MARKETING

MANAGEMENT
Prima parte

Federica Tagle
 1) Marketing
Case 1: Zappos

Marketing is engaging customers and managing profitable customer relationships to attracts

new customers by promising superior value and to keep and grow customers by delivering
value and satisfaction.
From the beginning marketing is all around us but in recent years, new marketing approaches
have been developed to reach the community directly.

Marketing Defined
Marketing must be understood as ”satisfying customer needs”. If the market understand their
needs and promotes them well, these products will sell easily. A larger marketing mix is
nothing but a set of marketing tools that work together to engage customers, satisfy customer
needs, and build customer relationships, all these actions together create the concept of
marketing in order to capture value from customers in return.

The Marketing Process

There are 5 main steps for creating and capturing customer value; in the first four steps,
companies work to understand the customer and create customer value and build strong
relationships. In the final step they turn the capture of value from customer.

Understanding the market place and customer needs

The main goal is to understand the customer needs and wants it in the marketplace in which
they operate.
There are 5 core customer and
marketplace concepts:

1.needs, wants and demands: human

needs are physical, social and
individual needs. Different are wants
that are nothing but needs shaped by
culture and individual personality.
Demands are what people ask as
products and services with benefits that
add up to the most valuable
satisfaction. In order to reach it
companies conduct consumer research
and observe them.

2. market offerings: consumer’s needs and wants are fulfilled through market offerings as to
say a combination of products, services and information offered by the market to satisfy a
 need or a want. Lots of times sellers suffer from marketing myopia as the mistake of paying
more attention to specific product rather than the benefits and experiences the good gives
to the company itself. Good marketers, indeed create brand experiences for customers.

3. value and satisfaction: customers form expectations about the value and satisfaction that
various market offerings will deliver and buy accordingly. Marketers must be careful to set
the right level of expectations. If they set expectations too low, they may satisfy those who
buy but fail to attract enough buyers. If they set expectations too high, buyers will be
disappointed.

4. exchange and relationship: exchange is the act of obtaining a desired object from
someone by offering something in return. The marketer tries to bring a response that
should be more than just buying and trading. Marketing consists of actions taken to
create, maintain, and grow desirable exchange relationships with target audiences.

5. markets: market is the set of actual and potential buyers of a product or service. Marketing
means managing markets to bring up profitable customer relationships, that is not as
simple as expected. Activities such as consumer research, product development,
communication, distribution, pricing, and service are core marketing activities. Buyers
have an important role too when they search for products, interact and obtain information
to make their purchase, thank even to the technology. Each party in the system is affected
by major environmental forces and each party in the system adds value for the next level.

Designing a Customer Value - Driven Marketing Strategy and Plan

We define marketing management as the art and science of choosing target markets and
building profitable relationships. They aim to engage, keep and grow target customer that is
possible by creating, delivering and communicating superior customer value.
To design a winning marketing strategy two important questions must be done:
1. what customer we will serve?
2. how can we serve these customers best?

Selecting Customers to Serve

To understand whom to serve it’s important to divide the market into:
• Market segmentation regarding segment of customers
• Target marketing selecting which segments it will go after
Marketers know that they cannot serve all customers in that case they may not serve any
customers well, this is the reason why a company wants to selects just a specific category that
will be highly profitable. All these activities are implemented by the customer management
and demand management.

Choosing a Value Position

The company must take into account how it will differentiate and position itself in the
marketplace. A brand’s value proposition is the set of benefits or values it provides is it to
deliver to satisfy customers needs. Such value propositions differentiate one brand from
another, that will give great advantages.

Marketing Management Orientations

There are 5 alternative concepts that lead a company to a specific marketing strategy:

1. Production concept: consumer will favor products that are available and highly affordable.
The role of the manager is to improving the production and distribution efficiency
(avoiding marketing myopia). This is highly risky bear use sometimes company’s may focus
too much on their own operation rather than on the real object.

2. Product concept: consumer will favor products that offer the most in quality, performance
and innovation features. Here the marketing strategy is to focus on marketing continuous
product improvements. Even in this case there could be the marketing myopia.

3. Selling concept: consumer will not buy enough unless it undertakes a large-scale selling
and promotion effort. This concept works with those goods that buyers don’t typically
think of buying. Here the percentage of risk is really high because sellers focus their effort
on creating sales transaction rather than building long-term relationships with customers;
as a matter of fact the goal in this section is to sell everything the company makes.

4. Marketing concept: achieving organizational goals depends on knowing the needs and
wants and delivering better than the competitors do. The marketing concept is a customer-
centered sense-and-respond philosophy. The graphic above shows the contrasts between
the selling concept and the marketing concept:
• The selling concept takes an inside-out perspective, focuses on the company’s existing
products, selling and promotion to obtain profits. It focuses primarily on getting short-
term sales with little concern about who buys or why.
• The marketing concept takes an outside-in perspective. The marketing concept starts with
a well-defined market, focuses on customer needs. In turn, it yields profits by creating
relationships with the right customers based on customer value and satisfaction.
Customer-driven companies research customers deeply to learn about their desires but in
many cases, clients don’t know what they want.

5. Societal marketing concept:marketing strategy should deliver value to customers in a way

that maintains or improves both the consumer’s and society’s well-being for the
 sustainable marketing as to say a marketer that meets the
present needs of consumer while also preserving and
enhancing the ability of future generations to meet their
needs. This cause led marketers to think about the share
value recognizing the social and economic needs,
balancing the triangle of the concept.

Preparing an Integrated Marketing Plan and Program

The company’s marketing strategy outlines which customers it will serve and how it will create
value for these customers.
The marketing program transform the marketing strategy into action. It consists of the firm’s
marketing mix, tools the firm uses to implement its marketing strategy.
The major marketing mix tools are divided into 4 broad groups, the four Ps:
• product
• price
• place
• promotion
To deliver on its value proposition, the firm must first create a offering product. It must then
decide how much it will charge as price and how it will make the offering available to target
consumers, the place. Finally, it must engage target consumers, communicate and persuade
consumers through the promotion. The firm must blend each marketing mix tool into a
comprehensive integrated marketing program.

Managing Customer Relationships and Capturing Customer Value

How companies go about engaging customers on a deeper level in this age of digital and
social marketing.

Customer Relationship Management

Customer relationship management is the overall process of building and maintaining
profitable customer relationships.
It deals with different aspects:

• Customer Value and Satisfaction: The key to building lasting customer relationships is to
create superior customer value, satisfaction and loyalty. A customer buys from the firm that
offers the highest customer-perceived value. This happens usually because customers often
do not judge values and costs accurately or objectively, they act on perceived
value.Customer satisfaction depends on the product’s perceived performance relative to a
buyer’s expectations. If the product’s performance falls short, the customer is dissatisfied.
However If performance matches expectations, the customer is satisfied. Higher levels of
customer satisfaction lead to greater customer loyalty, because delighted customers repeat
 purchases and become marketing partners and spread the word about their good
experiences to others. It essential to remember not to “give away the house” once the
company tries to attract customers.

