization’s resources but contribute little revenue.
Clearly there are lines of demarcation between those in the Existing Customer category. As we will
see later, identifying this line is critical for marketing success.
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Another problem is that customers may interact with organizations at different contact
points. A contact point is the method a customer uses to communicate with a company. For
instance, consider the different ways customers may interact with an organization:
In-Person – Customers seek in-person assistance for their needs by visiting retail stores
and other outlets, and also through discussion with company salespeople who visit customers
at their place of business or in their home.
Telephone – Customers seeking to make purchases or have a problem solved may find it
more convenient to do so through phone contact. In many companies a dedicated department
called a call center handles all incoming customer inquiries.
Internet – The fastest growing contact point is through the Internet. The use of the
Internet for purchasing (called electronic commerce) has exploded and is now the leading
method for purchasing certain types of products including music. The Internet is also a key
area where customers look for help with their purchases.
Kiosks – A kiosk is a standalone, interactive computer, often equipped with a touch-screen,
that offers customers several service options including product information, ability to make a
purchase, and review of a customer’s account. Kiosks are now widely used for airline check-
in, retail job applications, and banking.
In-Person Product Support – Some in-person assistance is not principally intended to
assist with selling but is designed to offer support once a purchase is made. Such services are
handled by delivery people and service/repair technicians.
Financial Assistance – Customer contact may also occur through company personnel
who assist customers with financial issues. For instance, credit personnel help customers
arrange the necessary funds to make a purchase while personnel in accounts receivable work
with customers who are experiencing payment problems.
The challenge of insuring that customers are handled properly no matter the contact
point they use is daunting for many companies. For some organizations the customer contact points
cited above operate independently of others. For instance, retail stores may not be directly
connected to telephone customer service. The result is that for different contact points many
companies have developed different procedures and techniques for handling customers. And for
some firms there exists little integration between the contact points so customers communicating
through one point one day and another point the next day may receive conflicting information. In
such cases customers are likely to become frustrated and question the company’s ability to service
its customers.
The business market is comprised of organizations that, in some form, are involved in the
manufacturer, distribution or support of products or services sold or otherwise provided to other
organizations. The amount of purchasing undertaken in the business market easily dwarfs the total
spending by consumers. Because the business market is so large it draws the interest of millions of
companies worldwide that market exclusively to business customers. For these marketers
understanding how businesses make purchase decisions is critical to their organizations’ marketing
efforts.
In some ways understanding the business market is not as complicated as understanding the
consumer market. For example, in certain business markets purchase decisions hinge on the
outcome of a bidding process between competitors offering similar products and services. In these
cases the decision to buy is often whittled down to one concern – who has the lowest price. Thus,
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unlike consumer markets, where building a recognizable brand is very important, for many purchase
situations in the business market this is not the case.
However, in many other ways business buying is much more complicated. For instance, the demand
by businesses for products and services is affected by consumer purchases (called derived demand)
and because so many organizations may have a part in creating consumer purchases, a small swing
in consumer demand can create big changes in business purchasing. Automobile purchases are a
good example. If consumer demand for cars increases many companies connected with the
automobile industry will also see demand for their products and services increase (we will later refer
to these companies as supply chain members). Under these conditions companies will ratchet up
their operations to ensure demand is met, which invariably will lead to new purchases by a large
number of companies. In fact, it is conceivable that an increase of just one or two percent for
consumer demand can increase business demand for products and services by five or more percent.
Unfortunately, the opposite is true if demand declines. Trying to predict these swings requires
businesses to not only understand their immediate customers but also the end user, which as we will
discuss, may be well down the supply chain from where the business operates.
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Once industry codes are known these can be used within various government and industry research
reports to locate specific industry information such as number of firms operating in the industry,
total industry sales, number of employees and more.
For the purposes of this tutorial, however, we will use a broader approach to categorizing businesses
choosing to categorize based on the general business function an organization performs rather then
by industry. We break the business market down into two broad categories - Supply Chain Members
and Business User Markets.
Raw Material These companies are generally Copper is mined and extracted
Suppliers considered the first stage in the supply from copper ore. Copper is then
chain and provide basic products refined to remove impurities.
through mining, harvesting, fishing,
etc., that are key ingredients in the
production of higher-order products.
Processed Firms at this level use raw materials to Copper is purchased by electrical
Materials or Basic produce more advanced materials or wire manufacturers.
Component products contained within more
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Product This market consists of companies that Power supplies are purchased by
Manufacturers purchase both basic and advanced manufacturers of desktop
components and then assemble these computers.
components into a final product
designated for a user. These products
may or may not be sold as stand-alone
products. Some may be included
within larger products.
Government Made up of Federal, State, Mostly require suppliers to Defense equipment, heavy
Local and International be approved, meet equipment for public works projects,
governments. They use specifications and to bid for office supplies, pharmaceuticals, etc.
purchases to assist with purchases.
the functioning of the
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Not-For-Profit Organizations whose tax Look for purchases that will Office equipment and supplies, office
structure precludes fit within tight budgetary rental, professional services, etc.
earning profits from restrictions and also within
operations and whose the mission of the
missions tend to be organization.
oriented to assisting
others.
Reseller Also called distributors, Seek products that are of Consumer and industrial products to
these companies operate interest to the reseller’s be redistributed to other businesses
in both the consumer and customers. Other issues and consumers.
the business markets. include how delivery is
Their function involves handled and whether the
purchasing large volumes supplier offers incentives to
of products from help the reseller promote the
manufacturers (and product.
sometimes from other
resellers) and selling these
products in smaller
quantities. Includes
wholesalers, retailers and
industrial distributors.
In the consumer market a very large percentage of purchase decisions are made by a single
person. There are situations in which multiple people may be involved in a consumer purchase
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decision, such as a child influencing a parent to choose a certain brand of cereal or a husband and
wife deciding together to buy a house, but most of the time purchases are individual decisions. The
business market is significantly different. While single person purchasing is not unusual, especially
within a small company, a significant percentage of business buying, especially within larger
organizations, requires the input of many. In the marketing literature those associated with the
purchase decision are known to be part of a Buying Center, which consists of individuals within an
organization that perform one or more of the following roles:
Buyer – responsible for dealing with suppliers and placing orders (e.g., purchasing agent)
Decider – has the power to make the final purchase decision (e.g., CEO)
Influencer – has the ability to affect what is ordered such as setting order specifications (e.g.,
engineers, researchers, product managers)
User – those who will actually use the product when it is received (e.g., office staff)
Initiator – any Buying Center member who is the first to determine that a need exists
Gatekeeper – anyone who controls access to other Buying Center members (e.g.,
administrative assistant)
For marketers confronting a Buying Center it is important to first identify who plays what
role. Once identified the marketer must address the needs of each member, which may differ
significantly. For instance, the Decider, who may be the company president wants to make sure the
purchase will not negatively affect the company’s bottom line while the Buyer wants to be assured
the product will be delivered on time. Thus, the way each Buying Center member is approached and
marketed to requires careful planning in order to address the unique needs of each member.
