Chapter 1, overview of marketing
Marketing is essentially about creating value for consumers and the company's shareholders.
What Is Marketing?
The Canadian Marketing Association states “Marketing is a set of business practices
designed to plan for and present an organization's products or services in ways that build
effective customer relationships.” Firms develop a marketing plan - a written document
composed of an analysis of the current marketing situation, opportunities and threats for the
firm, marketing objectives and strategy specified in terms of the four P's action programs and
projected or pro forma income (and other financial) statements. It specifies the marketing
activities for a specific period of time. The marketing plan is broken down into various
LO1. Exhibit 1.1 Marketing: occurs in many settings, helps create value, is about satisfying
customer needs and wants, entails an exchange, requires product, price, place and
promotion decisions and can be performed by both individuals and organizations.
Marketing Is About Satisfying Customer Needs and Wants
Understanding and satisfying consumer needs and wants is fundamental to marketing
success. A need is when a person feels physiologically deprived of the basic necessities of
life, such as food, clothing, shelter, or safety. A want is the particular way in which the person
chooses to fulfill his or her need, which is shaped by a person's knowledge, culture, and
personality. To understand customer needs and wants, the company must first identify the
customers or market for its product or service. Market refers to the group of people who
need or want a company's products or services and have the ability and willingness to buy
them. Marketers divide the market into subgroups or segments of people to whom they are
interested in marketing their products, services, or ideas. For example toothpaste, you want
to know for which market segments your product is most relevant and then make sure that
you build a marketing strategy that meets the needs and wants of the target groups or target
market the customer segment or group to whom the firm is interested in selling its products
Marketing Entails Value Exchange
Marketing is about an exchange—the trade of things of value between the buyer and the
seller so that each is better off as a result.
LO2 Marketing Requires Product, Price, Place, and Promotion Decisions
Marketing traditionally has been divided into a set of four interrelated decisions known as the
marketing mix, or four Ps: product, price, place, and promotion. This is the control label set
of activities that a firm uses to respond to the wants of its target market. Exhibit 1.3, page 8.
Product: Creating Value
One main purpose of marketing is to create value by developing a variety of offerings,
including goods, services, and ideas, to satisfy customer needs. The benefits need to be
higher than the costs of the good. Try to have value orientation in everything. Good value, is
the best way to hold a sustainable advantage. Goods are items that you can physically
touch. Unlike goods, services are intangible customer benefits that are produced by people
or machines and cannot be separated from the producer. Many offerings represent a
combination of goods and services. Ideas include thoughts, opinions, philosophies, and
intellectual concepts that also can be marketed. Price: Transacting Value
Everything has a price, though it doesn't always have to be monetary. Price, therefore, is
everything the buyer gives up—money, time, energy—in exchange for the product or service.
Marketers must determine the price of a product carefully on the basis of the potential
buyer's belief about its value. For marketers, the key to determining prices is figuring out how
much customers are willing to pay so that they are satisfied with the purchase and the seller
achieves a reasonable profit.
Place: Delivering Value
The third P, place, describes all the activities necessary to get the product from the
manufacturer or producer to the right customer when that customer wants it.
Promotion: Communicating Value
Even the best products and services will go unsold if marketers cannot communicate their
value to customers. Promotion is communication by a marketer that informs, persuades, and
reminds potential buyers about a product or service to influence their opinions or elicit a
response. Promotion generally can enhance a product or service's value The four Ps work
together. Although marketers deliver value through each of the four Ps individually, they can
deliver greater value to consumers by configuring the four Ps as a whole rather than by
treating them as separate components. That is, the product or service offered must satisfy
the target customers' specific needs and wants, be priced appropriately, be available at
locations where customers want it, and be promoted in a manner and through media that are
consistent with the target consumers. All done to develop long term relationships with loyal
Marketing Is Shaped by Forces and Players Within the Firm
EXHIBIT 1.4, page 11. A company's marketing activities are shaped by factors that are both
internal to the firm and external to the firm. The consumer is the centre of all marketing
activities, and offering the best value possible will attract customers to products and keep
Marketing Is Shaped by Forces and Players External to the Firm
External forces such as cultural, demographic, social, technological, economic, and political
and legal changes shape a company's marketing activities
Marketing Can Be Performed by Both Individuals and Organizations
Fortunately, marketing intermediaries, such as retailers, accumulate merchandise from
producers in large amounts and then sell it to you in smaller amounts. The process in which
businesses sell to consumers is known as B2C (business-to-consumer) marketing,
whereas the process of selling merchandise or services from one business to another is
called B2B (business-to-business) marketing. Consumers have started marketing their
products and services to other consumers, which requires a third category in which
consumers sell to other consumers, or C2C (consumer-to-consumer) marketing. Social
media is the use of Internet tools and software by individuals to easily and quickly create and
share content, such as information, knowledge, and insights, with people who have similar
interests to foster dialogue, social relationships, and personal identities. Although social
media is currently very popular among retail businesses and the consumer packaged goods
industry, interest from firms of all sizes, all industries, and all types (B2B, B2C, and C2C) are
increasing daily. First, more than 90 percent of Canadian Internet users are actively engaged
with social media Second, consumers are already carrying on conversations about companies, their brands
and services; therefore, to be part of the conversation or to initiate conversations, companies
must participate in social media. Third, social media enables marketers to accomplish many
marketing goals, such as promoting corporate social responsibility, building customer
relationships, enhancing customer service, building or defending their brands, engaging
customers in research and new product development, and recruiting talent.
Marketing occurs in many settings
Most people think of marketing as a way for firms to make profits, but marketing works
equally well in the nonprofit sector. In addition, marketing isn't useful only in countries with
well-developed economies. It can also jump-start the economies of less developed countries
by actually putting buyers and sellers together to create new markets. Marketing is often
designed to benefit an entire industry, which can help many firms simultaneously.
LO3 Marketing Helps Create Value
As we have examined marketing practices over the years, we have observed four different
marketing orientations or philosophies: product, sales, market, and value-based orientation.
Product-oriented companies focus on developing and distributing innovative products with
little concern about whether the products best satisfy customers’ needs. Companies with a
product orientation generally start out by thinking about the product they want to build; they
try selling the product after it is developed rather than starting with an understanding of the
customers’ needs and then developing a product to satisfy those needs.
Companies that have a sales orientation basically view marketing as a selling function where
companies try to sell as many of their products as possible rather than focus on making
products consumers really want. Companies with a selling orientation tend to focus on
making a sale or on each transaction rather than building long-term customer relationships.
Market-oriented companies start out by focusing on what consumers want and need before
they design, make, or attempt to sell their products and services. Basically, the “customer is
king,” and the market is a buyer's market since consumers wield tremendous power. Look at
attributes of product.
Most successful firms today are market oriented. That means they have gone beyond a
production or sales orientation and attempt to discover and satisfy their customers’ needs
and wants. Better marketing firms recognized that there was more to good marketing than
simply discovering and providing what consumers wanted and needed; to compete
successfully, they would have to give their customers greater value than their competitors.
Value reflects the relationship of benefits to costs, or what you get for what you give. In a
marketing context, customers seek a fair return in goods and/or services for their hard-
earned money and scarce time. Long term relationship.
What Is Value-Based Marketing?
