ADMS 2200 Marketing Notes.docx

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Department
Administrative Studies
Course
ADMS 2200
Professor
Richard Patterson
Semester
Fall

Description
ADMS 2200 Marketing Notes Chapter 1: Marketing – The Art and Science of Satisfying Customers Utility: The want satisfying power of a good or service  Form Utility: The conversion of raw materials and components into finished goods and services (Fabric and cloth into clothes)  Time Utility: Availability of goods and services when consumers want them (Dental Appointments)  Place Utility Availability of goods and services at convenient locations (Vending machines)  Ownership Utility : Ability to transfer title to goods or services from marketer to buyer (Retail sales) What is marketing? o Organizations must create utility and customers to survive. o Activities marketers perform to create customers: o Identifying customer needs o Designing products to meet those needs o Communicating information Marketing – An organizational function and a set of processes for creating, communicating, and delivering value to customers and managing customer relationships in ways that benefit the organization and its stakeholders Factors that have extended economic views o Increase in international trade agreements o Growth of electronic business o Interdependence of the world’s economies o Companies seek the most efficient manufacturing sites and most lucrative markets worldwide. o Companies are tailoring their marketing efforts to the needs and preferences of local markets. The essence of marketing is the exchange process, in which two or more parties give something of value to each other to satisfy perceived needs. Four Eras in the History of Marketing  Production orientation – Stressing efficiency in producing a quality product, with the attitude toward marketing that “a high product will sell itself”; production shortages Sales orientation –Belief that consumers will resist purchasing nonessential items with the attitude toward marketing that only creative adverting and personal selling can overcome consumer’s resistance and persuade them to buy Shift to a buyer’s market creates need for consumer orientation Seller’s Market: Market in which there are more buyers for fewer goods and services Buyers Market: Market in which there are more goods and services than people willing to buy them Consumer Orientation: Business philosophy incorporating the marketing concept that emphasises first determining unmet consumer needs and then designing a system for satisfying them Emergence of marketing concept – A companywide consumer orientation to achieve long-run success Relationship marketing – Developing long-term, value-added relationships over time with customers and suppliers; strategic alliances and partnerships among manufacturers, retailers and suppliers often benefit everyone Effective marketing turns needs into wants Marketing Myopia: Management’s failure to recognize the scope of its business (Review this)  Ex Nokia – connecting people (Their company motto) Marketing in Not-for-Profit Organizations o Adopt marketing strategies to meet service objectives o Market to multiple audiences o Form alliances with for-profit firms o Focus is to generate revenue to support cause and not on bottom line o Service users have less control over the firm’s future Categories of Non-traditional Marketing  Person Marketing: Marketing efforts designed to cultivate the attention and preference of a target market towards a person (typically a political leader, celebrity or athlete)  Place Marketing: Marketing efforts designed to attract people and organizations to a particular area. Improve consumer images of a city, province or country and or to attack new business/tourism (Nova Scotia – Canada’s Ocean Playground)  Cause Marketing: Identification and marketing of a social issue, cause or idea to selected target markets (Reading is fundamental – Literacy awareness, Don’t drink and drive)  Event Marketing: Marketing of sporting, cultural and charitable activities to selected target markets. Think Sponsorships (Grey cup, Super Bowl and the Commercials)  Organization Marketing: Marketing efforts of mutual organizations, service organizations and government organizations that seek to influence others to accept their goals, receive their services or contribute to them in some way. Think fundraising (Government/Hospitals/Universities) (Canadian Red Cross: Anywhere. Anytime) Transaction-based marketing – Buyer and seller exchanges characterized by limited communications and little or no ongoing relationships between the parties Relationship marketing – Gives a company new opportunities to gain a competitive edge by moving customers up a loyalty ladder  Interactive / social marketing - Using Interactive and Social Marketing to Build Relationships o Mobile marketing: Marketing messages transmitted via wireless technology o Interactive marketing: Buyer-seller communications in which the consumer controls the amount and type of information received from a marketer through channels as the Internet o Social marketing: The use of online social media as