Experienced Purchasers
Organizations often employ purchasing agents or professional buyers whose job is to negotiate
the best deals for their company. Unlike consumers, who often lack information when making purchase
decisions, professional buyers are generally as knowledgeable about the product and the industry as the
marketer who is selling to them.
Number of Buyers
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While there are several million companies worldwide that operate in the overall
business market, within a particular market the number is much smaller. For example, while in the
United States there are over 95 million households who may shop at a grocery store, there are only a
few thousand grocery stores with many of these centrally controlled as part of a chain of stores.
Additionally, within some industries buyers are highly concentrated in certain geographic areas.
Consequently, compared to consumer products, marketing efforts are confined to a smaller targeted
group.
Promotional Focus
Companies who primarily target consumers often use mass advertising methods to reach
an often widely dispersed market. For business-to-business marketers the size of individual orders, along
with a smaller number of buyers, makes person-to-person contact by sales representatives a more
effective means of promotion.
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case the buyer will spend considerably more time evaluating alternatives. For example, if
faced with a major new task purchase, which often involves complex items, such as computer
systems, buildings, robotic assembly lines, etc., the purchase cycle from first recognizing the
need to placement of the order may be months or even years.
1. Need Recognition
2. Search
3. Evaluate Options
4. Purchase
5. After-Purchase Evaluation.
While the steps are the same as consumer purchasing, the activities occurring within each
step are quite different as we discuss below.
1. Need Recognition
In a business environment needs arise from just about anywhere within the
organization. The Buying Center concept shows that Initiators are the first organizational members
to recognize a need. In most situations the Initiator is also the User or Buyer. Users are inclined to
identify the need for new solutions (i.e., new products) while Buyers are more likely to identify the
need to re-purchase products. But marketers should also understand that more companies are
replacing human involvement in re-purchase decisions with automated methods, thus making it more
challenging for competitors to replace currently purchased products. In straight re-purchase
situations, whether there is human intervention or not, the purchasing process often jumps from
Need Recognition to Purchase and little search activity is performed.
As part of this step, a specifications document may be generated that lays out the requirements of the
product or service to be purchased. Several members of the Buying Center may be involved in
creation of the specifications. For the marketer, establishing close contact with those who draw up
the specifications may help position the marketer’s product for inclusion in the search phase.
Search
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The search for alternatives to consider as potential solutions to recognized needs is one of the most
significant differences between consumer and business purchasing. Much of this has to do with an
organization’s motive to reduce costs. While a consumer will probably not search hard to save two
cents a gallon on gas, a company that has a large fleet of cars or trucks certainly will. In fact, this
step in the purchase process is where professional buyers make their mark. The primary intention of
their search efforts is to identify multiple suppliers who meet product specifications and then,
through a screening process, offer a selected group the opportunity to present their products to
members of the Buying Center. Although in some industries, such as chemicals, online
marketplaces and auction sites offer buyers another option for selecting suppliers that may not
include supplier presentations.
For suppliers, the key to this step of the purchase process is to make sure they are included within
the search activities of the Buyer or others in the Buying Center. In some instances this may require
that a supplier work to be included within an approved suppliers list. In the case of online
marketplaces and auction sites, suppliers should work to be included within relevant sites.
Evaluate Option
Once the search has produced options, members of the Buying Center may then choose among the
alternatives. In more advanced purchase situations, members of the Buying Center may evaluate
each option using a checklist of features and benefits sought by the buyer. Each feature/benefit is
assigned a weight that corresponds to its importance to the purchase decision. In many cases,
especially when dealing with Government and Not-For-Profit markets, suppliers must submit bids
with the lowest bidder often being awarded the order, assuming products or services meet
specifications.
Purchase
To actually place the order may require the completion of paperwork (or electronic documents) such
as a purchase order. Acquiring the necessary approvals can delay the order for an extended period of
time. And for very large purchases, such as buildings or large equipment, financing options may
need to be explored.
2. After-Purchase Evaluation
After the order is received the purchasing company may spend time reviewing the results of the
purchase. This may involve the Buyer discussing product performance issues with Users. If the
product is well received it may end up moving to a straight re-purchase status thus eliminating much
of the evaluation process on future purchases.
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What is a Market?
The simplest way to define a market is to think of it as consisting of all the people or
organizations that may have an interest in purchasing a company’s products or services. In other
words, a market comprises all customers who have needs that may be fulfilled by an organization’s
offerings. Yet just having a need is not enough to define a market. Many people may say they have
a need for a California mansion that overlooks the Pacific Ocean but most would not be considered
potential customers of a real estate agent who is attempting to sell such a property. So other factors
come into play when defining a market.
The first factor is that markets consist of customers who are qualified to make a purchase.
Qualified customers are defined as those who:
For some markets the customer may have a surrogate who will handle some of these
qualifications for a targeted customer. For instance, a market may consist of pre-teen customers who
have a need for certain clothing items but the actual purchase may rest with the pre-teens’ parents.
So the parents could possibly assume one or more surrogate roles (e.g., financial ability, authority)
that will result in the pre-teen being a qualified customer.
A second factor for defining a market rests with the company’s ability to service the market.
To an organization a market can only exist if the solutions sought by customers are ones that the
company can satisfy with their offerings. If a company identifies a group of customers who are
qualified to make purchases they only become a market for the company once the company is in a
position to execute marketing activities designed to service those customers.
Thus, for the purposes of this tutorial, a market is defined as a group of customers who are
qualified to make purchases of products or services that a marketer is able to offer. However, even if
an organization can offer products and services to a market, not all markets will fit an organization’s
goals and objectives. With this in mind, we now turn our attention to examining the process
marketers follow to choose which markets are best to target with their marketing effort.
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needs of these customers. But what approach should be taken to select markets the company will
target?
One approach is to target at a very broad level by identifying the market as consisting of qualified
customers who have a basic need that must be satisfied. For example, one could consider the
beverage market as consisting of all customers that want to purchase liquid refreshment products to
solve a thirst need. While this may be the largest possible market a company could hope for (it
would seem to contain just about everyone in the world!) in reality there are no commercial products
that would appeal to everyone in the world since individual nutritional needs, tastes, purchase
situations, economic conditions, and many other issues lead to differences in what people seek to
satisfy their thirst needs.
Because people are different and seek different ways to satisfy their needs, nearly all organizations,
whether for-profits or not-for-profits, industrial or consumer, domestic or international, must use a
Market Segmentation approach to target marketing. This approach divides broad markets, consisting
of customers possessing different characteristics, into smaller market segments in which customers
are grouped by characteristic shared by others in the segment.
To successfully target markets using a segmentation approach, organizations should engage in the
following three-step process.
We take the approach that the variables used to segment markets can be classified into a
three-stage hierarchy with higher stages building on information obtained from lower stages in order
to reach greater precision in identifying shared characteristics. Yet, the more precise a marketer
wishes to be with their segmentation efforts the more this process requires sufficient funding and
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strong research capabilities. For instance, a marketer entering a new market may not have the ability
to segment beyond the first two stages since the precision available in Stage 3 segmentation may
demand an established relationship with customers in the market.