Consumers make explicit and/or implicit trade-offs between the perceived benefits of a
product or service and their costs. To better understand value and to develop a value-based
marketing orientation (focuses on providing customers with benefits that far exceed the cost (money, time, effort) of acquiring and using a product or service while providing a
reasonable return to the firm), a business must also understand what customers view as the
key benefits of a given product or service and how to improve on them. The other side of the
value equation entails the firm's ability to provide either a better product/service mix at the
same cost or the same level of quality and convenience for a lower cost.
How Firms Compete on the Basis of Value
Value-based marketing, isn't just about creating strong products and services; it should be at
the core of every firm's functions.
How Firms Become Value-Driven Firms
By focusing on three activities: First, they share information about their customers and
competitors across their own organization and with other firms that might be involved in
getting the product or service to the marketplace, such as manufacturers and transportation
companies. Second, they strive to balance their customers’ benefits and costs. Third, they
concentrate on building relationships with customers.
In a value-based, market-oriented firm, marketers share information about customers and
competitors that has been collected through customer relationship management, and
integrate it across the firm's various departments.
Balancing Benefits with Costs
Value-oriented marketers constantly measure the benefits that customers perceive against
the cost of their offering.
LO4 Building Relationships with Customers
During the past decade or so, marketers have begun to realize that they need to think about
their customer orientation in terms of relationships rather than transactions. A transactional
orientation regards the buyer–seller relationship as a series of individual transactions, so
anything that happened before or after the transaction is of little importance. A relational
orientation, in contrast, is based on the philosophy that buyers and sellers should develop a
long-term relationship. According to this idea, the lifetime profitability of the relationship
matters, not how much money is made during each transaction. Firms that practise value-
based marketing also use a process known as customer relationship management (CRM),
a business philosophy and set of strategies, programs, and systems that focus on identifying
and building loyalty among the firm's most valued customers. So not every transaction is
important, but long term value of buyer seller relationship is.
LO5 Why Is Marketing Important?
Without marketing, it would be difficult for any of us to learn about new products and
Marketing Expands Firms’ Global Presence
How does marketing contribute to a company's successful global expansion? Understanding
customers is critical. Without the knowledge that can be gained by analyzing new customers’
needs and wants on a segment-by-segment, region-by-region basis—one of marketing's
main tasks—it would be difficult for a firm to expand globally. Marketing Is Pervasive Across the Organization
In value-based marketing firms, the marketing department works seamlessly with other
functional areas of the company to design, promote, price, and distribute products.
Marketing Is Pervasive Across the Supply Chain
Firms typically do not work in isolation. Manufacturers buy raw materials and components
from suppliers, which they sell to retailers or other businesses after they have turned the
materials into their products. The group of firms and set of techniques and approaches firms
use to make and deliver a given set of goods and services is commonly referred to as a
supply chain. Excellent supply chains effectively and efficiently integrate their supply chain
partners—suppliers, manufacturers, warehouses, stores, and transportation intermediaries—
to produce and distribute goods in the right quantities, to the right locations, and at the right
time. Often, some supply chain participants take a transactional orientation in which each link
in the chain is out for its own best interest. Supply chain members do not enjoy any
cooperation or coordination. But effectively managing supply chain relationships often has a
huge impact on a firm's ability to satisfy the consumer, which results in increased profitability
for all parties.
Marketing Makes Life Easier
Marketers provide you, as a consumer, with product and service choices, as well as
information about those choices, to ensure that your needs are being met. They balance the
product or service offering with a price that makes you comfortable with your purchase. After
the sale, they provide reasonable guarantees and return policies.
Marketing Provides Career Opportunities
Marketing also offers a host of career opportunities that require a variety of skills.
Marketing Enriches Society
Should marketing focus on factors other than financial profitability, such as good corporate
citizenry? Many Canadian corporations think so, → encourage their employees to participate
in activities that benefit their communities and invest heavily in socially responsible actions
and charities. Also, investors view firms that operate with high levels of corporate
responsibility and ethics as safe investments. Similarly, firms have come to realize that good
corporate citizenship through socially responsible actions should be a priority because it will
help their bottom line in the long run.
Marketing Can Be Entrepreneurial
Whereas marketing plays a major role in the success of large corporations, it also is at the
centre of the successes of numerous new ventures initiated by entrepreneurs, or people who
organize, operate, and assume the risk of a business venture. Need to understand marketing
opportunity (unfilled needs), conduct thorough examinations of the marketplace and develop
and communicate the values into products and services to potential customers.
Chapter 2, developing a marketing plan and marketing strategies
Levels of Strategic Planning in Corporations
Effective marketing doesn't just happen. Firms carefully plan their marketing strategies to
react to changes in the environment, the competition, and their customers by creating a
marketing plan. Strategic planning in most organizations occurs on at least two levels, the corporate level and the functional level (see Exhibit 2.1). Corporate level planning is done by
the company's top management and focuses on the overall direction of the entire company.
focuses on the long-term direction of the company, which is updated regularly to respond to
changes in the business environment. In addition to corporate and functional level strategic
planning, large companies that operate several business lines may see each of their
strategic business units (SBUs) develop strategic plans for their products and the markets
they serve. An SBU is a division of the company that can be managed somewhat
independently from other divisions since it markets a specific set of products to a clearly
defined group of customers. It is important to recognize that the marketing function may also
be involved in both corporate-level and SBU-level planning because of its focus on creating
value for customers and the company. In the remainder of this chapter, we focus on the
marketing planning process (set of steps a marketer goes through to develop a marketing
plan) for a product, brand, or market.
LO1 The Marketing Plan
A marketing plan is a written document composed of an analysis of the current marketing
situation, opportunities and threats for the firm, marketing objectives and strategy specified in
terms of the four Ps, action programs, and projected or pro forma income (and other
financial) statements. The three major phases of the marketing plan are planning,
implementation, and control. It is important that everyone involved in implementing the plan
knows what the overall objectives for the firm are and how they are going to be met. Other
stakeholders, such as investors and potential investors, also want to know what the firm
plans to do. A written marketing plan also provides a reference point for evaluating whether
or not the firm met its objectives. A marketing plan entails five steps, depicted in Exhibit 2.2,
p39. In Step 1 of the planning phase, marketing executives, in conjunction with other top
managers, define the mission and objectives of the business. For the second step, they
evaluate the situation by assessing how various players, both inside and outside the
organization, affect the firm's potential for success (Step 2). In the implementation phase,
marketing managers identify and evaluate different opportunities (situational analysis) by
engaging in a process known as segmentation, targeting, and positioning (STP, identification
of opportunities) (Step 3). They then are responsible for implementing the marketing mix by
using the four Ps (Step 4). Finally, the control phase entails evaluating the performance of
the marketing strategy by using marketing metrics and taking any necessary corrective
actions (Step 5). planning phase Where marketing executives and other top managers define
the mission and objectives of the business, and evaluate the situation by assessing how
various players, both inside and outside the organization, affect the firm's potential for
Step 1: Define the Business Mission and Objectives
The mission statement, a broad description of a firm's objectives and the scope of activities
it plans to undertake, attempts to answer two main questions: What type of business are we?
and What do we need to do to accomplish our goals and objectives? Another key goal or
objective often embedded in a mission statement is how the firm is building a sustainable
LO2 Step 2: Conduct a Situation Analysis
After developing its mission, a firm next must perform a situation analysis, using a SWOT
analysis that assesses both the internal environment with regard to its strengths (positive) and weaknesses (negative) (internal analysis of attributes) and the external environment in
terms of its opportunities (positive aspects) and threats (negative aspects) (external
analysis). Situation analysis also includes an examination of market trends, customer
analysis, and competitive analysis. Additionally, the firms should assess the opportunities and
uncertainties of the marketplace due to changes in cultural, demographic, social,
technological, economic, and political forces (CDSTEP). A SWOT analysis is designed to
help the firm determine areas in which it is strong and can compete effectively and areas
where it is weak and vulnerable to competitive attacks. By understanding its competitive
strengths and weaknesses, the firm will be better positioned to address weaknesses and
deal with threats arising from its external business environment. Strengths and weaknesses
are within the control of the firm, and it can take actions to alleviate weaknesses and
consolidate its strengths. Opportunities and threats are outside of the control of the firm;
therefore, the firm can decide only how it wants to respond. Exhibit 2.4 on page 41 examples
of things in the SWOT analysis.