communication channel for marketing messages. o Buzz marketing: Word of mouth Relationship marketing extends to suppliers, distributors, and customers for strategic advantage: o Strategic alliances: Partnerships in which two or more companies combine resources and capital to create competitive advantages in a new market. Forms of alliances: o Product development partnerships o Vertical alliances Developing Partnerships and Strategic Alliances o Relationship marketing extends to business-to-business relationships with suppliers, distributors, and other partners. Costs and Functions of Marketing (Review pg 21) 1. Buying: Ensuring product offerings are available in sufficient quantities to meet customer demands 2. Selling: Using advertisements, personal selling, and sale promotion to match products to customer needs 3. Transporting: Moving products from their point of production to locations convenient for purchasers 4. Storing: Warehousing products until needed for sale 5. Standardizing and Grading: Ensuring product offerings meet quality and quantity controls of size, weight and other variables 6. Financing: Providing credit for channel members (wholesalers and retailers) and consumers 7. Risk Taking: Dealing with uncertainty about future customer purchases 8. Securing Marketing Information: Collecting information about consumers, competitors and channel members for use in making marketing decisions Ethics – Moral standards of behaviour expected in a society Social responsibility – Marketing philosophies, policies, procedures, and actions whose primary objective is to enhance society Sustainable products – Products that can be produced, used, and disposed of with minimal impact on the environment Chapter 2: Strategic Planning in Contemporary Marketing Planning: Is the process of anticipating future events and conditions and of determining the best way to achieve organizational objectives. Planning is a continuous process that includes indentifying objectives and then determining the actions through which a firm can attain these objectives. Marketing planning – Implementing planning activities devoted to achieving marketing objectives Strategic Planning: Process of determining an organization’s primary objectives and adopting courses of action that will eventually achieve these objectives. This process includes allocation of necessary resources. Has a critical impact on firm’s destiny, because it provides a long term direction for its decision makers o Long-term focus Tactical Planning: Planning that guides the implementation of activities specified in the strategic plan. Typically address shorter term actions that focus on current and near future activities that a firm must complete to implement its larger strategies. o Shorter-term focus Planning at Different Managerial Levels Top Management: (Board of Directors, CEO, COO) Use strategic planning – Organization wide objectives, fundamental strategies, long term plans and total budgets Middle Management: (General Sales manager, Business unit manager, Director of marketing research) – Use tactical planning – Quarterly and semi annual plans, divisional budgets, divisional policies and procedures Supervisory Management: (District sales manager, Supervisor – telemarketing office) – Use operational planning – Daily and weekly plans, unit budgets, departmental rules and procedures Steps in the Marketing Planning Process Mission – Essential purpose that differentiates one company from another. The mission statement specifics the organization’s overall goals and operational scope and provides general guidelines for future management actions.  Tim Hortons: “Always Fresh. Always.” Objectives – Guide the development of marketing objectives and plans  Add 15 new outlets within the next year.  Reduce waste by 20 percent. Assessing Organizational Resources and Evaluating Environmental Risks and Opportunities Resources Strengths help planners:  Production  Set objectives.  Marketing  Develop plans.  Finance  Take advantage of marketing opportunities.  Technology  Employees Marketing strategy – Overall companywide program for selecting and satisfying target consumers through the marketing mix elements (Product, distribution, promotion and price) o The final steps of the planning process: o Put the marketing strategy into action. o Monitor performance to ensure that objectives are achieved. First mover strategy – Theory advocating that the company first to offer a product in a marketplace will be the long- term market winner (Apple with IPods) Second mover strategy – Theory that advocates observing the innovations of first movers and then improving on them to gain advantage in the marketplace (Facebook after MySpace) Porter’s Five Forces: Model developed by strategy expert Michael Porter, which indentifies five competitive forces that influence planning strategies, the threat of new entrants, the threat of substitute products, rivalry among competitors, the bargaining power of buyers and the bargaining power of suppliers SWOT Analysis: Analysis that helps planners compare internal organizational strengths, weakness with external opportunities and threats The Strategic