The three-stage segmentation process presented below works for both consumer and
business markets (e.g., manufacturers, reseller, etc.), though, as one might expect, the variables used
to segment these markets may be different. Each segmentation stage includes an explanation along
with suggestions for variables the marketer should consider. This is not meant to be an exhaustive
list, as other variables are potentially available, but for marketers who are new to segmentation these
will offer a good starting point for segmenting markets.
Demographics Demographics
age group (e.g., teens, retirees, young adults), type (e.g., manufacturer, retailer, wholesaler), industry, size (e.g., sales
gender, education level, ethnicity, income, volume; number of retail outlets), age (e.g., new; young growth, established
occupation, social class, marital status growth, mature)
Geographic Geographic
location (e.g., national, regional, location (e.g., national, regional, urban/suburban/rural, international), climate
urban/suburban/rural, international), climate Business Arrangement
ownership (e.g.,. private versus public, independent versus chain), financial
condition (e.g., credit rating, income growth, stock price, cash flow)
Some firms, especially companies with limited funds or those who feel they need to
move quickly to get their product to market will stop the search for segmentation variables at the
Stage 1 level. However, moving beyond Stage 1 segmentation offers a rich amount of customer
information that will allow marketers to more effectively and efficiently target customers’ needs. To
segment using Stage 2 variables marketers must use market research techniques that help gain
insight into customers’ current purchase situation and the environment in which the customer
operates. Information at this stage includes learning what options customers have chosen to satisfy
their needs, what circumstances within customers’ environment could affect how purchases are
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made, and understanding local conditions that could impact purchase decisions. Marketers might
locate some of this information through the same sources used in Stage 1 (e.g., may find out brands
most frequently purchased) but most of these variables require the marketer to engage in at least
casual contact with customers in the market. This can be done through primary research methods,
such as surveying the market, having sales personnel contact customers, purchasing research reports
from commercial research firms or hiring consultants to undertake research projects. The cost and
time needed to acquire this information may be significantly greater than that of Stage 1
segmentation.
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3 variables is often not an option for marketers new to a market unless they purchase this access via
other means (e.g., hire a consultant who knows the market to undertake customer research). To get
access to this information, marketers who already serve the market with other products may be able
to use primary research such as focus groups, in-depth interviews, observation research and other
high level market research techniques.
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In determining whether a segment is worthy of being a target market, the marketer needs to address
the following questions:
Is the segment large enough to support the marketer’s objectives? This is an especially
critical question if the marketer is entering a market served by many competitors.
Is the segment showing signs of growth? One of the worst situations for a marketer is
to enter a market whose growth is flat or declining, especially if competitors already
exist.
Does the company have the necessary skills, knowledge and expertise to service the
segment? The company should understand and be able to communicate with the
customers in the segment, otherwise they may face a significant learning curve in
understanding how to effectively market to a segment.
Does the segment meet the mission of the company? The segment should not extend too
far beyond the direction the company has chosen to take.
Once one or more segments have been identified the marketer must choose the most attractive
option(s) for their marketing efforts. At this point the choice becomes the firm’s target market(s).
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their-own” products. This approach requires extensive technical capability for marketers to
reach individual customers and allow customers to interact with the marketer. The Internet
has been the catalyst for this target marketing strategy. As more companies learn to utilize
the Internet micro-marketing is expected to flourish.
Product Positioning
No matter which target marketing strategy is selected, the overall marketing strategy
should involve the process of positioning the firm’s offerings in ways that will appeal to targeted
customers. Positioning is concerned with the perception customers hold regarding a product or
company. In particular, it relates to marketing decisions an organization undertakes to get customers
to think about a product or company in a certain way compared to its competitors. The goal of
positioning is to convince customers to believe the marketer’s offerings are different in some way
from its competitors on an important benefit sought by the market. For instance, if a customer has
discovered she has a need for an affordable laptop computer, a company such as Dell may come to
mind since their marketing efforts position their products as offering good value at a reasonable cost.
To position successfully the marketer must have thorough knowledge of the key benefits
sought by the market. Obviously the more effort the marketer expends on segmentation (i.e.,
reached Stage 3) the more likely they will know the benefits sought by the market. Once known, the
marketer must: 1) tailor marketing efforts to ensure their offerings satisfy the most sought after
benefits, and 2) communicate to the market in a way that differentiates the marketer’s offerings from
competitors.
For firms that seek to appeal to multiple target markets (i.e., segmentation marketing),
positioning strategies may differ for each market. For example, a marketer may sell the same
product to two different target markets, but in one market the emphasis is on styling while in another
market the emphasis is on ease-of-use benefits. The important point is that the overall market
strategy must be evaluated for each target market since what works well in one market may not work
as well in another market.
Product Decisions
Marketing starts with the product since it is what an organization has to offer its target
market. As we’ve stressed many times in this tutorial, organizations attempt to provide solutions to
a target market’s problems. These solutions include tangible or intangible (or both) product
offerings marketed by an organization.
In addition to satisfying the target market’s needs, the product is important because it is how
organizations generate revenue. It is the “thing” that for-profit companies sell in order to realize
profits and satisfy stakeholders and what non-profit organizations use to generate funds needed to
sustain itself. Without a well-developed product strategy that includes input from the target market,
a marketing organization will not have long-term success.
Categories of Business Products
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Raw Materials – These are products obtained through mining, harvesting, fishing, etc.,
that are key ingredients in the production of higher-order products.
Processed Materials – These are products created through the processing of basic raw
materials. In some cases the processing refines original raw materials while in other cases
the process combines different raw materials to create something new. For instance, several
crops including corn and sugar cane can be processed to create ethanol which has many uses
including as a fuel to power car and truck engines.
Equipment – These are products used to help with production or operations activities.
Examples range from conveyor belts used on an assembly line to large buildings used to
house the headquarters staff of a multi-national company.
Basic Components – These are products used within more advanced components. These
are often built with raw material or processed material. Electrical wire is an example.
Advanced Components – These are products that use basic components to produce
products that offer a significant function needed within a larger product. Yet by itself an
advanced component does not stand alone as a final product. In computers the motherboard
would be an example since it contains many basic components but without the inclusion of
other products (e.g., memory chips, microprocessor, etc.) would have little value.
Product Component – These are products used in the assembly of a final product
though these could also function as stand alone products. Dice included as part of a
children’s board game would be an example.