LO3 Step 3: Identify and Evaluate Opportunities by Using STP (Segmentation, Targeting, and
After completing the situation analysis, the next step is to identify and evaluate opportunities
for increasing sales and profits by using STP (segmentation, targeting, and positioning).
With STP, the firm must first understand customer needs and wants through market
research, then divide the market or customers into distinct subgroups or segments,
determine which of those segments it should pursue or target, and finally decide how it
should position its products and services to best meet the needs of those chosen targets.
They identify & evaluate opportunities for increasing sales and profits.
Each of these groups might be a market segment consisting of consumers who respond
similarly to a firm's marketing efforts. The process of dividing the market into distinct groups
of customers where each individual group has similar needs, wants, or characteristics—who
therefore might appreciate products or services geared especially for them in similar ways—
is called market segmentation.
After a firm has identified the various market segments it might pursue, it evaluates each
segment's attractiveness and decides which to pursue by using a process known as target
marketing or targeting. Firms typically are most successful when they focus on those
opportunities that build on their strengths relative to those of their competition.
Finally, when the firm decides which segments to pursue, it must determine how it wants to
be positioned within those segments. Because positioning is what consumers think and feel
about a brand or product, marketers try very hard through their various marketing efforts to
shape consumers' perceptions regarding their brand or product. Market positioning involves
the process of defining the marketing mix variables so that target customers have a clear,
distinct, desirable understanding of what the product does or represents in comparison with
Set Marketing Objectives
Normally the marketing manager is responsible for setting the specific marketing objectives
for the product or brand over the life of the plan. LO4, Step 4: Implement Marketing Mix and Allocate Resources
When the firm has identified and evaluated different growth opportunities by performing an
STP analysis, the real action begins. The company has decided what to do, how to do it, and
how many resources the firm should allocate to it. In the fourth step of the planning process,
marketers implement the marketing mix—product, price, promotion, and place—for each
product and service on the basis of what it believes its target markets will value
Product and Value Creation
Products, which include services. Key to success of any marketing program is the creation of
value, firms attempt to develop products and services that customers perceive as valuable
enough to buy.
Price and Value for Money
Price. As part of the exchange process, a firm provides a product or a service, or some
combination thereof, and in return it receives money. Value-based marketing requires that
firms charge a price that customers perceive as giving them good value for the products and
services they receive.
Place and Value Delivery
For the third P, place, the firm must be able to, after it has created value through a product
and/or service, make the product or service readily accessible when and where the customer
Promotion and Value Communication
Promotion. Marketers communicate the value of their offering, or the value proposition, to
their customers through a variety of media, including TV, radio, magazines, buses, trains,
blimps, sales promotion, publicity, the sales force, and the Internet. It is now possible for
firms in out-of-the-way locations to expand their market area to the whole world. Marketers
therefore must consider which are the most efficient and effective methods to communicate
with their customers, which goes back to understanding customers, the value created, and
the message being communicated. Research has shown that this type of campaign is much
more effective than either mail or TV advertising. In addition to developing the four Ps and
allocating resources, marketing managers must develop schedules: timelines for each
activity and the personnel responsible for the respective activity to avoid bottlenecks and
ensure smooth and timely implementation of the marketing mix activities. Also, marketers
must design the organization that will be responsible for putting the plan into action. This
organization is usually represented in the form of an organizational chart. The marketing
organization is usually responsible for the day-to-day operational decisions involved in
executing the plan.
Step 5: Evaluate Performance by Using Marketing Metrics
The final step in the planning process includes evaluating the results of the strategy and
implementation program by using marketing metrics. Typically, managers begin by reviewing
the implementation programs, and their analysis may indicate that the strategy (or even the
mission statement) needs to be reconsidered. Problems can arise both when firms
successfully implement poor strategies and when they poorly implement good strategies. Who Is Accountable for Performance?
At each level of an organization, the business unit and its manager should be held
accountable only for the revenues, expenses, and profits that they can control. Performance
evaluations are used to pinpoint problem areas. Reasons why performance may be above or
below planned levels must be examined. Actual performance may be different than the plan
predicts because of circumstances beyond the manager's control.
Performance Objectives and Metrics
Many factors contribute to a firm's overall performance, which make it hard to find a single
metric to evaluate performance. One approach is to compare a firm's performance over time
or to competing firms, using common financial metrics such as sales and profits. Another
method of assessing performance is to view the firm's products or services as a portfolio.
Depending on the firm's relative performance, the profits from some products or services are
used to fuel growth for others.
Financial Performance Metrics
Some commonly used metrics to assess performance include revenues, or sales, and profits.
Clearly, an attempt to maximize one metric may lower another. Managers must therefore
understand how their actions affect multiple performance metrics. The metrics used to
evaluate a firm vary depending on (1) the level of the organization at which the decision is
made and (2) the resources the manager controls.
Social Responsibility Performance Metrics
As Canadian companies become more convinced of the importance of social responsibility,
we will likely see an increasing number of companies report corporate social responsibility
Strategic Planning Is Not Sequential
The planning process in Exhibit 2.2 on page 39 suggests that managers follow a set
sequence when they make strategic decisions. But actual planning processes can move
back and forth among these steps.
Management evaluates the firm's various products and businesses - its portfolio and
allocates resources according to which products are expected to be the most profitable for
the firm in the future. Portfolio analysis is performed at Strategic business unit (SBU) a
division of the company that can be managed somewhat independently from other divisions
since it markets a specific set of products to a clearly difined group of customers. Or by
product line a group of products that consumers may use together or perceive as similar in
some way. But they can also use it to analyze brands or individual items. An SBU can be
managed somewhat independently from other divisions.
Bosston Consulting group's portfolio analysis. One of the most popular portfolio analysis
methods, developed by the Boston Consulting Group (BCG), requires that firms classify all
their products into a two-by-two matrix, as depicted in Exhibit 2.8. p51. The circles represent
brands, and their sizes are in direct proportion to the brands' annual sales—that is, larger
circles correspond to higher levels sales and smaller circles indicate lower levels of sales.
The horizontal axis represents the relative market share. In general, market share is the
percentage of a market accounted for by a specific entity, and it is used to establish the
product's strength in a particular market. The vertical axis is the market growth rate, or the
annual rate of growth of the specific market in which the product competes. Market growth rate thus measures how attractive a particular market is. Each quadrant has been named on
the basis of the amount of resources it generates for and requires from the firm
Stars. Stars (upper left quadrant) occur in high-growth markets and are high–market share
products. That is, stars often require a heavy resource investment in such things as
promotions and new production facilities to fuel their rapid growth.
Cash cows. Cash cows (lower left quadrant) are in low-growth markets but are high–
market share products. Because these products have already received heavy investments to
develop their high market share, they have excess resources that can be spun off to those
products that need it.