Window: Limited periods when key requirements of a market and a firm’s particular competencies best fit together  Requires a thorough analysis of o Current and projected external environmental conditions o Current and projected internal company capabilities o How, whether, and when the firm can reconcile environmental conditions and company capabilities Porter’s Five Forces Model SWOT Analysis Elements of a Marketing Strategy Review pg 45 o Target market – The group of people toward whom the firm directs its marketing efforts and merchandise o Marketing mix – Blending of four strategy elements to fit the needs and preferences of a specific target market o Product o Distribution o Promotion o Pricing o (Packaging) The Marketing Environment Five external dimensions that affect the marketing mix variables:  Competitive  Political-legal  Economic  Technological  Social-cultural Methods for Marketing Planning: Business Portfolio Analysis Strategic business units – Key business units within diversified firms  Each has its own managers, resources, objectives, and competitors.  Each pursues its own distinct mission and develops its own marketing plans. BCG Market Share/Market Growth Matrix Stars: Represent units with high market shares in high growth markets. These products or businesses are high growth market leaders. Although they generate considerable income, they need considerable inflows of cash to finance furtherer growth (RIM) Cash Cows: command high market shares in low growth markets. Marketers for an SBU want to maintain this status for as long a possible. The business produces strong cash, but instead of investing to improve its promotions and production, it uses funds to finance growth of other SBUs with higher growth potentials (Windows operating system) Question Marks: achieve low market shares in high growth markets. Marketers must decide whether to continue supporting these products/businesses since they usually require more cash than they generate (Ford sold off jaguar and Aston martin to focus on ford) Dogs: Manage only low market shares in low growth markets. SBUs in this category promise poor future prospects and marketers should seriously consider withdrawing from these businesses or product lines (IMB sold its PC business to Lenovo) Strategic Growth Opportunity Matrix Market Penetration: Is a strategy that a company uses when it attempts to build market share by selling existing products to existing customers. Least risky but often difficult to increase market share in mature markets as any increase comes at the expense of competitors Market Development: Occurs when a company tries to attract new customers for its existing products, sometimes by geographical expansion, but often by simply targeting new segments of customers. Product Development: Occurs when a company develops new products that it hopes to sell to existing customers Diversification: Is the most risky of growth strategies as companies that follow this strategy attempt to sell new products to new markets, that is they have little experience with either Transaction Based Marketing:   Buyer and seller exchanges characterized by limited communications and little or no ongoing relationship between the parties  Focuses on short-term, one-time exchanges Relationship Marketing  Development, growth, and maintenance of long-term, cost-effective relationships with individual customers, suppliers, employees, and other partners for mutual benefit  Three levels: (Financial- focus on price, Social, Structural/Dependency) Enhancing Customer Satisfaction How Marketers Keep Customers o Retaining customers is far more profitable than losing them. o It costs five times as much to acquire a new customer as it does to keep a loyal one. o Customer churn, or turnover, is expensive. Database Marketing o Use of software to analyze marketing information, identifying and targeting messages toward specific groups of potential customers Grassroots marketing — connecting directly with existing and potential customers through nonmainstream channels Customer Relationship Management: Combination of strategies and tools that drives relationship programs, reorienting the entire organization to a concentrated focus on satisfying customers Retrieving Lost Customers Customers leave for a variety of reasons: o Boredom with product o Move to a new location o No longer need the product o Prefers a competing product Buyer – Seller Relationships in Marketing o Advantages of buyer-seller relationship can include lower prices, quicker delivery, improved quality and reliability, and others Partnership: Affiliation of two or more companies that help each other achieve common goals  Protect or improve position in existing markets  Gain access to new domestic or international markets  Quickly enter new markets  Partnering can lead to enhanced revenues and increased profits. Business to Business Databases o Just as indispensable as in consumer marketing Lifetime value of a customer — Revenues and intangible benefits that a customer brings to the seller over an average lifetime, less the amount the company must spend to acquire, market to, and service the