Components of a Product
On the surface it seems a product is simply a marketing offering, whether tangible or
intangible, that someone wants to purchase and consume. In which case one might believe product
decisions are focused exclusively on designing and building the consumable elements of goods,
services or ideas. For instance, one might think the key product decision for a manufacturer of floor
cleaners is to focus on creating a formula that cleans more effectively. In actuality, while decisions
related to the consumable parts of the product are extremely important, the Total Product consists of
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more than what is consumed. The total product offering and the decisions facing the marketer can
be broken down into three key parts:
1. Core Benefits
2. Actual Product
3. Augmented Product
1. Core Benefits:
While many needs are addressed by the consumption of a product or service,
some needs are not. For instance, customers may need to be perceived highly by other members of
their group or need a product that is easy to use or need a risk-free purchase; people make buying
decisions that satisfy their needs. While many needs are addressed by the consumption of a product
or service, some needs are not. For instance, customers may need to be perceived highly by other
members of their group or need a product that is easy to use or need a risk-free purchase. In each of
these cases, and many more, the core product itself is the benefit the customer receives from using
the product. In some cases these core benefits are offered by the product itself (e.g., floor cleaner)
while in other cases the benefit is offered by other aspects of the product (e.g., the can containing the
floor cleaner that makes it easier to spread the product). Consequently, at the very heart of all
product decisions is determining the key or core benefits a product will provide. From this decision,
the rest of the product offering can be developed.
2. Actual Product:
The core benefits are offered through the components that make up the actual
product the customer purchases. For instance, when a consumer returns home from shopping at the
grocery store and takes a purchased item out of her shopping bag, the actual product is the item she
holds in her hand. Within the actual product is the consumable product, which can be viewed as the
main good, service or idea the customer is buying. For instance, while toothpaste may come in a
package that makes dispensing it easy, the Consumable Product is the paste that is placed on a
toothbrush. But marketers must understand that while the consumable product is, in most cases, the
most critical of all product decisions, the actual product includes many separate product decisions
including product features, branding, packaging, labeling, and more. Full coverage of several of
these important areas is provided later in this tutorial.
3. Augmented Product:
Marketers often surround their actual products with goods and services
that provide additional value to the customer’s purchase. While these factors may not be key
reasons leading customers to purchase (i.e., not core benefits), for some the inclusion of these items
strengthens the purchase decision while for others failure to include these may cause the customer
not to buy. Items considered part of the augmented product include:
Guarantee – This provides a level of assurance that the product will perform up to
expectations and if not the company marketing the product will support the customer’s
decision to replace, have it repaired or return for a refund.
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Warranty – This offers customers a level of protection that often extends past the
guarantee period to cover repair or replacement of certain product components.
Customer Service – This consists of additional services that support the customer’s
needs including offering training and assistance via telephone or online.
Accessibility – How customers obtain the product can affect its perceived value depending
on such considerations as how easy it is to obtain (e.g., stocked at nearby store, delivered
directly to office), the speed at which it can be obtained, and the likelihood it will be
available when needed.
• the number and variety of tasks that must be performed (i.e., what has to
be done)
• the value these tasks represent to the organization (i.e., how important
marketing is perceived within the company)
• The overall financial stake the marketing position holds (i.e., total sales
volume and profit generation).
Product Item Level – At this level responsibilities are associated with marketing a single
product or brand. By “single” we are limiting the marketer’s responsibility to one item. For
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instance, a startup software development company may initially market just one product. In
some organizations the person in charge has the title Product Manager, though in smaller
companies this person may simply be the Marketing Manager.
Brand Product Line Level – At this level responsibilities are associated with managing
two or more similar product items. By “similar” we are referring to products carrying the
same brand name that fit within the same product category and offer similar solutions to
customers’ needs. Procter & Gamble, one of the largest consumer products companies in the
world, markets Tide laundry detergent in several different packaging sizes (e.g., 50oz.,
100oz., 200oz.), in different forms (e.g., powder, liquid) and with different added features
(e.g., softener, bleach). Tide’s product line consists of over 100 different versions of the
product. Differences in the product offerings indicate these are targeted to different segments
within the larger market (e.g., those preferring liquid vs. those preferring powder), however,
it may also represent a choice for the same target market who may seek variety. A product
line is often measured by its depth, relative to competitors, with deep product lines offering
extensive product items. Brand product lines are often managed by a Brand or Product Line
Manager.
Category Product Line Level – At this level responsibilities are associated with
managing two or more brand product lines within the same product category. In this
situation the marketer may manage products that offer similar basic benefits (e.g., clean
clothes) but target their offerings to slightly different needs (e.g., product for tough to clean
clothing vs. product to clean delicate clothing). Multiple brand product lines allow the
marketer to cover the needs of more segments and, consequently, increase their chance to
generate sales. Often in larger companies category product lines are the responsibility of the
Product Category or Divisional Marketing Manager who may have Brand Product Managers
reporting to him/her.
Product Mix Level – At this level responsibilities include two or more category product
lines that are directed to different product categories. In some cases the category product
lines may yield similar general solutions (e.g., cleaning) but are aimed at entirely different
target markets (e.g., cleaning dishes vs. cleaning automobiles). In large companies, the
product lines are very diverse and offer different solutions. For example, BIC sells writing
instruments, shaving products, and lighters. This diversification strategy cushions against an
“all-eggs-in-one-basket” risk that may come if a company directs all resources to one product
category. A product mix can be classified based on its width (how many different category
product lines) and its depth (how many different brand product lines within a category
product line). Generally responsibility for this level belongs to a company’s Vice President
for Marketing.
Mellow
We made an ice cream which is genuinely a consumer product and it is perishable..
Branding Strategy
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By branding approach we are referring to different product identification strategies that can
be deployed to establish a product within the market. As we will see, the purpose of these
approaches is to build a brand that will exist for the long term. Making smart decisions up front is
crucial since a company may have to live with the decision for a long time.
• Ordering
• Handling and shipping
• Storage
• Display
• Promotion
• Selling
• Information feedback
Resellers:
These organizations, also known within some industries as intermediaries, distributors or
dealers, generally purchase or take ownership of products from the marketing company with the
intention of selling to others. If a marketer utilizes multiple resellers within its distribution channel
strategy the collection of resellers is termed a Reseller Network. These organizations can be
classified into several sub-categories including:
Retailers – Organizations that sell products directly to final consumers.
Wholesalers – Organizations that purchase products from suppliers, such as manufacturers or other wholesalers,
and in turn sell these to other resellers, such as retailers or other wholesalers.
Industrial Distributors – Firms that work mainly in the business-to-business market selling products obtained
from industrial suppliers.
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Agents and Brokers – Organizations that mainly work to bring suppliers and buyers together in
exchange for a fee.
Distribution Service Firms – Offer services aiding in the movement of products such as
assistance with transportation, storage, and order processing.
Others – This category includes firms that provide additional services to aid in the distribution
process such as insurance companies and firms offering transportation routing assistance.
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Reduce Exchange Time – Not only are channel members able to reduce distribution
costs by being experienced at what they do, they often perform their job more rapidly
resulting in faster product delivery. For instance, consider what would happen if a grocery
store received direct shipment from EVERY manufacturer that sells products in the store.