Question marks. Question marks (upper right quadrant) appear in high-growth markets but
have relatively low market shares; thus, they are often the most managerially intensive
products in that they require significant resources to maintain and potentially increase their
market share. Managers must decide whether to infuse question marks with resources
generated by the cash cows, so that they can become stars, or withdraw resources and
eventually phase out the products.
Dogs. Dogs (lower right quadrant) are in low-growth markets and have relatively low market
shares. Although they may generate enough resources to sustain themselves, dogs are not
destined for stardom and should be phased out unless they are needed to complement or
boost the sales of another product or for competitive purposes. In this case, the company
has decided to stop making Brand B. Although quite useful for conceptualizing the resource
allocation task, the BCG approach, and others like it, are often difficult to implement in
practice. In particular, it is difficult to accurately measure both relative market share and
industry growth. Because of these limitations, many firms have tempered their use of matrix
approaches to achieve a more balanced approach to allocating their resources.
Firms consider pursuing various market segments as part of their overall growth strategies,
which may include the four major strategies shown in Exhibit 2.9, p 52. The rows distinguish
those opportunities a firm possesses in its current markets from those it has in new markets,
whereas the columns distinguish between the firm's current marketing offering and that of a
A market penetration strategy employs the existing marketing mix and focuses the firm's
efforts on existing customers. Such a growth strategy might be achieved by encouraging
current customers to patronize the firm more often or buy more merchandise on each visit or
by attracting new consumers from within the firm's existing target market. A market
penetration strategy generally requires greater marketing efforts.
A market development strategy employs the existing marketing offering to reach new
market segments, whether domestic or international or segments not currently served by the
firm. International expansion is generally riskier than domestic expansion because firms must
deal with differences in government regulations, cultural traditions, supply chain
considerations, and language. Market development may also include segments the firms are
not currently serving but that represent great opportunities.
Product Development The third growth strategy option, a product development strategy, offers a new product or
service to a firm's current target market.
A diversification strategy, the last of the growth strategies, introduces a new product or
service to a market segment that it does not currently serve. Diversification opportunities may
be either related or unrelated. In a related diversification opportunity, the current target
market and/or marketing mix shares something in common with the new opportunity. In
contrast, in an unrelated diversification, the new business lacks any common elements with
the present business. While all four growth strategies present unique challenges for
marketers, a market penetration strategy is the easiest to implement since it focuses on
promoting existing products to existing customers. In this case, marketers know both their
products and markets. With market development or product development, marketers have
experience with one element and must learn the other element. Diversification requires
marketers to go outside of both their current products and markets, and the risks of making
mistakes are substantially greater with this strategy. The particular growth strategy a
company chooses depends on its goals and capabilities, among other things. Also,
marketers tend to pursue multiple growth strategies simultaneously. Marketers may also
develop strategies for downsizing their business operations by either exiting markets or
reducing their product portfolios. They may exit markets or abandon products for many
Marketing strategy and sustainable competitive advantage.
A marketing strategy identifies (1) a firm's target market(s), (2) a related marketing mix—
the four Ps, and (3) the bases upon which the firm plans to build a sustainable competitive
advantage. A sustainable competitive advantage is an advantage over the competition
that is not easily copied and thus can be maintained over a long period of time.
Building a Sustainable Competitive Advantage
What about these companies' respective marketing mixes would provide a sustainable
competitive advantage? Establishing a competitive advantage means that the firm, in effect,
builds a wall around its position in the market. When the wall is high, it will be difficult for
competitors outside the wall to enter the market and compete for the firm's target customers.
Over time, all advantages will be eroded by competitive forces; but, by building high, thick
walls, firms can sustain their advantage, minimize competitive pressure, and boost profits for
a longer time. Thus, establishing a sustainable competitive advantage is key to long-term
Customer excellence: Focuses on retaining loyal customers and excellent customer
service. Operational excellence: Involves a focus on efficient operations and excellent
supply chain management. Product excellence: Involves a focus on achieving high-quality
products and effective branding and positioning. Locational excellence: Having a good
physical location and Internet presence.
Customer excellence is achieved when a firm develops value-based strategies for retaining
loyal customers and provides outstanding customer service. Retaining loyal customers. Sometimes, the methods a firm uses to maintain a sustainable competitive advantage help
attract and maintain loyal customers. Loyalty is more than simply preferring to purchase from
one firm instead of another, it means that customers are reluctant to patronize competitive
firms. More and more firms realize the value of achieving customer excellence through
focusing their strategy on retaining their loyal customers. Marketers use several methods to
build customer loyalty. One such way involves developing a clear and precise positioning
strategy. Customer service. Marketers may also build sustainable competitive advantage by
offering excellent customer service, though consistently offering excellent service can prove
difficult. Customer service is provided by employees, and invariably, humans are less
consistent than machines.
A second way to achieve a sustainable competitive advantage is via operational excellence,
which is accomplished through a firm's efficient operations, excellent supply chain
management, strong relationships with suppliers, and excellent human resource
management (which yields productive employees). Efficient operations. All marketers strive
for efficient operations to get their customers the merchandise they want, when they want it,
in the required quantities, and at a lower delivered cost than that of their competitors. By so
doing, they ensure good value to their customers, earn a profit, and satisfy their customers'
needs. Excellent supply chain management and strong supplier relations. Firms
achieve efficiencies by developing sophisticated distribution and information systems as well
as strong relationships with vendors. Similar to customer relationships, vendor relations must
be developed over the long term and generally cannot be easily offset by a competitor. Firms
with strong relationships may gain exclusive rights to (1) sell merchandise in a particular
region, (2) obtain special terms of purchase that are not available to competitors, or (3)
receive popular merchandise that may be in short supply. Many companies are looking to
new technologies to improve their operations and strengthen their customer relationships.
Human resource management. Employees play a major role in the success of all firms.
Those who interact with customers when providing services are particularly important for
building customer loyalty. Knowledgeable and skilled employees committed to the firm's
objectives are critical assets that support the success of companies
The third way to achieve a sustainable competitive advantage, occurs by having products
with high perceived value and effective branding and positioning.
Location is particularly important for retailers and service providers. Many say the three most
important things in retailing are location, location, location. Most people will not walk or drive
very far when looking to buy a cup of coffee. A competitive advantage based on location is
sustainable because it is not easily duplicated.
Multiple Sources of Advantage In most cases
However, a single strategy, such as low prices or excellent service, is not sufficient to build a
sustainable competitive advantage. Firms require multiple approaches to build a wall around
their position that stands as high as possible.
Chapter 3, analyzing the market environment
A Marketing Environment Analysis Framework
Consumers may be influenced directly by the firm's microenvironment, including the
immediate actions of the focal company, the company's competition, and the corporate partners that work with the firm to make and supply products and services to consumers. The
firm, and therefore consumers indirectly, is influenced by the macro environment, which
includes influences such as culture and demographics, as well as social, technological,
economic, and political/legal factors. One of the goals of value-based marketing is to provide
greater value to consumers than competitors offer. This provision requires that the marketing
firm looks at the entire business process from a consumer's point of view. Firms use a variety
of tools to keep track of their competitors' activities and communicate with their corporate
partners. Furthermore, they monitor their macro environment to determine how such factors
influence consumers and how they should respond to them.