customer Chapter 3: The Market Environment, Ethics and Social Responsibility Environmental scanning: Collecting external marketing environment information to identify and interpret potential trends Environmental management: Attainment of organizational objectives by predicting and influencing the external environments (competitive, political, legal economic, technological, and social cultural environments) Strategic alliance: Partnership when companies combine resources to create competitive advantages Competitive Environment Competition  Monopoly: Market structure in which a single seller dominates trade in a good or service for which buyers can find no close substitutes  Oligopoly: Market structure in which relatively few sellers compete and where high start up costs form barriers to keep out new competition Distinguish between  Direct competition: occurs among marketers of similar products (rogers, bell telus)  Indirect competition: involves products that are easily substituted (Fast food industry, pizza, burgers, tacos, chicken) Time-based competition – Strategy of developing and distributing goods more quickly than competitors Political-Legal Environment: component of the marketing environment consisting of laws and interpretations of laws that require firms to operate under competitive conditions and to protect consumer rights Competition Act – Comprehensive legislation administered by Industry Canada and designed to help both consumers and businesses by promoting a healthy competitive environment (government regulation)  Foster a growing, knowledge based Canadian economy Laws roughly categorized in three marketing areas:  Pricing  Promotion  Distribution Some Marketing Practices Covered by the Competition Act: Price Issues:  Price Fixing: Sellers collude to set prices higher than they would be in a free market  Bid Rigging: Sellers collude to set prices with resepect to one or more bids or quotations  Price discrimination: A seller charges different [rices for the same quantitiy and quality of products to two consumers who are in competition with each other  Predatory Pricing: Sellers set prices so low they deter compeition from entering a market or with the intention to rive cometition from the market  Double Ticketing: An item has been ticketed with two prices (the lowest price must prevail although there are now limits to protect sellers)  Resale price maintenance: Manufacturers or other channel memebers try to infulence the price at which products are sold to subsequent buyers Promotion Issues:  Misleading Advertising: Representations in print or made orally concerning a product are false or misleading  Referral selling: Price reduction or other inducements are offered to a customer for the names of other potential customers  Bait and switch selling: sellers attract customers with low prices but then offer another product at a higher price because they are unable to provide the original promoted item  Tied Selling: A seller requires a buyer to purchase another product or to refrain from purchasing a product from a specific manufacturer as a condition to getting the product they want Distribution Issues:  Refusal to deal: Sellers refuse to sell to legitimate buyers  Exclusive dealing: A seller refuses to sell to another channel member unless that customer agrees to buy only from that seller  Pyramid Selling: Salespeople are paid to recruit additional salespeople, and each new salesperson pays to “invest” in the scheme, with some of that investment going to earlier participants in the scheme, not to be confused with genuine multi-level marketing plans Government Regulation Provincial laws generally focused on protection of buyers and sellers with respect to direct sales contracts; commonly called Consumer Protection Act or Direct Seller’s Act Government Regulatory Agencies o Canadian Radio-television and Telecommunications Commission (CRTC) o National Energy Board Other Regulatory Forces  Consumer interest organizations; e.g., People for the Ethical Treatment of Animals  Other groups attempt to advance the rights of minorities, senior citizens, and other causes; e.g., Mothers Against Drunk Driving  Self-regulatory groups set guidelines for responsible business conduct; e.g., Advertising Standards Canada The Economic Environment Gross domestic product (GDP) – Sum of all goods and services produced by a nation in a year Economic environment – Factors that influence consumer buying power and marketing strategies Business cycle – Pattern of stages in the level of economic activity (Prosperity, Recession, Depression, Recovery) Inflation: Rising prices caused by some combination of excess consumer demand and increases in the costs of one or more factors of production Deflation: Falling prices leads to lower prices on goods, but hurts business profits, lower return on investment, and job losses and layoffs Unemployment: Proportion of people in the economy actively seeking work that do not have jobs Discretionary income: Money available to spend after buying necessitates such as food, clothing and housing De-marketing: Process of reducing consumer demand for a good or service to level that the firm can supply (resource availability) The Technological Environment  Application of knowledge based on discoveries in science, inventions, and innovations to marketing  Technology leads to o New products. o Improvements in existing products. o Better customer service. o Reduced prices. The Social-Cultural Environment: The component of the marketing environment consisting of the relationship between the marketer, society, and culture (Think baby boomers, older population, and how market changes accordingly, this micro-culture creates needs and wants to be satisfied)  Marketers must be sensitive to demographic shifts and changing values.  