• Customer Relationship Levels and Tools: a company with many low-margin customers may
seek to develop a basic relationships. In markets with few customers and high margin,
sellers want to create full partnership. Marketers can use specific marketing tools to develop
stronger bonds indeed many companies offer frequency marketing programs that reward
customers who buy frequently. Today’s digital technologies have profoundly changed the
ways that people relate to one another.

• Customer Engagement and Today’s Digital and Social Media: the old marketing involved
marketing brands to consumers, however the new marketing is customer-engagement
marketing, in other words the continuous customer involvement. Its goal is to make the
brand a meaningful part of consumers’ conversations and lives. Knowing that today’s
consumers are better informed and more connected thus, marketers are now embracing the
customer-managed relationships, in which customers connect with companies and with
each other to help forge and share their own brand experiences. Marketers must practice
marketing by attraction.The key to engagement marketing is to find ways to enter targeted
consumers’ conversations with engaging and relevant brand message.

Consumer-Generated Marketing
The consumer-generated marketing, by which consumers themselves play role in shaping
their own brand experiences. This might happen through blogs, video-sharing sites, social
media. Some companies go directly to their customers for new product ideas and designs,
other companies invite customers to play an active role in shaping ads and brand content.
Many brands incorporate user-generated social media content into their own traditional
marketing and social media campaigns.
As consumers become more connected and empowered, consumer brand engagement, will
be an increasingly important marketing force.

Partner Relationship Management

To being good at customer relationship management, marketers must also be good at partner
relationship management, this means working closely with others inside and outside the
company to bring more value to customers.
In today’s more connected world, every functional area in the organization can interact with
customers, a firms must link all departments in the cause of creating customer value.
The supply chain is a longer channel, from raw materials to components to final products that
are carried to final buyers. Through supply chain management, companies today are
strengthening their connections with partners.
Capturing Value from Customers
The first 4 steps, to capture value from customers, involve engaging customers and building
customer relationships by creating and delivering superior customer value. The final step
involves capturing value in return. By creating superior customer value, the firm creates
satisfied customers that means greater long-run returns for the firm.

• Creating Customer Loyalty and Retention: the aim of customer relationship management is
to create customer delight. Keeping customers loyal makes good economic sense and it’s
five times cheaper to keep an old customer than acquire a new one. Moreover losing a
customer means losing more than a single sale, it means losing the entire stream: customer
lifetime value. A company can lose money on a specific transaction but still benefit greatly
from a long-term relationship.

• Growing Share of Customer: good customer relationship management can increase their
share of customer as to say the portion of the customer’s purchasing that a company gets in
its product categories. To increase this, a firms can offer greater variety to current customers.
They can create programs to cross-sell and up-sell to market more products and services to
existing customers.

• Building Customer Equity: the value of a company comes from the value of its current and
future customers. Customer want to “own” them for life, earn a greater share of their
purchases, and capture their customer lifetime value. Customer equity is the total combined
customer lifetime values of all of the company’s current and potential customers. A measure
of the future value of the company’s customer base. The more loyal the customers, the
higher its customer equity. Customer equity may be a better measure of a firm’s performance
than current sales or market share.

• Building the Right Relationships with the Right Customers: companies should view
customers as assets that need to be managed and maximized. The company can classify
customers according to their potential profitability and loyalty, into one of 4 relationship
groups:
1. Strangers low potential profitability and little loyalty. The relationship management strategy
for these customers is don’t invest anything in them; make money on every transaction.
2. Butterflies are potentially profitable but not loyal; we can enjoy them for only a short
while. Company should create satisfying and profitable transactions with them, capturing
as much as possible.
3. True friends are both profitable and loyal. The firm
wants to turn true friends into true believers, who come
back regularly and tell others about their good
experiences.
4. Barnacles are highly loyal but not very profitable.
Barnacles are perhaps the most problematic customers,
if they cannot be made profitable, they should be
“fired.”
Different types of customers require different engagement and relationship management
strategies. The goal is to build the right relationships with the right customers.

The Changing Marketing Landscape

The Digital Age: Online, Mobile, and Social Media Marketing

The explosive growth in digital technology has changed the way we live, how we
communicate, share information, access entertainment, and shop. The age of the Internet of
Things (IoT), everything and everyone is digitally connected to everything and everyone else.
The consumer love affair with digital and mobile technology makes it fertile ground for
marketers trying to engage customers.
Digital and social media marketing involves using digital marketing tools consumers
anywhere. Nowadays most companies are integrating social and mobile media into the
marketing mixes:

• Social Media Marketing: social media provide exciting opportunities to extend customer
engagement and get people talking about a brand. Some social media are huge and offer an
ideal platform for real-time marketing, by which marketers can engage consumers in the
moment by linking brands to important trending topics.

• Mobile Marketing: is perhaps the fastest-growing digital marketing platform. Smartphones

makes them ideal for engaging customers anytime, anywhere. Four out of five smartphone
users use their phones to shop. Marketers use mobile channels to stimulate immediate
buying, make shopping easier, enrich the brand experience. Most marketers are still
learning how to use them effectively. The key is to blend smoothly integrated marketing
strategy and mix.

The Changing Economic Environment

The Great Recession of 2008 to 2009 forced consumers to bring their consumption back in
line with their incomes and rethink their buying priorities.
The new consumer spending values emphasize simpler living and more value for the dollar.
In response, companies in all industries have realigned their marketing strategies with the new
economic realities. More than ever, marketers are focusing on value for the money,
practicality, and durability in their product offerings and marketing pitches.
Companies may be tempted to cut their marketing budgets although cutting costs and offering
selected discounts can be important marketing tactics, smart marketers understand that cut in
the wrong places can damage long-term brand images and customer relationships. Many
marketers hold the line on prices and instead explain why their brands are worth it.

The Growth of Not-for-Profit Marketing

Marketing has also become a major part of the strategies of many not-for- profit organizations.
Government agencies have also shown an increased interest in marketing .
Rapid Globalization
Today every company is touched in some way by global competition. Companies are not just
selling more of their locally produced goods in international markets; they are also sourcing
more supplies and components abroad and developing new products for specific markets
around the world.

Sustainable Marketing—The Call for More Environmental and Social

Responsibility
Marketers are reexamining their relationships with social values and responsibilities and with
the Earth. Today’s marketers are being called on to develop sustainable marketing practices.
Customers expect companies to deliver value in a socially and environmentally responsible
way.
Some companies apply this method only when forced by legislation. Forward-looking
companies accept their responsibilities to the world around them looking at the sustainable
marketing as an opportunity.