LO1 Micro environmental Factors
The three factors in a firm's micro environment are its capabilities, corporate partners and
competition. Understanding these three factors is key to serving its customers, who should
be at the hear of all its marketing decisions and activities. The factors help decide the
business activities the firm should engage in and how it should design and deliver its
LO2 Company Capabilities
The first factor that affects the consumer is the firm itself. They focus on satisfying customer
needs that match with their core competencies. Everything should utilize its strengths and
revolve around the customer, otherwise they cannot sell anything.
Competition also significantly affects consumers in the microenvironment. It is critical that
marketers understand their firm's competitors, including their strengths, weaknesses, and
likely reactions to the marketing activities their own firm undertakes. Firms use competitive
intelligence (CI) to collect and synthesize information about their position with respect to
their rivals. In this way, CI enables companies to anticipate changes in the marketplace
rather than merely react to them. The strategies to gather CI can range from simply sending
a retail employee to a competitive store to check merchandise, prices to analyzing a rival's
marketing tactics, distribution practices, pricing, and hiring needs. Although CI is widely
regarded as a necessary function in today's world, certain methods of obtaining information
have come under ethical and legal scrutiny.
Few firms operate in isolation. For example, automobile manufacturers collaborate with
All three strategies are central to the firms marketing strategy and help add value to firms
In addition to understanding the company itself, their competition, and their corporate
partners, marketers must also understand the macro environmental factors that operate in
the external environment, namely, the culture, demographics, social trends, technological
advances, economic situation, and political/legal environment, or CDSTEP, as shown in
Exhibit 3.3, p. 92.
We broadly define culture as the shared meanings, beliefs, morals, values, and customs of
a group of people. Transmitted by words, literature, and institutions, culture gets passed
down from generation to generation and learned over time. Our various cultures influence
what, why, how, where, and when we buy. Two dimensions of culture that marketers must
take into account as they develop their marketing strategies are the culture of the country
and that of a region within a country.
The visible nuances of a country's culture, such as artifacts, behaviour, dress, symbols,
physical settings, ceremonies, language differences, colours and tastes, and food
preferences, are easy to spot. But the subtle aspects of culture generally are trickier to
identify and navigate.
The region in which people live in a particular country affects the way they react to different
cultural rituals, or even how they refer to a particular product category.
Demographics indicate the characteristics of human populations and segments, especially
those used to identify consumer markets, such as age, gender, income, race, ethnicity and
A group of people of the same generation, generational cohorts, have similar purchase
behaviours because they have shared experiences and are in the same stage of life. Tweens
—not quite teenagers but not young children either (9-12)—sit in beTWEEN. The importance
of tweens to marketers stems from their immense buying power, In Canada, tweens spend
their money mainly on food and drinks, electronics (gaming consoles and games, digital
music players, cellphones, and computers) and clothing. They learn about new products
mainly from TV shows and friends. Although they enjoy the attention they get from marketers,
they are not an easy group to market to. Tweens are also known as speeders, because they
do everything at lightning speed.Marketers must be careful with this cohort though; once they
get bored, tweens are gone, off doing something else. Generation Y, also called millennials
or the “echo boom” generation, represent just over 7 million Canadians, or about 21 percent
of the population. This group also varies the most in age (13-32), ranging from teenagers to
young adults who have their own families. Generation Y grew up in a more media-intensive
and brand-conscious era than their parents. Thus, they are more skeptical about what they
hear in the media, which makes marketing to this group even more challenging. If a gen Y
member believes the sell is “too hard,” they won't buy. Gen Y puts a strong emphasis on
balancing work and life; these young adults want a good job, but they also want to live in a
location that supports their lifestyle. EXHIBIT 3.4Generational Cohort Comparisons, page 3.4
Generation X. are people between the ages of 36 and 47. Unlike their baby boomer parents,
gen X is the first generation of latchkey kids: those who grew up in homes in which both
parents worked. These young adults, having grown up in times of economic recession, are
more likely than previous generations to be unemployed. Gen Xers possesses considerable
spending power because they tend to wait to get married and buy houses later in life. They're
much less interested in shopping than their parents but are far more cynical, which tends to
make them astute consumers. Finally, gen X is much less interested in status products than
older generations, not because they can't afford luxury brands but because they just don't see the point. Baby Boomers. After World War II, the birth rate in Canada rose sharply,
resulting in a group known as the baby boomers, who are between the ages of 48 and 66.
First, they are individualistic. Second, leisure time represents a high priority for them. Third,
they believe that they will always be able to take care of themselves, partly driven by their
feeling of economic security, even though they are a little careless about the way they spend
their money. Fourth, they have an obsession with maintaining their youth. Fifth and finally,
they will always love rock 'n' roll. The baby boomers' quest for youth, in both attitude and
appearance, provides a massive market for anti-aging products.
Seniors are over the age of 65 and make up Canada's fastest-growing group. They're more
likely to complain, need special attention, and take time browsing before making a purchase
compared with younger groups. However, they generally have time to shop and money to
spend. Specifically, seniors tend to like “made in Canada” items and recognizable brand
names (but generally not designer labels), value, quality, and classic styles. They're typically
loyal and willing to spend but are extremely quality conscious and demand hassle-free
The median income of Canadian families in 2008 was approximately $63,900. Canadians
may be classified into distinct groups based on their income and other factors such as
background, education, and occupation: upper class, middle class, working class (or low-
income earners), and under class (at or below poverty). Upper class consumers are very
affluent, and their spending patterns are not influenced by economic conditions. They have
high discretionary incomes and tend to purchase luxury items. Middle class families earn
between $30,000 to $70,000, with the majority tending toward the higher end of this scale.
They can afford a good life most of the time. They tend to be careful about their spending
and are often value-conscious. Approximately 38 percent of Canadian households fall in the
middle class. Working class, or low-income families, earn between $20,000 and $30,000,
barely sufficient income to cover their basic needs. Under class families earn less than
$20,000 and often rely on assistance to cover their basic needs. Just under 15 percent of
Canadian households belong to the working class and the under class. Another aspect of the
income demographic relates to the concept of value. In contrast, median earnings among
those in the bottom 20 percent fell 20.6 percent. Median earnings among those in the middle
20 percent stagnated, increasing by only 0.1 percent.
Studies show that higher levels of education lead to better jobs and higher incomes.
Moreover, average annual earnings are higher for those with degrees than for those without.
Marketers are therefore quite cognizant of the interaction among education, income, and
Years ago, gender roles appeared clear, but those male/female roles have been blurred.
This shift in attitude and behaviour affects the way many firms design and promote their
products and services. Although the gap is narrowing, men still earn more money than
Statistics Canada data shows that the ethnic composition of Canada has changed over the
last two decades and will continue to change in the next decade. Current research shows
that 1 out of every 5 Canadians was not born here, accounting for nearly 70 percent of
Canada's population growth. What does this ethnic demographic shift mean for marketers?
Simply put, the growing number of ethnic groups or visible minorities represents both a challenge and a marketing opportunity. The challenge is for marketers to understand the
culture, value, and spending patterns of the various groups and figure out the best way to
communicate and serve them. In terms of marketing opportunity, it is estimated that ethnic
groups spend more than $42 billion on retail goods and services, and the average Chinese
household spends $63,500 per year, compared with the Canadian average of $58,500.
LO 5Social Trends
Social trends shape consumer values in Canada, US, and the world. Change over time in
popularity and importance, marketers try to identify emerging trends to see if they are an
opportunity or threat.
Green marketing involves a strategic effort by firms to supply customers with
environmentally friendly merchandise. Although this “green” trend is not new, it is growing.