This delivery system would be chaotic as hundreds of trucks line up each day to make
deliveries, many of which would consist of only a few boxes. On a busy day a truck may sit
for hours waiting for space so they can unload their products. Instead, a better distribution
scheme may have the grocery store purchasing its supplies from a grocery wholesaler that
has its own warehouse for handling simultaneous shipments from a large number of
suppliers. The wholesaler will distributes to the store in the quantities the store needs, on a
schedule that works for the store, and often in a single truck, all of which speeds up the time
it takes to get the product on the store’s shelves.
Resellers Sell Smaller Quantities – Not only do resellers allow customers to purchase
products from a variety of suppliers, they also allow customers to purchase in quantities that
work for them. Suppliers though like to ship products they produce in large quantities since
this is more cost effective than shipping smaller amounts. For instance, consider what it
costs to drive a truck a long distance. In terms of operational expenses for the truck (e.g.,
fuel, truck driver’s cost) let’s assume it costs (US) $1,000 to go from point A to point B. Yet
in most cases, with the exception of a little decrease in fuel efficiency, it does not cost that
much more to drive the truck whether it is filled with 1000 boxes containing the product or
whether it only has 100 boxes. But when transportation costs are considered on a per product
basis ($1 per box vs. $10 per box) the cost is much less for a full truck. The ability of
intermediaries to purchase large quantities but to resell them in smaller quantities (referred to
as bulk breaking) not only makes these products available to those wanting smaller quantities
but the reseller is able to pass along to their customers a significant portion of the cost
savings gained by purchasing in large volume.
Create Sales – Resellers are at the front line when it comes to creating demand for the
marketer’s product. In some cases resellers perform an active selling role using persuasive
techniques to encourage customers to purchase a marketer’s product. In other cases they
encourage sales of the product through their own advertising efforts and using other
promotional means such as special product displays.
Offer Financial Support – Resellers often provide programs that enable customers to
more easily purchase products by offering financial programs that ease payment
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requirements. These programs include allowing customers to: purchase on credit; purchase
using a payment plan; delay the start of payments; and allowing trade-in or exchange options.
Provide Information – Companies utilizing resellers for selling their products depend
on distributors to provide information that can help improve the product. High-level
intermediaries may offer their suppliers real-time access to sales data including information
showing how products are selling by such characteristics as geographic location, type of
customer, and product location (e.g., where located within a store, where found on a
website). If high-level information is not available, marketers can often count on resellers to
provide feedback as to how customers are responding to products. This feedback can occur
either through surveys or interviews with reseller’s employees or by requesting the reseller
allow the marketer to survey customers.
Loss of Communication Control – Marketers not only give up revenue when using resellers,
they may also give up control of the message being conveyed to customers. If the reseller engages
in communication activities, such as personal selling in order to get customers to purchase the
product, the marketer is no longer controlling what is being said about the product. This can lead to
miscommunication problems with customers, especially if the reseller embellishes the benefits the
product provides to the customer. While marketers can influence what is being said by training
reseller’s salespeople, they lack ultimate control of the message.
Loss of Product Importance – Once a product is out of the marketer’s hands the importance
of that product is left up to channel members. If there are pressing issues in the channel, such as
transportation problems, or if a competitor is using promotional incentives in an effort to push their
product through resellers, the marketer’s product may not get the attention the marketer feels it
should receive.
Retailing
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In an ideal business world, most marketers would prefer to handle all their distribution
activities by way of the corporate channel arrangement. Such an arrangement provides the marketer
with two important benefits. First, being responsible for all distribution means the marketing
organization need only worry about making decisions concerning their product. When others, such
as resellers, are involved in distribution attention is not given to a single supplier but is stretched
across all products the reseller carries. Second, having control on all distribution means the marketer
is always in direct contact with buyers of their products, which can make it easier to build strong,
long-term relationships with customers.
Unfortunately, as we saw in the last tutorial, for many marketing organizations a corporate
channel arrangement is not feasible. Whether due to high cost or lack of experience needed to run a
channel efficiently, the majority of marketing organizations rely on third parties to get their products
into the hands of customers.
Now we examine the key parties through which marketers seek distribution assistance.
Choosing which parties to aid in product distribution is important since a distributor’s actions can
affect how customers view the marketer and the products they offer. As we discussed a customer’s
perception of a product affects how they mentally position the product in relation to competitive
products. How a product is distributed, including where it is located (e.g., reputation of resellers
from whom they purchase) and customer experience with the purchasing process (e.g., how long to
receive, condition when received), will impact a customer’s feelings about the product which in turn
affects how a customer positions the product in their mind.
What is Retailing?
Retailing is a distribution channel function where one organization buys products from
supplying firms or manufactures the product themselves, and then sells these directly to consumers.
A retailer is a reseller (i.e., obtains product from one party in order to sell to another) from which a
consumer purchases products. In the US alone there are over 1,100,000 retailers according to the
2002 US Census of Retail Trade.
In the majority of retail situations, the organization from which a consumer makes purchases is
a reseller of products obtained from others and not the product manufacturer. But as we discussed
some manufacturers also operate their own retail outlets in a corporate channel arrangement. While
consumers are the retailer’s buyers, a consumer does not always buy from retailers. For instance,
when a consumer purchases from another consumer (e.g., eBay) the consumer purchase would not
be classified as a retail purchase. This distinction can get confusing but in the US and other
countries the dividing line is whether the one selling to consumers is classified as a business (e.g.,
legal and tax purposes) or is selling as a hobby without a legal business standing.
For consumers the most important benefits relate to the ability to purchase small quantities of a
wide assortment of products at prices that are considered reasonably affordable. For suppliers the
most important benefits relate to offering opportunities to reach their target market, build product
demand through retail promotions, and provide consumer feedback to the product marketer.
Concerns of Retailers
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Retailers are faced with many issues as they attempt to be successful. The key issues
include:
Customer Satisfaction – Retailers know that satisfied customers are loyal customers.
Consequently, retailers must develop strategies intended to build relationships that result in
customers returning to make more purchases.
Ability to Acquire the Right Products – A customer will only be satisfied if they
can purchase the right products to satisfy their needs. Since a large percentage of retailers do
not manufacture their own products, they must seek suppliers who will supply products
demanded by customers. Thus, an important objective for retailers is to identify the products
customers will demand and negotiate with suppliers to obtain these products.
Traffic Building – Like any marketer, retailers must use promotional methods to build
customer interest. For retailers a key measure of interest is the number of people visiting a
retail location or website. Building “traffic” is accomplished with a variety of promotional
techniques such as advertising, including local newspapers or Internet, and specialized
promotional activities, such as coupons.
Location – Where to physically locate a retail store may help or hinder store traffic. Well
placed stores with high visibility and easy access, while possibly commanding higher land
usage fees, may hold significantly more value than lower cost sites that yield less traffic.
Understanding the trade-off between costs and benefits of locations is an important retail
decision.
Keeping Pace With Technology – Technology has invaded all areas of retailing
including customer knowledge (e.g., customer relationship management software), product
movement (e.g., use of RFID tags for tracking), point-of-purchase (e.g., scanners, kiosks,
self-serve checkout), web technologies (e.g., online shopping carts, purchase
recommendations) and many more.