2) Company and Marketing Strategy

Case 2: Rolex

Company-Wide Strategic Planning: Defining Marketing’s Role

The focus of strategic planning is developing and maintaining a strategic fit between the
organization’s goals and capabilities and its changing marketing opportunities.
The annual and long-range plans deal with the company’s current businesses and how to keep
them going. The strategic plan involves adapting the firm to take advantage of opportunities in
its constantly changing environment.
The company starts the strategic planning process by defining its overall purpose and mission.
Thus, marketing planning occurs at the business-unit, product, and market levels.

Defining a Market-Oriented Mission

An organization exists to accomplish something, and this purpose should be clearly stated. To
embody a successful mission a marketer should answer the following questions:
• What is our business? (Find the real reason, the ultimate goal)
• Who is the customer? (the target of customers you'd like to serve)
• What do consumers value?
• What should our business be?
A mission statement is a statement of the organization’s purpose, what to accomplish in the
larger environment. Mission statements should be market oriented and defined in terms of
satisfying basic customer needs.
Mission statements should be meaningful, specific and motivating. They should emphasize the
company’s strengths and tell forcefully how it intends to win in the marketplace.

Setting Company Objectives and Goals

The company needs to turn its broad mission into detailed supporting objectives for each level
of management. Marketing strategies and programs must be developed to support these
marketing objectives.

Designing the Business Portfolio

Management now must plan its business portfolio composed by businesses and products that
make up the company. It’s the one that best fits the company’s strengths and weaknesses to
opportunities in the environment.
Business portfolio planning involves 2 steps:
I. The company must analyze its current business portfolio and determine which businesses
should receive more, less, or no investment.
II. It must shape the future portfolio by developing strategies for growth and downsizing.

Analyzing the Current Business Portfolio

The portfolio analysis the process by which management evaluates the products and
businesses that make up the company.
Management’s first step is to identify the strategic business units (SBUs), they can be a
company division, a product line within a division, or sometimes a single product or brand.
The company next assesses the attractiveness of its SBUs.
Most standard portfolio analysis methods evaluate SBUs on 2 important dimensions:
• the attractiveness of the SBU’s market or industry
• the strength of the SBU’s position in that market or industry

The Boston Consulting Group Approach

Using the now-classic Boston Consulting Group (BCG) approach, a company classifies all its
SBUs according to the growth-share matrix, always taking into account that the market
growth rate provides a measure of market attractiveness.
There’re 4 types of SBUs:
1.Stars are high-growth, high-share businesses or products.
They often need heavy investments to finance their rapid
growth. Eventually they will turn into cash cows.
2.Cash cows are low-growth, high-share businesses or
products. Successful SBUs need less investment to hold their
market share. Thus, they produce a lot of the cash that the
company uses.
3.Question marks are low-share business units in high-growth.
 markets. They require a lot of cash to hold their share. Management has to think hard
about which it should try to build into stars and which to phase out.
4. Dogs are low-growth, low-share businesses and products. They may generate enough cash
to maintain themselves but do not promise to be large sources of cash.

Once it has classified its SBUs, the company must determine what role each will play in the
future. It can build its share, hold the SBU’s share at the current level, harvest the SBU or
finally, it can divest the SBU.
Such centralized approaches have limitations, they can be difficult, time consuming, and
costly to implement. These approaches provide little advice for future planning.
Many companies have dropped formal matrix methods in favor of more customized
approaches. Today’s strategic planning has been decentralized and managers have rich and
current data and can adapt their plans quickly.

Developing Strategies for Growth and Downsizing

Designing the business portfolio involves finding businesses and products the company
should consider in the future. Companies need to compete more effectively, satisfy their
stakeholders, and attract top talent.
Marketing needs to identify, evaluate, and select market opportunities and lay down strategies;
one useful device for identifying growth opportunities is the product/market expansion grid:
I.Consider whether the company can achieve deeper
market penetration as making more sales in its current
product lines and markets. It can adjust its product design,
advertising, pricing, and distribution efforts.
II.Consider possibilities for market development, in other
words identifying and developing new markets for its
current products (new demographic markets).
III. Consider product development, modifying or making new products to current markets.
IV. Consider diversification, like starting up or buying businesses outside of its current
products and markets.

Planning Marketing: Partnering to Build Customer Relationships

The company’s strategic plan establishes what kinds of businesses the company will operate
and its objectives for each.
Marketing plays a key role in the company’s strategic planning in several ways:
• philosophy: the marketing concept that suggests the company strategy should revolve
around customer value and relationships.
• inputs: aim to identify attractive market opportunities
• strategies for reaching the unit’s objectives.
Marketing alone cannot produce engagement and superior value for customers; marketers
must practice partner relationship management, they must work closely with partners to form
an effective internal value chain and a competitively superior external value delivery network.
Partnering with Other Company Departments
Each company department can be thought of as a link in the company’s internal value chain.
Each department carries out value-creating activities.The firm’s success depends also on how
well the various departments coordinate their activities and how well each group performs its
work.
The marketing department takes the consumer’s point of view. But when marketing tries to
improve customer satisfaction, it can cause other departments to do a poorer job.

Partnering with Others in the Marketing System

The firm needs to look beyond its own internal value chain and into the value chains of its
suppliers, etc...
More companies today are partnering with other members of the supply chain to improve the
performance of the customer value delivery network.

Marketing Strategy and the Marketing Mix

The strategic plan defines the company’s overall mission
and objectives.
Consumers are in the center. Then marketing strategy,
here company hopes to create customer value and
achieve profitable relationships. The company decides
which customers to serve. It then selects the most
promising segments.
The company designs an integrated marketing mix made
up with the four Ps. The company engages in marketing
analysis, planning, implementation, and control. The
company forces in the marketing environment.

Customer Value–Driven Marketing Strategy

To succeed in today’s competitive marketplace, companies must be customer centered. They
must win customers from competitors and then engage and grow before another company
first understand customer needs and wants.
Most companies are in a position to serve some segments better than others. Thus, each
company must divide up the total market into:

• Market Segmentation: consumers can be grouped and served in various ways based on
geographic, demographic, psychographic, and behavioral factors. The market segmentation
consists of consumers who respond in a similar way to a given set of marketing efforts.

• Market Targeting: a company should target segments in which it can profitably generate the
greatest customer value and sustain it over time. A company with limited resources might
decide to serve only one or a few special segments or market niches. Most companies enter
a new market by serving a single segment; if this proves successful, they add more
segments.
• Market Differentiation and Positioning: after it’s important for a company to positioning as to
say arranging for a product to occupy a clear, distinctive, and desirable place. A company
can offer greater customer value by either charging lower prices or offering more benefits to
justify higher prices. If the company promises greater value, it must then deliver that greater
value through differentiation to create superior customer value.