Marketing to Children
The Center for Science and the Public Interest (CSPI) has proposed Guidelines for
Responsible Food Marketing to Children, which outlines a variety of changes to advertising
directed at children. The CSPI notes that children are highly impressionable, and most food
advertising to these young consumers touts high-calorie, low-nutrition products, associated in
advertising with various toys, cartoons, and celebrities.
More and more consumers worldwide sense a loss of privacy. Along with the Internet →
created an exploding volcano of accessibility to consumer information, improvements in
computer storage facilities and the manipulation of information have led to more and better
credit check services.
The Time-Poor Society
Reaching a target market has always been a major challenge, but it is made even more
complicated by several trends that increase the difficulty of grabbing those markets' attention.
First, in the majority of families, both parents work, and the kids are busier than ever.
Second, consumers today have hundreds of shows and programs available to them through
TV, radio, PDAs, DVDs, smartphones, personal computers, and the Internet. Third, many
consumers attempt to cope with their lack of leisure time by multitasking: watching TV or
listening to music while talking on the telephone or doing homework. Marketers are thus
faced with the challenge of finding more creative ways to get their marketing messages out
to consumers under these ever-changing media consumption trends.
Technological advances, technological changes that have contributed to the improvement
of the value of both products and services it the past few decades. On the retail side, firms
are able to track an item from the moment it is manufactured, through the distribution system,
to the retail store, and into the hands of the final consumer by using radio frequency
identification device (RFID) chips that are affixed to the merchandise. Because they are able
to determine exactly how much of each product is at a point in the supply chain, retailers also
can communicate with their suppliers—instantaneously over the Internet—and collaboratively
plan to meet their inventory needs. Different technology adoption levels also matter to
marketers when communicating a new product or using a new media type. Not only are
marketers trying to make social media an integral part of their marketing strategy, but also
consumers are using social media to share information and their experiences and
frustrations with products, services, and marketers. As well as posing a serious threat to marketers, this mixture of social media and traditional media is also an opportunity for
marketers to demonstrate their customer care efforts and gain free publicity. The key
challenge for marketers is to spot emerging technology trends very early and to assess their
likely impact, positive or negative, on business. They must then develop appropriate
strategies for responding to the trends.
Marketers monitor the general economic situation, both in their home country and abroad,
because it affects the way consumers buy merchandise and spend money. Some major
factors that influence the state of an economy include the rate of inflation, foreign currency
exchange rates, interest rates, and recession. Inflation refers to the persistent increase in
the prices of goods and services. Increasing prices cause the purchasing power of the dollar
to decline; in other words, a dollar buys less than it used to. Another, perhaps unexpected
result of the strengthening of the Canadian dollar compared with the U.S. dollar, is that it
might allow Canadian manufacturers to win and American manufacturers to lose—that is,
imports of raw material from the United States are cheaper. Interest rates represent the cost
of borrowing money. Finally, recession is a period of economic downturn when the
economic growth of the country is negative for at least a couple of consecutive quarters. We
experienced this in 2008–2009. In a recession, the stock market declines sharply,
unemployment increases, business and consumer confidence falls, and spending by both
businesses and consumers is severely reduced. Indeed, thousands of consumers lose their
jobs during a recession; thus, their purchasing power is greatly reduced. Even people who
have jobs tend to spend cautiously because of uncertainty as to whether they will lose or
keep their jobs. recession In recessionary times, consumers alter their spending patterns by
postponing big-ticket or discretionary items and look for the best deals for items they need—
that is, they become even more value conscious, wanting the most value for their money.
Marketers must adjust their marketing strategies accordingly. How do these four important
economic factors—inflation, foreign currency fluctuations, interest rates, and recession—
affect a firm's ability to market goods and services? Shifts in the four economic factors make
marketing easier for some and harder for others. As consumers switch from more- to less-
expensive goods and services and demand greater value, marketers who were able to adjust
their offering did much better than those who did not change their value offering.
The political/legal environment comprises political parties, government organizations, and
legislation and laws that promote or inhibit trade and marketing activities. Organizations must
fully understand and comply with any legislation regarding fair competition, consumer
protection, or industry-specific regulation. Legislation also has been enacted to protect
consumers in a variety of ways. First, regulations require manufacturers to abstain from false
or misleading advertising practices that might mislead consumers, such as claims that a
medication can cure a disease when in fact it causes other health risks. Second,
manufacturers are required to identify and remove any harmful or hazardous materials (e.g.,
asbestos) that might place a consumer at risk. Third, organizations must adhere to fair and
reasonable business practices when they communicate with consumers. Last but not least,
the government enacts laws focused on specific industries and on consumers. These laws
may be geared toward increasing competition, such as the deregulation of the telephone and
energy industries. Or, they may be in response to current events or to Generally, government
regulations may have a negative or positive impact on marketers. On the positive side,
certain laws create an opportunity for marketers to sell more of their products. In other cases, regulation tends to increase the cost of compliance; compliance usually requires more
paperwork, time, effort, and money and may cause delays when government approval is
Chapter 4, marketing research
As the E.D. Smith example shows, marketing research is a key prerequisite to successful
decision making; it consists of a set of techniques and principles for systematically collecting,
recording, analyzing, and interpreting data that can aid decision makers involved in
marketing goods, services, or ideas.
LO1The Marketing Research Process
Managers consider several factors before embarking on a marketing research project. First,
will the research be useful? Will it provide insights beyond what the managers already know
and reduce uncertainty associated with the project? Second, is top management committed
to the project and willing to abide by the results of the research? Related to both of these
questions is the value of the research. Third, should the marketing research project be small
or large? Because research is both expensive and time-consuming, it is important to
establish in advance exactly what information is required to answer specific research
questions, and how that information should be obtained. The marketing research process
itself consists of five steps, as shown in Exhibit 4.1., page 121. Although the stages of the
marketing research process are shown as a step-by-step progression, of course, research
doesn't always happen this way. Another important step when embarking on a research
project is to plan the entire project in advance. By planning the entire research process well
in advance of starting the project, researchers can avoid unnecessary alterations to the
research plan as they move through the process. Now let's examine each step of the
research process in more detail.
Step 1: Define the Research Problem and Objectives Correctly
Defining the marketing problem is one of the most important elements of the marketing
research process. To underscore the importance of this first step, some marketing
researchers claim that this aspect is the most difficult of the marketing research process.
Easy to make mistakes, however, timely and focused marketing research could help
companies refine their marketing efforts and campaigns. Thus, market researchers devote
considerable effort to defining the problem and trying to separate the symptoms of a problem
from the actual problem.
Step 2: Design the Research Project
The second step in the marketing research project involves design. In this step, researchers
identify the type of data needed and determine the type of research necessary to collect it.
Recall that the objectives of the project drive the type of data needed, as outlined in Step 1.
The specific purpose of the marketing research is twofold: to determine the brand's current
relative market share (Chapter 2) and to assess how that position will change in the next few
years. Identifying the type of data needed for the first purpose—determining relative market
share—is fairly straightforward. It requires finding the company's sales during a particular
time frame relative to the largest firm in the industry. Identifying the type of data needed for
the second purpose—assessing the extent to which the firm's market position will improve,
stay the same, or deteriorate—is not as easy to obtain. The marketer must now decide whether the data required to make a decision should be obtained from secondary sources or
LO2 Secondary Data
Are pieces of information that have been collected prior to the start of the focal research
project. Secondary data include both external and internal data sources. A marketing
research project often begins with a review of the relevant secondary data. Secondary data
might come from free or very inexpensive external sources such as census data, information
from trade associations, the Internet, books, journal articles, and reports published in
magazines and newspapers. Primary data, in contrast, are those data collected to address
the specific research needs/questions currently under investigation. Some primary data
collection methods include focus groups, in-depth interviews, and surveys. LO3 Sometimes,
however, secondary data are not adequate to meet researchers' needs. Because the data
initially were acquired for some purpose other than the research question at hand, they may
not be completely relevant. Although the secondary data described above is either free or
inexpensive and can be quickly accessed, they may not always be adequate to answer the
research objective. Under these circumstances, marketers may find it useful to purchase
external secondary data called syndicated data, which are data available for a fee from
commercial research firms such as SymphonyIRI Group. Finally, when it comes to secondary
data, marketers must pay careful attention to how the secondary data were collected.