Increasing importance of cultural diversity  Psychographics – interests, beliefs, opinions Consumerism – Social force within the environment that aids and protects the consumer by exerting legal, moral, and economic pressures on business and government Consumer rights:  The right to choose freely  The right to be informed  The right to be heard  The right to be safe  (Issues related to food labels, pesticide usage and how info should be available to see to consumers when making buying decisions) Marketing ethics – Marketers’ standards of conduct and moral values o Many companies create ethics programs to train employees to act ethically o Employees’ personal values sometimes conflict with employers’ ethical standards This chart shows each element of the marketing mix and how they raise their own set of ethical questions relating to each element Establishing a code of ethics may mitigate some responsibility and help reduce some fines and sentences, but responsibility for its implementation ultimately rests with senior executives Ethics in Marketing Research Invasion of privacy has become a critical issue in marketing research. o Consumers are concerned about privacy o Proliferation of databases o Selling of address lists o Ease with which consumer information can be gathered o Several agencies offer assistance to Internet consumers o Canada has a National Do-Not-Call List to help prevent unwanted telemarketing Ethics in Product Strategy  Product quality, planned obsolescence, brand similarity and packaging questions all raise ethical questions Ethics in Promotion  The way certain items are promoted and marketed to be shown in a certain light  Truth in advertising – representing accurately a products benefits and drawbacks, warranties, price and availability Ethics in Pricing  Unethical pricing behaviour is illegal Ethics and Social Responsibility – The Four Step Pyramid of Corporate Social Responsibility Social Responsibility: Marketing philosophies, polices, procedures and actions that have enhancement of society’s welfare as a primary objective (Giving back, CSR) Ecology – Relationship between organisms and their natural environments o Environmental issues influence all areas of marketing decision making o The growing concerns of pollution, waste production, too many disposable short lived products o The emergence of going green and longer lasting, and more efficient and recycled products are needed – also helps with positive publicity Green marketing – Production, promotion, and reclamation of environmentally sensitive products Chapter 4 Consumer Behaviour Micro-Cultures: Smaller groups within a society that have their own distinct characteristics and modes of behaviour  Bye ethnicity, nationality, age, social class, location, religion and geographic distribution Consumer Behaviour  Process through which buyers make decisions  Marketers borrow from psychology and sociology. The Consumer Decision Process Interpersonal Determinants of Consumer Behaviour  Cultural influences  Social influences  Family influences Cultural Influences - Culture includes:  The values, beliefs, preferences, and tastes handed down from one generation to the next.  Cultural influences include:  Core values  Micro-cultures Social Influences – Social influences include:  Reference groups  Social classes  Opinion leaders  Group membership influences an individual’s purchase decisions and behaviour in both overt and subtle ways  Family, school, friends, sports teams, work Reference Groups: People or institutions whose opinions are valued and to whom a person looks for guidance in his or her own behaviour, values and conduct such as family, friends or celebrities – groups whose value structures and standards influence a person’s behaviour (kids get the most influence – try to show off to friends) o Influence of reference group depends on two conditions: • Purchased product must be one others can see and identify • Purchased product must be conspicuous, something that not everybody owns Social Classes:  Six classes: upper-upper, lower-upper, upper-middle, lower-middle, working class, lower class  Class levels are determined by occupation, income, education, family background, and residence location  Income not always a primary factor  People buy things to try and appear to be higher class, luxury products Opinion Leaders: Trendsetters who purchase new products before others in a group and then influence others in their purchases  Individuals tend to act as opinion leaders for specific