Developing an Integrated Marketing Mix

After determining its overall marketing strategy, the company is ready to the marketing mix,
set of tactical marketing tools. The marketing mix consists of everything the firm can do to
engage consumers and deliver customer value.
It’s explained through The four Ps:
• Product: goods-and-services combination the company offers.
• Price: is the amount of money customers must pay to obtain the product. They negotiate the
price with each customer, offering discounts, trade-in allowances, and credit terms.
•Place: includes company activities that make the product
available to target consumers.
•Promotion: activities that communicate the merits of the
product and persuade target customers to buy it. Social
media platforms engage consumers with the brand and with
other brand fans.
An effective marketing program blends the marketing mix
elements into an integrated marketing program to achieve the
company’s marketing objectives.

Many marketing activities that might appear to be left out of

the marketing mix are included under one of the four Ps.
Another concern from the buyer’s viewpoint is the four As:
• acceptability: the product exceeds customer expectations;
• affordability: customers are willing and able to pay the product’s price;
• accessibility: customers can readily acquire the product;
• awareness: customers are informed about the product’s features.

Managing the Marketing Effort and Marketing Return on Investment

Managing the Marketing Effort

Companies also need to pay attention to the management.
The marketing process requires the five marketing management functions:

1. Marketing Analysis: a complete analysis of the company’s situation. The marketer should
conduct a SWOT analysis. It evaluates the company’s overall strengths (S), weaknesses
(W), opportunities (O), and threats (T)
 • Strengths: internal capabilities and positive factors that may help the company serve its
customers and achieve its objectives.
• Weaknesses: internal limitations and negative factors may interfere with the company’s
performance.
• Opportunities: favorable factors in the external environment the company may be able to
exploit.
• Threats: unfavorable external factors that may present challenges to performance.

2. Marketing Planning: through strategic planning, the company decides what to do with
each business unit that involves choosing marketing strategies.The plan begins with an
executive summary that quickly reviews major assessments, goals, and recommendations.
The main section of the plan presents a detailed SWOT analysis. The plan next states a
marketing strategy consists of specific strategies for target markets, positioning, the
marketing mix. Additional sections of the marketing plan lay out an action program for
implementing the marketing strategy with the details of a supporting marketing budget.
The last section outlines the controls used to monitor progress, measure return on
marketing investment, and take corrective action.

3. Marketing implementation is the process that turns marketing plans into marketing actions
to accomplish strategic marketing objectives.

4. Marketing Department Organization: the company must design a marketing organization

that can carry out marketing strategies and plans. In large companies, this department
contains many specialists for example the chief marketing officer (CMO) that heads up the
company’s entire marketing operation. However there are different types of organizations:
• Functional organization: different marketing activities are headed by a functional
specialist;
• A company that sells across the country or internationally often uses a geographic
organization;
• Companies with many very different products or brands often create a product
management organization.
• For companies that sell one product line to many different types of markets and customers
who have different needs a market or customer management organization might be best.
• Large companies that produce different products flowing into different geographic and
customer markets employ some combination of the functional, geographic, product, and
market organization forms.

5. Marketing Control: because many surprises occur during the implementation of marketing
strategies and plans, marketers must practice constant marketing control essential to
evaluate results and take corrective action. This may require changing the action programs
or even changing the goals. Operating control involves checking ongoing performance
against the annual plan and taking corrective action. It also involves determining the
profitability of products, territories, markets, and channels. Strategic control involves
looking at whether the company’s basic strategies are well matched to its opportunities.
Measuring and Managing Marketing Return on Investment
Marketing managers must ensure that their marketing dollars are being well spent. One
important marketing performance measure is marketing return on investment (ROI) that is the
net return from a marketing investment divided by the costs of the marketing investment. It
can be difficult to measure.
However, marketers are using customer-centered measures of marketing impact, such as
customer acquisition, customer engagement, customer experience. Therefore, these measures
capture not only current marketing performance but also future performance resulting.

3) Analyzing the Marketing Environment

Case 3: FitBit

A company’s marketing environment consists of the actors and forces outside marketing that
affect marketing management’s ability to build and maintain successful relationships with
target customers.
Marketers have two special aptitudes. They have a specific methods for collecting information
and developing insights about the marketing environment. They also spend more time in
customer and competitor environments.

The Microenvironment and Macroenvironment

The microenvironment consists of the actors close to the company that affect its ability to
engage and serve its customers. The macroenvironment consists of the larger societal forces
that affect the microenvironment.

The Microenvironment
Marketing management’s job is to build relationships with customers. However, marketing
managers cannot do this alone, they need the major actors in the marketer’s
microenvironment.

The Company
In designing marketing plans, marketing management takes other company groups into
account. All of these interrelated groups form the internal environment. Marketing managers
make decisions within these broader strategies and plans. All departments share the
responsibility for understanding customer needs and creating customer value.

Suppliers
Suppliers provide the resources needed by the company to produce its goods and services.
Supplier problems can seriously affect marketing. Supply disasters, can cost sales in the short
run and damage customer satisfaction in the long run.

Marketing intermediaries
Marketing intermediaries help the company promote, sell, and distribute its products to final
buyers.
• Resellers are distribution channel firms that help the company find customers or make sales
to them.
• Physical distribution firms help the company stock and move goods from their points of
origin to their destinations.
• Marketing services agencies are the marketing research firms, advertising agencies, media
firms that help the company target and promote.
• Financial intermediaries include banks, credit companies, insurance companies.
Today’s marketers recognize the importance of working with their intermediaries as partners
rather than simply as channels.

Competitors
To be successful, a company must provide greater customer value and satisfaction than its
competitors do. They also must gain strategic advantage by positioning their offerings strongly
against competitors’ offerings.

Public
A public is any group that has an actual or potential interest in or impact on an organization’s
ability to achieve its objectives.
We can identify seven types of publics:
• Financial publics: This group influences
the company’s ability to obtain funds.
• Media publics: This group carries news,
features, editorial opinions, and other
content.
• Government publics: Government
developments into account. Marketers
must often consult the company’s
lawyers.
• Citizen-action publics: A company’s
marketing decisions may be questioned
by consumer organizations. Its public
relations department can help it stay in touch with consumer and citizen groups.
• Internal publics: Large companies use newsletters and other means to inform and motivate
their internal publics.
• General public: A company needs to be concerned about the general public’s attitude.
• Local publics. Companies usually work to become responsible members of the local
communities in which they operate.

Suppose the company wants a specific response from a particular public, the company would
have to design an offer to this public that is attractive enough to produce the de- sired
response.

Customers
Customers are the most important actors in the company’s microenvironment. The company
might target any or all of five types of customer markets:
• Consumer markets: individuals and households that buy for personal consumption.
• Business markets: buy for further processing or reselling.
• Government markets: government agencies that buy to produce public services to others
who need them.
• International markets: buyers in other countries.

The Macroenvironment
The company and all of the other actors operate in a larger macroenvironment that shape
opportunities and pose threats to the company. Even the most dominant companies can be
vulnerable to the often turbulent and changing forces in the marketing environment.
Companies that understand and adapt well to their environments can thrive.
Demographic and Economic Environments

The Demographic Environment

Demography is the study of human populations in terms
of size, density, location, age, gender, race, occupation,
and other statistics. The world’s large and highly diverse
population poses both opportunities and challenges.
They analyze changing age and family structures,
geographic population shifts, educational characteristics,
etc...