Despite the great deal of data available on the Internet and elsewhere, easy access does not
ensure that the data are trustworthy.
In many cases, the information researchers need is available only through primary data, or
data collected to address the specific research needs/questions currently under investigation.
Marketers collect primary data by using a variety of means, such as observing consumer
behaviour, conducting focus groups, or surveying customers by using the mail, telephone, in-
person interviews, or the Internet. Primary data collection can help eliminate some of the
problems inherent to secondary data. A major advantage of primary research is that it can be
tailored to fit the research questions; however, it also has its own set of disadvantages. For
one thing, it is usually more costly to collect primary than secondary data, and the collection
typically takes longer. Furthermore, marketers often require extensive training and
experience to design and collect primary data that are unbiased, valid, and reliable.
EXHIBIT 4.4, p 126. Data collection through primary research requires that the researcher
makes several important decisions. These decisions include which methods to use (see
Exhibit 4.5 for a list of various methods), what types of sampling plan is best in light of the
research objective, what types of research instruments (e.g., questionnaire, observation) to
use, how the research instrument should be designed (described below), and how best to
contact potential respondents (telephone, online, in-person, or mail). Improper execution of
any of these important aspects of primary data collection could seriously reduce the reliability
and validity of the research study. EXHIBIT 4.5Exploratory Versus Conclusive Data
Collection, p 127. Simply put, reliability is the extent to which you will get the same result if
the study is repeated under identical situations. Validity is the extent to which the study
actually measures what it is supposed to measure. One very important aspect of market
research that can affect the reliability and validity of a study is the sampling plan. Often it is
too difficult, impractical, or costly to study the entire group of consumers, so marketers
usually select a sample, a segment or subset of the population that adequately represents
the entire population of interest. Three important questions that must be answered are (1) who should be surveyed, (2) how big should the sample be, and (3) what types of sampling
procedure to use? Although there is a formula in statistics to calculate required sample size,
as a rule of thumb, sample sizes should be large enough to ensure the reliability of the study.
Generally, larger samples tend to yield more reliable results up to a certain point.
LO4 Step 3: Collect Data
Depending on the nature of the research problem, the data collection method can employ
either an exploratory method or a conclusive research method. As its name implies,
exploratory research attempts to begin to understand the phenomenon of interest; it also
provides initial information that helps the researcher more clearly formulate the research
problem or objectives. Exploratory research is more informal and qualitative than conclusive
research methods and includes observation, following social media sites, in-depth interviews,
focus groups, and projective techniques shows how researchers are using exploratory
research methods to develop a better understanding of how organizations can build
sustainability into their organizational culture. exploratory research Attempts to begin to
understand the phenomenon of interest; also provides initial information when the problem
lacks any clear definition. If the firm is ready to move beyond preliminary insights gained from
exploratory research, it is likely ready to engage in conclusive research, which provides
the information needed to confirm those insights and which managers can use to pursue
appropriate courses of action. For marketing researchers, because it is often quantitative in
nature, conclusive research offers a means to confirm implicit hunches through surveys,
formal studies such as specific experiments, scanner and panel data, or some combination
of these. Conclusive research also enables researchers to test their prediction or
hypothesis, which is a statement or proposition predicting a particular relationship among
Exploratory (Qualitative) Research Methods
Observation, an exploratory research method, observation entails examining purchase and
consumption behaviours through personal means or the use of technology, such as video
camera or other tracking devices. Ethnography is an observational method that studies
people in their daily lives and activities in their homes, work, and communities. It is often
used when market researchers believe that potential respondents may be unable to express
in a useful way their experiences with a product or service. Ethnographic studies require
highly trained researchers. Analysis of ethnographic data requires very experienced and
knowledgeable market researchers to make sense of hours of video tapes, audio tapes, or a
volume of notes from the researcher's diary.
An in-depth interview is an exploratory research technique in which trained researchers
ask questions, listen to and record the answers, and then pose additional questions to clarify
or expand on a particular issue. In-depth interviews have quite a few benefits. They can
provide a historical context for the phenomenon of interest, particularly when they include
industry experts or experienced consumers. They also can communicate how people really
feel about a product or service at the individual level, a level that rarely emerges from other
methods that use group discussions. Finally, marketers can use the results of in-depth
interviews to develop surveys.
Focus Group In focus groups, a small group of persons (usually 8 to 12) comes together for an in-depth
discussion about a particular topic. Using an unstructured method of inquiry, a trained
moderator guides the conversation on the basis of a predetermined general outline of the
topics of interest. Researchers usually record the interactions on videotape or audiotape so
they can carefully comb through the interviews later to catch any patterns of verbal or
nonverbal responses. In particular, focus groups gather qualitative data about initial reactions
to a new or existing product or service, opinions about different competitive offerings, or
reactions to marketing stimuli, like a new ad campaign or point-of-purchase display materials.
A projective technique is a type of qualitative research in which subjects are provided a
scenario and asked to express their thoughts and feelings about it. The respondent would
write in their thoughts on the issue in the text box. Thus, the cartoon allows respondents to
visualize the situation and project their thoughts or feelings by filling out the text box.
Social media sites are a booming source of data for marketers. Marketers believe that social
media can provide valuable information that could aid them in their marketing research and
strategy endeavours. These social media sites can provide insights into what consumers are
saying about the firm's own products or its competitor's products. Customers appear keen to
submit their opinions about their own and friends' purchases and interests to polls and blogs.
Marketers are paying attention to online reviews about everything from restaurants to running
shoes to jeans. One question that must be going through your mind at this stage is which of
these primary qualitative data collection techniques are used most frequently. Generally,
focus groups and in-depth interviews are used more frequently than personal observations,
especially ethnography. Deciding which technique to use depends on several important
considerations, such as the objective of the research, the cost to undertake the research, the
time required to undertake the research, how soon the results are needed, and whether the
marketer has the research expertise in-house or has to hire a market research firm to do the
research, especially with methods such as ethnography and projective techniques. Normally,
marketers have to make a trade-off between these considerations to get the results in a
timely and cost-effective manner. Often a company may use several methods together to get
Conclusive (Quantitative) Research Methods
Conclusive research is intended to verify insights and to aid decision makers in selecting a
specific course of action. Conclusive research can be descriptive in nature, such as when it
profiles a typical user or non-user of a particular brand according to a survey.
Survey research is probably the most popular type of conclusive research method used in
marketing research. It is widely used to study consumers' attitudes, preferences, behaviours,
and knowledge about products and brands. It is generally more cost-effective than other
methods for reaching a large sample of consumers. Survey questionnaires usually yield
quantitative data that can be easily analyzed by using sophisticated statistical methods to
examine the relationships among variables. However, it suffers from a few shortcomings.
