Textbook notes for Marketing.docx

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Department
Management and Organizational Studies
Course Code
Management and Organizational Studies 2320A/B
Professor
Gail Leizerovici

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Description
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 components. 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 and services. 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 customers! 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 them loyal. 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 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. Sales Orientation 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 Orientation 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. Value-Based Orientation 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. Sharing Information 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 services. 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 success. 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 competitive advantage. 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 Positioning) 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. Segmentation 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. Targeting 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. Positioning 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 competing products. 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 wants it. 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 metrics. 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. Portfolio analysis 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. Growth Strategies 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 new opportunity. Market Penetration 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. Market Development 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. Diversification 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 reasons. 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 financial performance 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 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. Operational Excellence 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 Product excellence The third way to achieve a sustainable competitive advantage, occurs by having products with high perceived value and effective branding and positioning. Locational Excellence 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 marketing offers. 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 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. Corporate Partners Few firms operate in isolation. For example, automobile manufacturers collaborate with suppliers. All three strategies are central to the firms marketing strategy and help add value to firms products. LO3Macroenvironmental Factors 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. Culture Culture 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. Country Culture 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. Regional Subcultures 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 Demographics indicate the characteristics of human populations and segments, especially those used to identify consumer markets, such as age, gender, income, race, ethnicity and education. Generational Cohorts 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 shopping, Income 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. Education 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 occupation. Gender 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 women. Ethnicity 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. Greener Consumers 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. Privacy Concerns 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 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. Economic Situation 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. Political/Legal Environment 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 needed. 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 primary sources. 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. Primary Data 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 multiple variables. Exploratory (Qualitative) Research Methods Observation 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. In-Depth Interviews 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. Projective Technique 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. 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 actionable results. 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 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 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 variable. Scanner Research 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 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 4.10 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 152 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 Functional needs pertain to the performance of a product or service. Psychological Needs 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
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