The Changing Age Structure of the Population

The most important demographic trend is the changing age structure of the population.
Because of falling birthrates and longer life expectancies.
The population contains several generational groups:

• The Baby Boomers: were born between 1946 and 1964, they have been one of the most
powerful forces shaping the marketing environment. The boomers constitute a lucrative
market for financial services. Thus, although boomers buy lots of products that help them
 deal with issues of aging, they tend to appreciate marketers who appeal to their youthful
thinking rather than their advancing age.

• Generation X: were born between 1965 and 1976. They are less materialistic with a major
sensibility to shop, this is the reason why they research heavily before they consider a
purchase.

• Millennials: were born between 1977 and 2000, larger even than the baby boomer
segment. Facing higher unemployment and saddled with more debt, the millennials make
up a huge and attractive market. One thing that all millennials have in common is their
comfort with digital technology, that allows them to seek authenticity and opportunities to
shape their own brand experiences and share them with others.

• Generation Z: were born after 2000. These young consumer represent tomorrow’s markets.
Despite their youth, this generation do purchase research before buying a product or having
their parents buy it for them; they prefer shopping online.

• Generational Marketing: marketers need to be careful about turning off one generation each
time they craft a product that appeals effectively to another. Marketers need to form more
precise age-specific segments within each group.

The Changing American Family

More people are divorcing or separating, or they have changed their idea of the traditional
family, moreover most of the marriages nowadays are interracial or interethnic. The number of
working women has also increased, therefore among households the 60% are dual-income
households. Meanwhile, more men also stay home with their children.

Geographic Shifts in Population

This is a period of great migratory movements between and within countries, the shift in
where people live has also caused a shift in where they work.

A Better-Educated, More White-Collar, More Professional Population

The population is becoming better educated. The workforce also is becoming more white
collar. The rising number of educated professionals will affect not just what people buy but
also how they buy.

Increasing Diversity
Marketers now face increasingly diverse markets, both at home and abroad, as their
operations become more international.
Diversity goes beyond ethnic heritage. For example, many major companies explicitly target
gay and lesbian consumers.
As the population grows more diverse, successful marketers will continue to diversify their
marketing programs to take advantage.
The Economic Environment
The economic environment consists of economic factors that affect consumer purchasing
power and spending patterns. Economic factors can have a dramatic effect on consumer that
lead them to adopt back-to-basics sensibility in their lifestyles and spending patterns, like
buying less and looking for greater value. The value marketing has become the watchword for
many marketers that are looking for ways to offer today’s more financially frugal buyers
greater value.
Marketers should pay attention to income distribution. Over the past several decades, the rich
have grown richer, the middle class has shrunk, and the poor have remained poor.
Changes in major economic variables, have a large impact on the marketplace. With
adequate warning, they can take advantage of changes in the economic environment.

The Natural and Technological Environments

The Natural Environment
The natural environment involves the physical environment and the natural resources that are
needed as inputs by marketers or that are affected by marketing activities. Unexpected
happenings in the physical environment, can affect companies and their marketing strategies.
Although companies can’t prevent such natural occurrences, they should prepare for dealing
with them. Environmental sustainability concerns have grown steadily over the past several
decades.
Marketers should be aware of several trends in the natural environment:
• Shortages of raw materials: nonrenewable resources pose a serious problem. Firms making
products that require these scarce resources face large cost.
• Increased pollution: industry will almost always damage the quality of the natural
environment.
• Increased government intervention: in natural resource management. Countries vary in their
concern and efforts to promote a clean environment and marketers should help develop
solutions to the problem.

With the environmental sustainability movement, today enlightened companies are

developing strategies and practices that create a world economy that the planet can support
indefinitely. Many companies are responding to consumer demands with more
environmentally responsible products making the environmental sustainability a part of their
core mission.

The Technological Environment

The technological environment can offer exciting opportunities for marketers. On the one
hand, such technologies would provide many advantages to both buyers and sellers. On the
other hand, they could be a bit scary.
Many firms are already using RFID technology to track products and customers at various
points in the distribution channel.
However, every new technology replaces an older technology, when old industries fight or
ignore new technologies, their businesses decline. Therefore, companies that do not keep up
will soon find their products outdated. Government agencies investigate and ban potentially
unsafe products. Marketers should be aware of these regulations when applying new
technologies and developing new products.

The Political–Social and Cultural Environments

The Political and Social Environment

Marketing decisions are strongly affected by the political environment; it consists of laws,
government agencies, and pressure groups that influence or limit various organizations and
individuals in a given society.

Legislation Regulating Business

Regulation can encourage competition and ensure fair markets. Thus, governments develop
public policy, sets of laws and regulations that limit business for the good of society as a
whole.
Understanding the public policy is not a simple matter because regulations often overlap.
Moreover, regulations are constantly changing; marketers must work hard to keep up with
changes in regulations and their interpretations.
Business legislation has been enacted for a number of reasons:
• Protect companies from each other and to define and prevent unfair competition.
• Protect consumers from unfair business practices.
• Protect the interests of society against unrestrained business behavior that sometimes doesn’t
create a better quality of life.

Increased Emphasis on Ethics and Socially Responsible Actions

Written regulations cannot possibly cover all potential marketing abuses, business is also
governed by social codes and rules of professional ethics.

I. Socially Responsible Behavior: Enlightened companies encourage their managers to look

beyond what the regulatory system allows and simply “do the right thing.” Almost every
aspect of marketing involves ethics and social responsibility issues, for instance conflicting
interests. Thus, many professionals have suggested codes of ethics. Critics worry most
about online privacy issues. Legitimate businesses track consumers’ online browsing and
buying behavior and collect digital data.

II. Cause-Related Marketing. To exercise their social responsibility and build more positive
images, many companies are now linking themselves to worthwhile causes. Some
companies are founded on cause-related missions, that let companies “do well by doing
good”. Cause-related marketing has also stirred some controversy, considering it more like
a strategy for selling than a strategy for giving. The company gains an effective marketing
 tool while building a more positive public image, visibility and new sources of funding
and support.

The Cultural Environment

The cultural environment consists of institutions and other forces that affect a society’s basic
values, perceptions, preferences, and behaviors. People grow up in a particular society that
shapes their basic beliefs and values.

The Persistence of Cultural Values

People in a given society hold many beliefs and values. These beliefs shape more specific
attitudes and behaviors found in everyday life.
Core beliefs and values are passed on from parents to children and are reinforced by schools,
businesses, religious institutions, and government.
Secondary beliefs and values are more open to change. Marketers have some chance of
changing secondary values but little chance of changing core values.

Shifts in Secondary Cultural Values

Cultural swings do take place. Marketers want to predict cultural shifts to spot new
opportunities or threats.
The major cultural values of a society are:

I. People’s Views of Themselves: people vary in their emphasis on serving themselves versus
serving others, therefore they buy products and services that match their views of
themselves.