Consumers may be unable to answer some of the questions on the questionnaire, may not
be able recall the information, or may even interpret the questions differently from what the researchers intended. Another big problem, especially in the data analysis phase, is when
respondents answer some but not all the questions on the questionnaire. Incomplete data
makes the analysis and interpretation of the data more complicated and tricky A survey is a
systematic means of collecting information from people that generally uses a questionnaire.
A questionnaire is a form that features a set of questions designed to gather information
from respondents and thereby accomplish the researchers' objectives. Survey questionnaires
can take different forms:Individual questions on a questionnaire can be either unstructured or
structured. Unstructured questions are open-ended and allow respondents to answer in
their own words. Structured questions thus are closed-ended questions for which a
discrete set of response alternatives, or specific answers, is provided for respondents to
evaluate. Developing a questionnaire is part art and part science. The questions must be
carefully designed to address the specific set of research questions. Moreover, for a
questionnaire to produce meaningful results, its questions cannot be misleading in any
fashion (e.g., open to multiple interpretations), and they must address only one issue at a
time. Furthermore, they must be worded in vocabulary that will be familiar and comfortable to
those being surveyed. More specifically, the questions should be sequenced appropriately.
Finally, the layout and appearance of the questionnaire must be professional and easy to
follow, with appropriate instructions in suitable places. Marketing surveys can be conducted
either online or offline, but online marketing surveys offer researchers the chance to develop
a database quickly with many responses, whereas offline marketing surveys provide a more
direct approach that includes interactions with the target market. Web surveys have steadily
grown as a percentage of all quantitative surveys. Many online survey tools let researchers
quickly design a survey, launch it, download the data, and analyze the data even as the
survey is progressing, as well as at the end of the data collection. Response rates are
relatively high. Traditional phone or mail surveys require laborious data collection, tabulation,
summary, and distribution before anyone can grasp their results. The Internet can also be
used to collect data other than that available from quantitative surveys. Marketing
researchers typically use different types of scales to measure certain concepts such as
attitudes, perceived quality, perceived value, loyalty, and convenience.
Experimental research is a type of quantitative research that systematically manipulates
one or more variables to determine which variable(s) have a causal effect on another
Scanner research is a type of quantitative research that uses data obtained from scanner
readings of UPC codes at checkout counters. Whenever you go into your local grocery store,
your purchases are rung up by using scanner systems. The data from these purchases are
likely to be acquired by leading marketing research firms
Panel research is a type of quantitative research that involves collecting information from a
group of consumers (the panel) over time. The data collected from the panellists may be from
a survey or a record of purchases. This data provides consumer packaged goods firms with a
comprehensive picture of what individual consumers are buying or not buying. P. 137 exhibit
Step 4: Analyze Data
The next step in the marketing research process—analyzing and interpreting the data—
should be both thorough and methodical. To generate meaningful information, researchers analyze and make use of the collected data. In this context, data can be defined as raw
numbers or other factual information that, on their own, have limited value to marketers.
However, when the data are interpreted, they become information, which results from
organizing, analyzing, and interpreting the data, and putting it into a form that is useful to
marketing decision makers. The purpose of converting data to information is to describe,
explain, predict, and/or evaluate a particular situation. Data analysis might be as simple as
calculating the average purchases of different customer segments or as complex as
forecasting sales by market segment by using elaborate statistical techniques. It is important
for market researchers to analyze and interpret the data in an objective manner. They should
not try to hide or colour-coat findings that are different from what they had hoped for.
Misinterpreting the findings or manipulating the statistics in a way to suit the researcher's
hunch or prediction could lead to the wrong decision, which could have serious
consequences for marketers. The temptation to lie with statistics is something market
researchers must always be aware of and try to avoid.
Step 5: Present Action Plan
In the final phase of the marketing research process, the analyst prepares the results and
presents them to the appropriate decision makers, who undertake appropriate marketing
actions and strategies. A typical marketing research presentation includes an executive
summary, the body of the report (which discusses the research objectives, methodology
used, and detailed findings), the conclusions, the limitations, and appropriate supplemental
tables, figures, and appendices. To be effective, a written report must be short, interesting,
methodical, precise, lucid, and free of errors. Furthermore, the reports should use a style
appropriate to the audience, devoid of technical jargon, and include recommendations that
managers can actually implement.
LO5 The Ethics of Using Customer Information
A strong ethical orientation must be an integral part of a firm's marketing strategy and
decision making. In Chapter 17, we will discuss how marketers have a duty to understand
and address the concerns of the various stakeholders in the firm. As technology continues to
advance rapidly, especially in terms of a firm's ability to link data sets and build enormous
databases that contain information on millions of customers, marketing researchers must be
careful to not abuse their ability to access these data, which can be very sensitive. More and
more, consumers want to be assured that they have control over the information that has
been collected about them through various means, such as a website or product registration
or rebate form. It is extremely important to adhere to ethical practices when conducting
marketing research. The Canadian Marketing Association, for example, provides three
guidelines for conducting marketing research: (1) it prohibits selling or fundraising under the
guise of conducting research, (2) it supports maintaining research integrity by avoiding
misrepresentation or the omission of pertinent research data, and (3) it encourages the fair
treatment of clients and suppliers.
Chapter 5, consumer behaviour
The Prius provides an excellent example in which a company identified a consumer need
even before it was articulated and brought a product to market to satisfy that need. The
hybrid-car market is still a niche market consisting of consumers who are excited about new
technologies (technology enthusiasts), who are environmentally conscious, and who are value conscious (i.e., looking for high fuel economy and low maintenance at affordable
prices). All of us purchase goods and services; therefore, we are all consumers at one time
or another. But we are also complex and irrational creatures who cannot always explain our
own actions, making the job of marketing managers even more difficult because without a
deep understanding of consumers' behaviour, they will not be able to properly satisfy the
needs and wants of their customers. To understand consumer behaviour, we must ask why
people buy products or services, or even specific brands. Using principles and theories from
sociology and psychology, marketers have been able to decipher many consumer actions
and develop basic strategies for dealing with their behaviour. Generally, people buy one
product or service instead of another because they perceive it to be the better value for them;
that is, the ratio of benefits to costs is higher for that product or service than for any other.3
However, “benefits” can be subtle and far from rationally conceived, as we shall see
The Consumer Decision Process
The consumer decision process model represents the steps that consumers go through
before, during, and after making purchases. EXHIBIT 5.1The Consumer Decision Process, p
Step 1: Need Recognition
The consumer decision process begins when consumers recognize they have an unsatisfied
need and want to go from their actual, needy state to a different, desired state. The greater
the discrepancy between these two states, the greater the need recognition will be.
Functional needs pertain to the performance of a product or service.
Psychological needs pertain to the personal gratification consumers associate with a
product and/or service. Vast majority of products and services are likely to satisfy both
functional and psychological needs, albeit in different degrees. A key to successful marketing
is determining the correct balance of functional and psychological needs that best appeals to
the firm's target markets. So, what can marketers do at the need recognition stage to
influence consumer purchase decisions? Marketers use numerous tactics to either remind
customers of a need or create new needs. Researching and understanding what products
and services customers need or want and why, are the first steps in developing appropriate
tactics. Common tactics marketers employ include using reminder advertising for their
products, creating awareness about a new product and its capabilities, showing how a
product could enhance consumers' image, and even altering the physical layout of a store or
where products are placed in stores.
LO2 Step 2: Information Search
The second step, after a consumer recognizes a need, is to search for information about the
various options that exist to satis