goods or services based on their knowledge of and interest in those products. Family Influences  Family structure is changing over the last century due to: o A declining birth rate o An increase in the number of childless couples o Higher divorce and separation rates o Children staying at home longer  Spouse Roles – Autonomic Role (Both buy things independently) Husband Dominant Role, Wife Dominant Role and Syncratic Role (Joint decision making)  Kids these days make a lot of buying decisions and have huge influences on parental purchasing decisions (cars) Personal Determinants of Consumer Behaviour  Needs imbalance between a consumer’s actual and desired state  Motive the inner state that directs a consumer toward the goal of satisfying a need  Perception – meaning that a person attributes to incoming stimuli gathering through the five senses.  Attitudes – person’s favourable or unfavourable evaluations, emotions, or action tendencies toward some object or idea  Learning –knowledge or skill that is acquired as a result of experience, which changes consumer behaviour  Self-Concept – person’s multifaceted picture of himself or herself  Physiological Needs: Needs at the most basic level concern essential requirements for survival, such as food, water and shelter and clothing  Safety Needs: Needs include financial or lifestyle security, protection from physical harm and avoidance of the unexpected  Social/Belongingness Needs: Satisfaction of physiological and safety needs leads a person to attend to third level needs, the desire to be accepted by people and groups important to that individual  Esteem Needs: People have a universal desire for a sense of accomplishment and achievement, wish to gain respect of others  Self Actualization: People’s desire to realize their full potential and to find fulfillment by expressing their unique talents and capabilities, giving back to the community, donating to charity Marketing Strategies Based on Maslow’s Hierarchy of Needs – Products targets towards certain needs  Physiological Needs – Vitamins, medicines, food, exercise equipment, bottled water  Safety Needs – Air Bags, Alarm systems, retirement investments, insurance, medicines, smoke detectors  Belongingness Needs – Beauty Products, entertainment, clothing, cars  Esteem Needs – Clothing, cars, jewellery, hobbies,  Self Actualization Needs – Education, cultural events, sports, luxury goods, technology, travel Successful marketing persuades a prospective client to purchase the product or service you are selling. One of the most effective ways to accomplish this is to appeal directly to one or more of his basic needs. Maslow's basic principles linking marketing to human psychology remain valid. You connect best with prospective customers if you appeal to their needs in a relevant, meaningful way. Consider the level of need your customer is trying to meet, and market your product in such a way as to convince him that it will fulfill exactly that need. Perform periodic evaluations of your marketing techniques because your target audience may not remain static. Always be aware of where on Maslow's needs hierarchy your customer base is and where your product fits in. Perceptions: Meaning that a person attributes to incoming stimuli gathered through the five senses – sight, hearing, touch, taste and smell  A buyer’s behaviour is influenced by his or her perceptions of a good or service  Perceptual Screens: Mental filter or block through which all inputs must pass to be noticed Attitudes: Person’s enduring favourable or unfavourable evaluations, emotions, or action tendencies toward some object or idea. As they form overtime though individual and group experiences, they become resistant to change Attitude Components  Cognitive – refers to the individuals information and knowledge about an object or concept  Affective – component deals with feelings and emotional reactions  Behavioural – component involves tendencies to act in a certain manner Learning: Knowledge or skill that is acquired as a result of experience, which changes consumer behaviour  Learning process: o Drive o Cue o Response o Reinforcement Self Concept Theory: Person’s multifaceted picture of himself or herself.  Four components that influence purchasing decisions: o Real self o Self-image o Looking-glass self o Ideal self Classifying Consumer Problem Solving Processes  Marketers recognize three categories of problem-solving behaviour: o Routinized response behaviour o Limited problem solving o Extended problem solving o Impulsive Purchases vs. More thought out decisions Chapter 5 Business to Business Marketing Business to Business Marketing: Organizational sales and purchases of goods and services to support production of other products, for daily company operations for resale.  Think who is buying the good/service and why is the purchase made?  