II. People’s Views of Others: people’s attitudes toward and interactions with others shift over
time. Today’s digital technologies seem to have launched an era of “mass mingling.”
People are using social media and mobile communications to connect more than ever.
This new way of interacting strongly affects how companies market their brands and
communicate with customers.

III. People’s Views of Organizations: people vary in their attitudes toward corporations,
government agencies, universities, and other organizations. The past two decades have
seen a sharp decrease in confidence and loyalty toward business and political
organizations and institutions. Many people today see work not as a source of satisfaction
but as a required chore to earn money to enjoy their non-work hours. Organizations need
to find new ways to win consumer and employee confidence.

IV. People’s Views of Society: people vary in their attitudes toward their society and this
phenomenon may influence their consumption patterns and attitudes toward the
marketplace.
V. People’s Views of Nature: people vary in their attitudes toward the natural world, someone
feels ruled by it, others feel in harmony with it. More recently, however, people have
recognized that nature is finite and fragile.

VI. People’s Views of the Universe: people vary in their beliefs about the origins of the
universe and their place in it. Although most people practice religion activities have been
dropping off gradually through the years. The fact that people are dropping out of
organized religion doesn’t mean that they are abandoning their faith.

Responding to the Marketing Environment

There are three kinds of companies:
1. those who make things happen
2. those who watch things happen
3. those who wonder what’s happened

Many companies view the marketing environment as an uncontrollable element to which

they must react and adapt, they do not try to change it.
Other companies take a proactive stance toward the marketing environment. These firms
develop strategies to change the environment. Proactive firms take aggressive actions to affect
their marketing environment; such companies hire lobbyists to influence legislation.
Marketing management cannot always control environmental forces, it must settle for simply
watching and reacting to the environment. But smart marketing managers take a proactive
rather than reactive approach to the marketing environment.

4) Managing Marketing Information

Case 4: Campbell Soup Company

Marketing Information and Customer Insights

To create value for customers and build meaningful relationships with them, marketers must
first gain a deep insights into what customers need and want. Such customer insights come
from good marketing information and are useful to develop a competitive advantage.
These insights can be very difficult to obtain, consumers themselves usually can’t tell you
exactly what they need and why they buy.

Marketing Information and Today’s “Big Data”

With the recent explosion of information technologies, companies can generate and find
marketing information in great quantities. Consumers themselves are generating tons of
marketing information, through their smartphones.
Most marketing managers are overloaded with data and often overwhelmed by it. This
problem is summed up in the concept of big data as the huge and complex data sets
generated by information generation and analysis technologies.
Big data presents big opportunities and big challenges.
Marketers don’t need more information; they need better information and they need to make
better use of the information they already have.

Managing Marketing Information

Companies have created customer insights teams, whose job it is to develop actionable
insights from marketing information and work strategically with marketing decision makers to
apply those insights.
Effective marketing information systems (MIS)
give managers the right information, in the
right form, at the right time and help them to
use this information to create customer value.
The MIS process:
1.It interacts with these information users to
assess information needs.
2.It interacts with the marketing environment
to develop needed information through
internal company databases, marketing
intelligence activities, and marketing research.
3. Helps users to analyze and use the information to develop customer insights.

Assessing Information Needs and Developing Data

Assessing Marketing Information Needs

The marketing information system provide information to external partners. Therefore a good
marketing information system balances the information, users would like to have against what
they really need and what is feasible to offer. Some managers will want to collect and store
vast amounts of digital data because technology lets them. But too much information can be
as harmful. The company must decide whether the value of insights is worth the costs of
providing it, and both value and cost are often hard to assess.

Developing Marketing Information

Marketers can obtain the needed information from:

1. Internal Data: collections of consumer and market information obtained from data sources
within the company’s network. Such information can provide powerful customer insights
and competitive advantage. The access it’s more quickly and cheaply than other
information sources. They also present some problems, it may be incomplete or in the
wrong form for making marketing decisions and it requires highly sophisticated
equipment.

2. Competitive marketing intelligence: is the systematic monitoring, collection, and analysis

of available information about consumers, competitors, and developments in the
marketplace. The goal is to improve strategic decision making by understanding the
 consumer environment, assessing and tracking competitors’ actions. Good marketing
intelligence can help marketers gain insights into how consumers talk about and engage
with their brands. Essential for companies is to actively monitor competitor’s activities that
can be done anticipating their moves through the marketing intelligence.The growing use
of marketing intelligence also raises ethical issues.

3. Marketing Research

Marketing Research
It’s the systematic design, collection, analysis, and reporting of data of a specific marketing
situation. It gives marketers insights into customer motivations, purchase behavior, and
satisfaction and help them to assess market potential and market share. Some large companies
have their own research departments.
The marketing research process has 4 steps:

1) Defining the Problem and Research Objectives

Marketing managers and researchers must work together closely to define the problem and
agree on research objectives. The manager best understands the decision for which
information is needed. It’s often the hardest step.
After the problem has been defined, a marketing research project might have one of three
types of objectives:

• Exploratory research: gather preliminary information that will help define the problem and
suggest hypotheses.
• Descriptive research: describe the market potential for a product or the demographics and
attitudes of consumers.
• Causal research: test hypotheses about cause-and-effect relationships

2) Developing the Research Plan

Once researchers have defined the research problem and objectives, they must determine the
exact information needed. The research plan outlines sources of existing data that researchers
will use to gather new data.The research plan should be presented in a written proposal.
To meet the manager’s information needs, the research plan can call for gathering secondary
data and primary data.

Secondary Data
The company’s internal database provides a good starting point. The company can also use a
wide assortment of external information sources. Using commercial online databases,
marketing researchers can conduct their own searches of secondary data sources that offer
information for a fee. Internet search engines can usually obtain information more quickly and
at a lower cost than primary data. Problems are that researchers can rarely obtain all the data
they need. They must evaluate secondary information regarding the relevance, accuracy, and
impartiality.

Primary Data
In most cases, the company must also collect primary data. To gather these data a process
must be used considering certain number of decisions on:

1. Research Approaches: gathering primary data include:

• Observational research: gathering primary data by observing relevant people, actions, and
situations. Researchers often observe consumer behavior. A larger range of companies are
using the ethnographic research: marketers not only observe what consumers do but also
observe what consumers are saying through feedback so they can watch and interact with
them. Although somethings simply cannot be observed, such as attitudes, motives and
observations can be very difficult to interpret. Because of these limitations, researchers
use other data collection methods.

• Survey Research: survey research, the most widely used method for gathering descriptive
information such as knowledge, attitudes, preferences, or buying behavior. The major
advantage of survey research is its flexibility used to obtain many different kinds of
information. However, survey presents problems. People may be unwilling to respond to
unknown interviewers or about things they consider private.