Promotion
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What is promotion?
Promotion is a form of corporate communication that uses various methods to reach a
targeted audience with a certain message in order to achieve specific organizational objectives.
Nearly all organizations, whether for-profit or not-for-profit, in all types of industries, must engage
in some form of promotion. Such efforts may range from multinational firms spending large sums
on securing high-profile celebrities to serve as corporate spokespersons to the owner of a one-person
enterprise passing out business cards at a local businessperson’s meeting.
Like most marketing decisions, an effective promotional strategy requires the marketer
understand how promotion fits with other pieces of the marketing puzzle (e.g., product, distribution,
pricing, target markets). Consequently, promotion decisions should be made with an appreciation
for how it affects other areas of the company. For instance, running a major advertising campaign
for a new product without first assuring there will be enough inventory to meet potential demand
generated by the advertising would certainly not go over well with the company’s production
department (not to mention other key company executives). Thus, marketers should not work in a
vacuum when making promotion decisions. Rather, the overall success of a promotional strategy
requires input from others in impacted functional areas.
In addition to coordinating general promotion decisions with other business areas, individual
promotions must also work together. Under the concept of Integrated Marketing Communication
marketers attempt to develop a unified promotional strategy involving the coordination of many
different types of promotional techniques. The key idea for the marketer who employs several
promotional options to reach objectives for the product is to employ a consistent message across all
options. For instance, salespeople will discuss the same benefits of a product as mentioned in
television advertisements. In this way no matter how customers are exposed to a marketer’s
promotional efforts they all receive the same information.
Targets of a marketing message generally fall into one of the following categories:
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influencers to its benefit. Influencers include the news media (e.g., offer company stories),
special interest groups, opinion leaders (e.g., doctors directing patients), and industry trade
associations.
Other Companies – The most likely scenario in which a company will communicate
with another company occurs when the marketer is probing to see if the company would have
an interest in a joint venture, such as a co-marketing arrangement where two firms share
marketing costs. Reaching out to other companies, including companies who may be
competitors for other products, could help create interest in discussing such a relationship.
Other Organizational Stakeholders – Marketers may also be involved with
communication activities directed at other stakeholders. This group consists of those who
provide services, support or, in other ways, impact the company. For example, an industry
group that sets industry standards can affect company products through the issuance of
recommended compliance standards for product development or other marketing activities.
Communicating with this group is important to insure the marketer’s views of any changes in
standards are known.
However, marketers must understand that getting customers to commit to a decision, such as a
purchase decision, is only achievable when a customer is ready to make the decision. Customers
often move through several stages before a purchase decision is made. Additionally before turning
into a repeat customer, purchasers analyze their initial purchase to see whether they received a good
value, and then often repeat the purchase process again before deciding to make the same choice.
The type of customer the marketer is attempting to attract and which stage of the purchase
process a customer is in will affect the objectives of a particular marketing communication effort.
And since a marketer often has multiple simultaneous promotional campaigns, the objective of each
could be different.
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Stimulate Demand – The right promotion can drive customers to make a purchase. In
the case of products that a customer has not previously purchased or has not purchased in a
long time, the promotional efforts may be directed at getting the customer to try the product.
This is often seen on the Internet where software companies allow for free demonstrations or
even free downloadable trials of their products. For products with an established customer-
base, promotion can encourage customers to increase their purchasing by providing a reason
to purchase products sooner or purchase in greater quantities than they normally do. For
example, a pre-holiday newspaper advertisement may remind customers to stock up for the
holiday by purchasing more than they typically purchase during non-holiday periods.
Reinforce the Brand – Once a purchase is made, a marketer can use promotion to help
build a strong relationship that can lead to the purchaser becoming a loyal customer. For
instance, many retail stores now ask for a customer’s email address so that follow-up emails
containing additional product information or even an incentive to purchase other products
from the retailer can be sent in order to strengthen the customer-marketer relationship.
Advertising
What is Advertising?
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Advertising has long been viewed as a method of mass promotion in that a single message can
reach a large number of people. But, this mass promotion approach presents problems since many
exposed to an advertising message may not be within the marketer’s target market, and thus, may be
an inefficient use of promotional funds. However, this is changing as new advertising technologies
and the emergence of new media outlets offer more options for targeted advertising.
Advertising also has a history of being considered a one-way form of marketing communication
where the message receiver (i.e., target market) is not in position to immediately respond to the
message (e.g., seek more information). This too is changing. For example, in the next few years
technologies will be readily available to enable a television viewer to click a button to request more
details on a product seen on their favorite TV program. In fact, it is expected that over the next 10-
20 years advertising will move away from a one-way communication model and become one that is
highly interactive.
Another characteristic that may change as advertising evolves is the view that advertising does
not stimulate immediate demand for the product advertised. That is, customers cannot quickly
purchase a product they see advertised. But as more media outlets allow customers to interact with
the messages being delivered the ability of advertising to quickly stimulate demand will improve.
Selling
Academically, selling is thought of as a part of marketing [, however, the two disciplines
are completely different. Sales often forms A separate grouping in a corporate structure, employing
separate specialist operatives known as salespeople (singular: salesperson). Selling is considered by
many to be a sort of persuading "art". Contrary to popular belief, the methodological approach of
selling refers to a systematic process of repetitive and measurable milestones, by which a
salesperson relates his or her offering of a product or service in return enabling the buyer to
achieve their goal in an economic way.
While the sales process refers to a systematic process of repetitive and measurable milestones,
the definition of the selling is somewhat ambiguous due to the close nature of advertising, promotion,
public relations, and direct marketing
Selling involves sales which are the pinnacle act of completed of a purchasing activity.
Selling also involves salespeople who are the primary agents of facilitating sales.
Selling is the profession-wide term, much like marketing defines a profession. Recently,
attempts have been made to clearly understand who is in the sales profession, and who is not. There
are many articles looking at marketing, advertising, promotions, and even public relations as ways to
create a unique transaction.
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Principles of Marketing
Many believe that the focus of selling is on the human agents involved in the exchange
between buyer and seller. Effective selling also requires a systems approach , at minimum involving
roles that sell, enable selling, and develop sales capabilities. Selling also involves salespeople who
possess specific set of sales skills and knowledge are required to facilitate the exchange of value
between buyers and sellers that is unique from marketing, advertising,etc.
Within these three tenets the following definition of profession selling is offered by the American
Society for Training and Development (ASTD):
Many sales positions do not include a strong emphasis on generating customer sales,
rather these positions help meet promotional objectives in other ways, such as communicating with
people who influence the final buyer, responding to customer-initiated inquiry (e.g., customer
carrying product to a retail counter) or serving as support for the organization’s sales team.
Yet, for a large percentage of marketers seeking the benefits of personal selling as a promotional
tool, success is measured in terms of products sold as a direct result of personal selling efforts (i.e.,
order getters). For this reason it is important that all marketers fully understand how order-generated
selling occurs.