Personal Selling plays a much bigger role in business markets than consumer markets, distribution channels are shorter, customer relationships tend to last longer and purchase decisions can involve many decision makers Components of the Business Market  Commercial market – Individuals and firms that acquire products to support, directly or indirectly, production of other goods and services  Trade industries – Retailers or wholesalers (resellers) that purchase products for resale to other  Resellers: Marketing intermediaries that operate in the trade sector  Government – Highways, auctions  Institutions (public and private) – hospitals, schools, churches, universities, museums, not for profits Segmenting B2B Markets: by segmenting the markets, marketers can develop strategies to better cater to diff segments  Segmentation by demographic characteristics  Customer-based segmentation: Dividing a B2B market into homogenous groups based on buyers’ product specifications  North American Industry Classification System (NAICS): Classification used by NAFTA countries to categorize the business marketplace into detailed market segments  Segmentation by end-use application: Segmenting a B2B market based on how industrial purchasers will use products  Segmentation by purchase categories: focus on satisfying customers (CRM) Characteristics of the B2B Market  More concentrated than the consumer market  Fewer but larger customers  Purchase process more formal and complex; longer time-frame  Relationship marketing more important Evaluating International Business Markets  Business purchasing patterns differ from country to country.  Global sourcing – Purchasing goods and services from suppliers worldwide o Can bring significant cost savings but product quality must be monitored Categories of Business Market Demand  Derived Demand: The linkage between the demand for a company’s output and its purchases of resources it needs to make its output (supplies and raw materials) Volatile Demand: Derived demand creates volatility in the business market place (Gas pump example) Joint Demand: Demand for a product that depends on the demand for another product used in combination with it Inelastic Demand: Demand that throughout an industry will not change significantly due to a price change Inventory Adjustments and inventory policies can also affect business demand The Make, Buy or Lease Decision  Firms acquiring finished goods have three options: make, buy, or lease  Make the good or provide the service in house? Purchase it from another organization? Lease it from another organization?  Offshoring – Movement of high-wage jobs from one country to lower-cost overseas locations  Nearshoring – Moving jobs to vendors in countries close to the business’s home country  Outsourcing – Using outside vendors to provide goods and services formerly produced in-house Problems with Offshoring and Outsourcing  Cost savings are less than expected.  Can raise security concerns over proprietary technology or customer data  Can reduce company’s ability to respond quickly to marketplace  Can create conflicts between nonunion outside workers and in-house union employees  Can negatively affect employee morale and loyalty The Business Buying Process  Environmental Factors  Organizational Factors  Interpersonal Influences  The role of the professional buyer: o Merchandisers: Trade sector buyers who secure needed products at the best possible prices o Category advisor or category captain: Trade industry vendor who develops a comprehensive procurement plan for a retail buyer Stages in the Buying Process  Classifying Business Buying Situations  Straight rebuy: Recurring purchase decision in which a customer repurchases a good or service that has performed satisfactorily in the past  Modified rebuy: Situation in which a purchaser is willing to re-evaluate available options for repurchasing a good or service  New-task buy: First time or unique purchase situation that requires considerable effort by decision makers  Reciprocity: Buying from suppliers who are also customers  Analysis tools o Value analysis – Systematic study of the components of a purchase o Vendor analysis – Assessment of supplier performance in areas like price, back orders, timely delivery and attention to special requests The Buying Centre Concept  Buying centre – Participants in an organizational buying action  Buying centre roles o Users: Individuals or groups that actually uses a business good or service o Gatekeepers: Person who controls the info that all buying center members will review o Influencers: Typically, technical staff such as engineers who affect the buying decision by supplying info to guide evaluation of alternatives or by setting buying specifications o Deciders: Person who chooses a good/service although another person may have formal authority to complete the sale o Buyers :Person who has the formal authority to buy from the supplier Developing Effective Business to Business Marketing Strategies  Challenges of government markets o The government buys products under two basic types of contracts: o Fixed-price contracts. o Cost-reimbursement contracts. o Purchasing procedures largely determined by size of purchase o MERX online e-tendering service widely used Challenges of Institutional Markets  Institutional buyers – Schools, hospitals, libraries, foundations, clinics, churches, and not-for-profit agencies  Widely diverse buying practices  Multiple buying influences can affect buying decisions  Group purchasing is an important factor Challenges of International Markets  Marketers must consider buyers’ attitudes and cultural patterns  Local industries, economic conditions, geographic characteristics, and legal restrictions must be considered.  