• Experimental Research: best suited for gathering causal information. Experiments involve
selecting matched groups of subjects. Thus, experimental research tries to explain cause-
and-effect relationships.

2. Contact Methods: information can be collected with different methods, each contact
method has its own particular strengths and weaknesses:

• Mail, Telephone, and Personal Interviewing: mail questionnaires can be used to collect
large amounts of information at a low cost per respondent. Respondents may give more
honest answers but mail questionnaires are not very flexible and respondent are slow.
Telephone interviewing the best methods for gathering information quickly, and it provides
 greater flexibility. However, with telephone interviewing, the cost per respondent is higher,
also, people may not want to discuss personal questions with an interviewer. Individual
interviewing involves talking with people in their homes or offices; such interviewing is
flexible. They can show subjects actual products. It may cost three to four times as much
as telephone interviews.

• Group interviewing consists of inviting small groups of people to meet with a trained
moderator to talk about a product and participants normally are paid a small sum for
attending. It has become one of the major qualitative marketing research tools for gaining
insights into consumer thoughts and feelings. They usually employ small samples to keep
time and costs down, and it may be hard to generalize from the results. To overcome these
problems, some companies are changing the environments in which they conduct focus
groups. Other companies use immersion groups, small groups of consumers who interact
directly and informally with product designers.

• Online Marketing Research: internet and mobile surveys, it can take many forms like
questionnaire on its web or social media sites, online panels that provide regular
feedback. Or a virtual shopping environments to test new products and marketing
programs. The internet is especially well suited to quantitative research. The internet is the
dominant data collection methodology and responses can be almost instantaneous and
costs are less. Companies are now also adopting qualitative internet-based research
approaches, such as online focus groups, where researchers can view the sessions in real
time from anywhere, eliminating facility costs.

• Online Behavioral and Social Tracking and Targeting: online listening provides the
unsolicited consumer opinions using sophisticated online-analysis tools to deeply analyze
what consumers are saying or feeling about a brand. This practice is called behavioral
targeting, marketers use the online data to target specific consumers. Research shows that
consumers shop a lot like their friends and are much more likely to respond to ads from
brands friends use. Regulations are essential to avoid consumer stalking.

3. Sampling Plan: is a segment of the population selected for marketing research to represent
the population as a whole. The sample should be representative so that the researcher can
make accurate estimates. Designing the sample requires three decisions and different kind
of samples:

• who is to be studied (sampling unit)

• how many people should be included (sample size)
• how should the people in the sample be chosen (sampling procedure)

• probability samples, each population member has a known chance of being included, in
order to limit sampling error. But this method costs too much and takes too much time.
 • nonprobability samples here sampling error cannot be measured, but this method has
different costs and time limitations.

4. Research Instruments: in collecting primary data, marketing researchers have a choice of

two main research instruments:

• Questionnaires: is by the most common instrument and it’s very flexible. This includes
closed-ended and open-ended questions. Open-ended questions are especially useful in
exploratory research trying to find out what people think but closed-ended questions
provide answers that are easier

• Mechanical Instruments: to monitor consumer behavior using checkout scanners or

mobile phone GPS technologies. Other researchers apply neuromarketing to track brain
electrical activity, even though such brain responses can be difficult to interpret.

3) Implementing the Research Plan

The researcher next puts the marketing research plan into action. This involves collecting,
processing, and analyzing the information. Researchers should watch closely to make sure
that the plan is implemented correctly. They must guard against problems with data collection
techniques and technologies. They need to check data for accuracy and completeness and
code them for analysis.

4) Interpreting and Reporting the Findings

The market researcher must now interpret the findings, draw conclusions, and report them to
management. The researcher should present important findings and insights that are useful in
the major decisions faced by management.
The best research means little if the manager blindly accepts faulty interpretations from the
researcher. Moreover findings can be interpreted in different ways, and discussions between
researchers and managers will help point to the best interpretations.

Analyzing and Using Marketing Information

Information gathered usually requires additional analysis. Managers may need help like
advanced analytics to learn more about customers and help them making better decisions.
Customer Relationship Management CRM
Many companies are now turning to customer relationship management (CRM) to manage
detailed information about individual customers and carefully manage customer touch points
to maximize customer loyalty.
CRM consists of sophisticated software and analysis tools that integrate customer and
marketplace information from all sources, analyze it, and apply the results to build stronger
customer relationships.

Big Data and Marketing Analytics

Marketing analytics consists of the analysis tools, technologies, and processes by which
marketers dig out meaningful patterns in big data to gain customer insights and gauge
marketing performance. It’s applied to the large and complex sets of data companies collect.
There are several risks and costs to sustain if a company would use this method. The most
common mistake is to view CRM and marketing analytics as technology processes only, but
technology alone cannot build profitable customer relationships. Marketers should start with
the fundamentals of managing customer relationships and then employ high-tech data and
analytics solutions.

Distributing and Using Marketing Information

The MIS must make information readily available to mangers and others, providing regular
performance reports, results of research studies, etc...
But marketing managers may also need access to non-routine information.
Many firms use intranet and internal CRM systems that give ready access to research and
intelligence information.
In addition, companies are increasingly allowing key customers to access data on demand
through extranets. With the extranet a company can improve customer service.

Other Marketing Information Considerations

Marketing Research in Small Businesses and Nonprofit Organizations

Small businesses and not-for-profit organizations need market information so even though
large-scale research studies are beyond the budgets of most of them some techniques can be
used by smaller organizations in a less formal manner and at little or no expense. Small
businesses and not-for-profit organizations can obtain good marketing insights through
observation or informal surveys using small convenience samples. Also,
many associations, local media, and government agencies provide special help. Although
these informal research methods are less complex and less costly, they still must be
conducted with care.

International Marketing Research

International researchers follow the same steps as domestic researchers, bu these researchers
often face more and different problems. International researchers deal with diverse markets in
many different countries. These markets often vary greatly in their levels of economic
development, cultures and cus- toms, and buying patterns. However, the international
researcher can obtain secondary data from dozens of domestic researchers services. Even
when secondary information is available, it usually must be obtained from many different
sources on a country-by- country basis, making the information difficult to combine or
compare.
Several problems arise with this kind of researches:
• difficult simply to develop good samples and reaching respondents is often not so easy in
other parts of the world.
• few people have computers.
• Cultural differences from country to country cause additional problems for international
researchers.
• Language is the most obvious obstacle.
• This adds to research costs and increases the risks of error.
• People in one country may be very willing to respond; in other countries, nonresponse can
be a major problem.

Although the costs and problems associated with international research may be high, the costs
of not doing it might be even higher.

Public Policy and Ethics in Marketing Research

A marketing research can also harm or annoy consumers. Two major public policy and ethics
issues in marketing research are:

1. Intrusions on Consumer Privacy: many consumers enjoy being interviewed and giving
their opinions. However, others strongly don’t like being interrupted by researchers. They
worry that marketers are building huge databases full of personal information about
customers. Marketers must be careful not to cross over the privacy line. Most major
companies, have now appointed a chief privacy officer (CPO), whose job is to safeguard
the privacy of customers.