Additionally, understanding the selling process is beneficial for many others who do not
view themselves in sales roles. For instance, a product manager must convince the VP of Marketing
to fund a major market research study. Though what the product manager must do may seem far
removed from what most people perceive as selling, the key is whether one person is persuading
another person to make a decision. Whether it is convincing someone to make a purchase, accept a
point-of-view, change attitudes or an infinite number of other behavioral decisions, it all comes
down to mastering persuasive communication or selling.
Yet, for a large percentage of marketers seeking the benefits of personal selling as a
promotional tool, success is measured in terms of products sold as a direct result of personal selling
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Principles of Marketing
efforts (i.e., order getters). For this reason it is important that all marketers fully understand how
order-generated selling occurs.
Additionally, understanding the selling process is beneficial for many others who do not view
themselves in sales roles. For instance, a product manager must convince the VP of Marketing to
fund a major market research study. Though what the product manager must do may seem far
removed from what most people perceive as selling, the key is whether one person is persuading
another person to make a decision. Whether it is convincing someone to make a purchase, accept a
point-of-view, change attitudes or an infinite number of other behavioral decisions, it all comes
down to mastering persuasive communication or selling.
Additionally, salespeople often find circumstances in which all activities are required but the
order these are carried out may be disrupted. For instance, salespeople are often confronted with a
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Principles of Marketing
buyer who is resistant to making a purchase even before the salesperson has made a presentation
(e.g., “I don’t think I’m interested in what you’re selling”). This will likely force the salesperson to
adjust his or her selling process. In this example it will require the salesperson address the buyer’s
resistance before beginning to present the product.
Prospect Initiated – Includes leads obtained when prospects initiate contact such as
when they fill out a website form, enter a trade show booth or respond to an advertisement.
Profile Fitting – Uses market research tools, such as company profiles, to locate leads
based on customers that fit a particular profile likely to be a match for the company’s
products. The profile is often based on the profile of previous customers.
Market Monitoring – Through this approach leads are obtained by monitoring media
outlets, such as news articles, Internet forums and corporate press releases.
Canvassing – Here leads are gathered by cold-calling (i.e., contacting someone without
pre-notification) including in-person, by telephone or by email.
Data Mining – This technique uses sophisticated software to evaluate information (e.g., in
a corporate database) previously gathered by a company in hopes of locating prospects.
Personal and Professional Contacts – A very common method for locating sales
leads uses referrals. Such referrals may come at no cost to the salesperson or, to encourage
referrals, salespeople may offer payment for referrals. Non-paying methods including asking
acquaintances (e.g., friends, business associates) and networking (e.g., joining local or
professional groups and associations). Paid methods may include payment to others who
direct leads that eventually turn into customers including using Internet affiliate programs
(i.e., paid for website referrals).
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Principles of Marketing
Promotions – The method uses free gifts to encourage prospect to provide contact
information or attend a sales meeting. For example, offering free software for signing up for
a demonstration of another product.
Need Already Satisfied - Prospects may have already purchased a similar product
offered by a competitor and, thus, may not have the need for additional products.
Lack Financial Capacity - Just because someone has a need for a product does not
mean they can afford it. Lack of financial capacity is major reason why sales leads do not
become prospects.
May Not Be Key Decision Maker - Prospects may lack the authority to approve the
purchase.
May Not Meet Requirements to Purchase - Prospects may not meet the
requirements for purchasing the product (e.g., lack other products needed for seller’s product
to work properly).
The process of determining whether a sales lead has the potential to become a prospect
is known as “qualifying” the lead. In some cases, a sales lead can be qualified by the seller prior to
making first contact. For instance, this can be done through the use of research reports, such as an
evaluation of a company’s financial position using publicly available financial reporting services.
More likely, sellers will not be in a position to qualify leads until they establish contact with a lead,
which may occur in activities associated with either Preparation for the Sales Call or The Sales
Meeting.
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Principles of Marketing
It should be noted that while we present these activities in an order that is suggestive of a
step-by-step approach (i.e., one activity must be carried out before the next), in many selling
situations this will not be the case. For example, a buyer for a large retailer may have observed a
salesperson’s product being used while visiting a competitor’s store. The buyer, anxious to obtain
the product for use in her own stores, contacts the salesperson immediately upon returning to the
office. After addressing a few questions from the salesperson confirming the buyer’s status at the
retail company and without much prodding by the salesperson, the buyer places an order and agrees
to meet the salesperson for lunch the next day. In our example, only activities #2 – Qualifying the
Lead, #6 – Closing the Sale and #7 – Account Maintenance are carried out in order to obtain the sale
and to begin building a long-term relationship.
Additionally, salespeople often find circumstances in which all activities are required but the
order these are carried out may be disrupted. For instance, salespeople are often confronted with a
buyer who is resistant to making a purchase even before the salesperson has made a presentation
(e.g., “I don’t think I’m interested in what you’re selling”). This will likely force the salesperson to
adjust his or her selling process. In this example it will require the salesperson address the buyer’s
resistance before beginning to present the product.
However, for a large percentage of salespeople lead generation consumes a significant portion
of their everyday work. For salespeople actively involved in generating leads, they are continually
on the look out for potential new business. In fact, for salespeople whose chief role is that of order
getter, there is virtually no chance of being successful unless they can consistently generate sales
leads.
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Principles of Marketing
Prospect Initiated – Includes leads obtained when prospects initiate contact such as
when they fill out a website form, enter a trade show booth or respond to an advertisement.
Profile Fitting – Uses market research tools, such as company profiles, to locate leads
based on customers that fit a particular profile likely to be a match for the company’s
products. The profile is often based on the profile of previous customers.
Market Monitoring – Through this approach leads are obtained by monitoring media
outlets, such as news articles, Internet forums and corporate press releases.
Canvassing – Here leads are gathered by cold-calling (i.e., contacting someone without
pre-notification) including in-person, by telephone or by email.
Data Mining – This technique uses sophisticated software to evaluate information (e.g., in
a corporate database) previously gathered by a company in hopes of locating prospects.
Personal and Professional Contacts – A very common method for locating sales
leads uses referrals. Such referrals may come at no cost to the salesperson or, to encourage
referrals, salespeople may offer payment for referrals. Non-paying methods including asking
acquaintances (e.g., friends, business associates) and networking (e.g., joining local or
professional groups and associations). Paid methods may include payment to others who
direct leads that eventually turn into customers including using Internet affiliate programs
(i.e., paid for website referrals).
Promotions – The method uses free gifts to encourage prospect to provide contact
information or attend a sales meeting. For example, offering free software for signing up for
a demonstration of another product.
Need Already Satisfied - Prospects may have already purchased a similar product
offered by a competitor and, thus, may not have the need for additional products.
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Principles of Marketing
Lack Financial Capacity - Just because someone has a need for a product does not
mean they can afford it. Lack of financial capacity is major reason why sales leads do not
become prospects.