Remanufacturing – Efforts to restore older products to like-new condition  Foreign governments are an important business market  People conduct business in different way in different countries, be aware of cultural differences and adapt, different government regulations and cultural practices Chapter 7 Marketing Research, Decision Support Systems, and Sales Forecasting Market Research: The process of collecting and using information for marketing decision making Types of Research Firms  Syndicated services: Organization that provides standardized data to all customers  Full-service research suppliers: Marketing research organization that contacts clients to conduct complete marketing research  Limited-service research suppliers: Marketing research firm that specializes in a limited number of research activities such as conducting field interviews or performing data processing  (Marketing research companies out there help gather information and can be hired to help with market research)  Customer Satisfaction Measurement Programs: Firms often focus on tacking the satisfaction levels of current customers The Marketing Research Process  The Marketing Research Process Explorative Research: Seeks to discover the cause of a specific problem by discussing the problem with informed sources both within and outside the firm and by examining data from other information sources 5. Collect data o Secondary data – Previously published information (Internal/External and also government data) o Primary data – Information collected for a specific investigation o Primary costs more to gather but can be much more valuable The final step is to interpret the findings and present them to the decision makers Sampling Techniques o Sampling – Process of selecting survey respondents or research participants, if it fails to involve the right consumers, your findings will lead to misleading conclusions o Probability sample – Sample that gives every member of the population a chance of being selected o Nonprobability sample – Sample that involves personal judgment somewhere in the selection process Primary Research Methods  Observation (Traffic counts, TV ratings)  Surveys and Interviews (Focus groups, telephone surveys and online surveys)  Controlled Experiments (Test markets) Observation Method: Researchers view the overt actions of subjects being studied (Ethnographic research-study of behavior) or Interpretative Research Survey Method: Researchers must ask questions to get information on attitudes, motives, and opinions Experimental Method:  Least used method  Controlled experiment  Test marketing: Involves introducing a new product in a specific area and then measuring its degree of success Conducting International Marketing Research  Follow same basic steps as for domestic marketing research  Researchers must be aware of cultural and legal environments.  May have to adapt research methods to local conditions Computer Technology in Marketing Research  Marketing Information System (MIS) – Planned, computer based system designed to provide managers with a continuous flow of information relevant to their specific decisions and areas of responsibility  Marketing Decision Support System (MDSS) – picks up on variables hard to notice to marketers Data Mining: The process of searching through computerized data files to detect patterns that guide decision making  Focuses on identifying relationships that are not obvious to marketers, can reveal info about customer loyalty Business intelligence: Process of gathering information and analyzing it to improve business strategy, tactics, and daily operations Competitive Intelligence: A form of business intelligence that focuses on finding information about competitors using published sources, interviews, observations by salespeople and suppliers in the industry, and other sources Sales Forecasting: Estimate of a firm’s revenue for a specified time period (sales forecasts are usually wrong, but the degree in which it varies is important) Firms can use:  Qualitative Forecasting: Use of subjective techniques to forecast sales  Quantitative Forecasting: Use of statistical forecasting techniques Qualitative Forecasting Techniques  Jury of executive opinion: Combines the outlooks of top executives from areas like marketing, finance, production and purchasing. Assess the sales expectations of various executives  Delphi technique: Gathers and redistributes several rounds of anonymous forecasts until the participants reach a consensus  Sales force composite: Forecasting method based on the combined sales estimates of the firm’s salespeople  Survey of buyer intentions: Samples the opinions among groups of present and potential customers concerning purchase intentions  (Don’t stay inside your business, get fresh perspective from outsiders) Quanti
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