May Not Be Key Decision Maker - Prospects may lack the authority to approve the
purchase.
May Not Meet Requirements to Purchase - Prospects may not meet the
requirements for purchasing the product (e.g., lack other products needed for seller’s product
to work properly).
The process of determining whether a sales lead has the potential to become a prospect is
known as “qualifying” the lead. In some cases, a sales lead can be qualified by the seller prior to
making first contact. For instance, this can be done through the use of research reports, such as an
evaluation of a company’s financial position using publicly available financial reporting services.
More likely, sellers will not be in a position to qualify leads until they establish contact with a lead,
which may occur in activities associated with either Preparation for the Sales Call or The Sales
Meeting.
Pricing Decisions
What do the following words have in common? Fare, dues, tuition, interest, rent, and fee. The
answer is that each of these is a term used to describe what one must pay to acquire benefits from
another party. More commonly, most people simply use the word price to indicate what it costs to
acquire a product.
The pricing decision is a critical one for most marketers, yet the amount of attention given to
this key area is often much less than is given to other marketing decisions. One reason for the lack
of attention is that many believe price setting is a mechanical process requiring the marketer to
utilize financial tools, such as spreadsheets, to build their case for setting price levels. While
financial tools are widely used to assist in setting price, marketers must consider many other factors
when arriving at the price for which their product will sell.
What is Price?
In general terms price is a component of an exchange or transaction that takes place
between two parties and refers to what must be given up by one party (i.e., buyer) in order to obtain
something offered by another party (i.e., seller). Yet this view of price provides a somewhat limited
explanation of what price means to participants in the transaction. In fact, price means different
things to different participants in an exchange:
Buyers’ View – For those making a purchase, such as final customers, price refers to what
must be given up to obtain benefits. In most cases what is given up is financial consideration
(e.g., money) in exchange for acquiring access to a good or service. But financial
consideration is not always what the buyer gives up. Sometimes in a barter situation a buyer
may acquire a product by giving up their own product. For instance, two farmers may
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Principles of Marketing
exchange cattle for crops. Also, as we will discuss below, buyers may also give up other
things to acquire the benefits of a product that are not direct financial payments (e.g., time to
learn to use the product).
Sellers’ View - To sellers in a transaction, price reflects the revenue generated for each
product sold and, thus, is an important factor in determining profit. For marketing
organizations price also serves as a marketing tool and is a key element in marketing
promotions. For example, most retailers highlight product pricing in their advertising
campaigns.
Price is commonly confused with the notion of cost as in “I paid a high cost for buying
my new plasma television”. Technically, though, these are different concepts. Price is what a buyer
pays to acquire products from a seller. Cost concerns the seller’s investment (e.g., manufacturing
expense) in the product being exchanged with a buyer. For marketing organizations seeking to make
a profit the hope is that price will exceed cost so the organization can see financial gain from the
transaction.
Finally, while product pricing is a main topic for discussion when a company is examining its
overall profitability, pricing decisions are not limited to for-profit companies. Not-for-profit
organizations, such as charities, educational institutions and industry trade groups, also set prices,
though it is often not as apparent. For instance, charities seeking to raise money may set different
“target” levels for donations that reward donors with increases in status (e.g., name in newsletter),
gifts or other benefits. While a charitable organization may not call it a price in their promotional
material, in reality these donations are equivalent to price setting since donors are required to give a
contribution in order to obtain something of value.
As we discussed back, value refers to the perception of benefits received for what someone
must give up. Since price often reflects an important part of what someone gives up, a customer’s
perceived value of a product will be affected by a marketer’s pricing decision. Any easy way to see
this is to view value as a calculation:
For the buyer value of a product will change as perceived price paid and/or perceived benefits
received change. But the price paid in a transaction is not only financial it can also involve other
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Principles of Marketing
things that a buyer may be giving up. For example, in addition to paying money a customer may
have to spend time learning to use a product, pay to have an old product removed, close down
current operations while a product is installed or incur other expenses. However, for the purpose of
this tutorial we will limit our discussion to how the marketer sets the financial price of a transaction.
Importance of Pricing
When marketers talk about what they do as part of their responsibilities for marketing
products, the tasks associated with setting price are often not at the top of the list. Marketers are
much more likely to discuss their activities related to promotion, product development, market
research and other tasks that are viewed as the more interesting and exciting parts of the job.
Yet pricing decisions can have important consequences for the marketing organization and the
attention given by the marketer to pricing is just as important as the attention given to more
recognizable marketing activities. Some reasons pricing is important include:
Most Flexible Marketing Mix Variable – For marketers price is the most adjustable
of all marketing decisions. Unlike product and distribution decisions, which can take months
or years to change, or some forms of promotion which can be time consuming to alter (e.g.,
television advertisement), price can be changed very rapidly. The flexibility of pricing
decisions is particularly important in times when the marketer seeks to quickly stimulate
demand or respond to competitor price actions. For instance, a marketer can agree to a field
salesperson’s request to lower price for a potential prospect during a phone conversation.
Likewise a marketer in charge of online operations can raise prices on hot selling products
with the click of a few website buttons.
Setting the Right Price – Pricing decisions made hastily without sufficient research,
analysis, and strategic evaluation can lead to the marketing organization losing revenue.
Prices set too low may mean the company is missing out on additional profits that could be
earned if the target market is willing to spend more to acquire the product. Additionally,
attempts to raise an initially low priced product to a higher price may be met by customer
resistance as they may feel the marketer is attempting to take advantage of their customers.
Prices set too high can also impact revenue as it prevents interested customers from
purchasing the product. Setting the right price level often takes considerable market
knowledge and, especially with new products, testing of different pricing options.
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Principles of Marketing
price. If so, pricing may become the most important of all marketing decisions if it can be
shown that customers are avoiding learning more about the product because of the price.
Important Part of Sales Promotion – Many times price adjustments are part of sales
promotions that lower price for a short term to stimulate interest in the product. However, as
we noted in our discussion of promotional pricing in the , marketers must guard against the
temptation to adjust prices too frequently since continually increasing and decreasing price
can lead customers to be conditioned to anticipate price reductions and, consequently,
withhold purchase until the price reduction occurs again.
Internal Factors - When setting price, marketers must take into consideration several
factors which are the result of company decisions and actions. To a large extent these factors
are controllable by the company and, if necessary, can be altered. However, while the
organization may have control over these factors making a quick change is not always
realistic. For instance, product pricing may depend heavily on the productivity of a
manufacturing facility (e.g., how much can be produced within a certain period of time). The
marketer knows that increasing productivity can reduce the cost of producing each product
and thus allow the marketer to potentially lower the product’s price. But increasing
productivity may require major changes at the manufacturing facility that will take time (not
to mention be costly) and will not translate into lower price products for a considerable
period of time.
External Factors - There are a number of influencing factors which are not controlled by
the company but will impact pricing decisions. Understanding these factors requires the
marketer conduct research to monitor what is happening in each market the company serves
since the effect of these factors can vary by market.
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