2. Misuse of Research Findings: research studies can be powerful persuasion tools. Almost
any research results can be variously interpreted depending on the researchers’ bias and
viewpoints. Each company must accept responsibility for policing the conduct and
reporting of its own marketing research to protect consumers’ best interests as well as its
own.
 5) Consumer Markets and Buyer
Behavior
Case 5: Goldie Blox

Model of Consumer Behavior

Consumers make many buying decisions every day, marketers can study actual consumer
purchases to find out what they buy, where, and how much. But learning about the whys is
not so easy, consumers themselves don’t know exactly what influences their purchases.
The starting point is the stimulus-response model of buyer behavior. Marketing and other
stimuli enter the consumer’s “black box” and produce certain responses.
Marketers want to understand how the stimuli are changed into responses inside the
consumer’s black box, which has two parts:
I. The buyer’s characteristics influence how he or she perceives and reacts to the stimuli,
including cultural, social, personal, and psychological factors.
II. The buyer’s decision process itself affects his or her behavior. This decision process begins
long before the actual purchase decision and continues long after.

Characteristics Affecting Consumer Behavior

Consumer purchases are influenced strongly by cultural, social, personal, and psychological
characteristics and marketers cannot control such factors, but they must take them into
account.

Cultural Factors
Cultural factors exert a broad and deep influence on consumer behavior. Marketers need to
understand the buyer’s:
1. culture
2. subculture
3. social class

Culture
It’s the most basic cause of a person’s wants and behavior. Growing up in a society, a child
learns basic values from his or her family and other important institutions. The buying
behavior may vary greatly from both county to county and country to country.
Marketers are always trying to spot cultural shifts so as to discover new products that might be
wanted.

Subculture
It’s a groups of people with shared value systems based on common life experiences and
situations like nationalities, religions, racial groups, and geographic regions.
Three important subculture groups are:

I. Hispanic American Consumers: a large, fast-growing market. They tend to be deeply fam-
ily oriented and make shopping a family affair.

II. African American: blacks are also strongly motivated by quality and selection, for this
reason brands are important for them.They are heavily users of digital and social media.

III. Asian American Consumers: a relatively well-educated segment, as a group, they shop
frequently and are the most brand conscious of all the ethnic groups.

Many marketers now embrace a total market strategy as the practice of integrating ethnic
themes and cross-cultural perspectives within their mainstream marketing. A total market
strategy appeals to consumer similarities across subcultural segments.

Social classes
They are society’s relatively permanent and ordered divisions whose members share similar
values, interests, and behaviors.
There are 7 social classes from the upper upper class to the lower lower class.
Each segment is measured as a combination of occupation, income, education, wealth, and
other variables.
Marketers are interested in social class because people within a given social class tend to
exhibit similar buying behavior.

Social Factors
A consumer’s behavior also is influenced by social factors, such as the consumer’s:
1. small groups and social networks
2. family
3. social roles and status.
Groups and Social Networks
Many small groups influence a person’s behavior. Groups that have a direct influence and to
which a person belongs are called membership groups.
In contrast, reference groups serve as direct or indirect points of comparison or reference in
forming a person’s attitudes or behavior.
Marketers try to identify the reference groups of their target markets.

• Word-of-mouth influence: the personal words and recommendations of trusted friends,

family, associates, and other consumers tend to be more credible than those coming from
commercial sources.

• Opinion leaders: people within a reference group who exert social influence on others. This
group is called the influentials or leading adopters. Buzz marketing involves enlisting or
even creating opinion leaders to serve as “brand ambassadors” who spread the word about
a company’s products.

• Online social networks: are online communities where people socialize or exchange
information and opinions. These online forms of consumer-to- consumer and business-to-
consumer dialogue have big implications for marketers. Marketers are working to harness
“word-of-web” opportunities to promote their products and build closer customer
relationships. The key is to find bloggers who have strong networks of relevant readers.

Family
The family is the most important consumer buying organization in society. Buying roles
change with evolving consumer lifestyles; such shifting roles signal a new marketing reality.
Children also have a strong influence on family buying decisions: where to go on vacation,
how often to go out to eat and where to live.

Roles and Status

A role consists of the activities people are expected to perform according to the people
around them. Each role carries a status reflecting the general esteem given to it by society.

Personal Factors
A buyer’s decisions also are influenced by personal characteristics such as the buyer’s:
1. occupation
2. age and stage
3. economic situation
4. lifestyle
5. personality and self-concept.
Occupation
A person’s occupation affects the goods and services bought. Blue-collar workers tend to buy
more rugged work clothes, whereas executives buy more business suits. Marketers try to
identify the occupational groups that have an above-average interest in their products and
services.

Age and Life Stage

People change the goods and services they buy over their lifetimes. Buying is also shaped by
the stage of the family life cycle. Marketers often develop appropriate products and
marketing plans for each stage.
The life-stage segmentation systems make a classifications considering a host of demographic
factors and behavioral and lifestyle factors.
Life-stage segmentation provides a powerful marketing tool for marketers in all industries to
better find, understand, and engage consumers.

Economic Situation
A person’s economic situation will affect his or her store and product choices, most
companies have taken steps to create more customer value by redesigning, repositioning, and
repricing their products and services.

Lifestyle
It’s a person’s pattern of living as expressed in his or her psychographics.
It involves measuring consumers’ major AIO dimensions:
• Activities
• Interests
• Opinions

The lifestyle concept can help marketers understand changing consumer values and how they
affect buyer behavior.
Marketers look for lifestyle segments with needs that can be served through special products
or marketing approaches.

Personality and Self-Concept

It refers to the unique psychological characteristics that distinguish a person or group.
Personality is usually described as self-confidence, dominance, sociability, autonomy, and it
can be useful in analyzing consumer behavior for certain
product or brand choices.
The common thought that people’s possessions contribute to
and reflect their identities that is, “we are what we
consume.”
The idea is that brands also have personalities, and
consumers are likely to choose brands with personalities that
match their own.
Brand personalities are:
• sincerity
• excitement
• competence
• sophistication
• ruggedness

Psychological Factors
A person’s buying choices are further influenced by four major psychological factors:
1. Motivation
2. Perception
3. Learning
4. Beliefs and attitudes

Motivation
A need becomes a motive when it is aroused to a sufficient level of intensity. A motive or drive
is a need that is sufficiently pressing to direct the person to seek satisfaction. Sigmund Freud’s
theory suggests that a person’s buying decisions are affected by subconscious motives that
even the buyer may not fully understand.
Many companies employ teams of psychologists, anthropologists, and other social scientists
to carry out motivation research that probes the subconscious motivations underlying
consumers’ emotions and behaviors toward brands.
Therefore marketers use such touchy-feely approaches, called interpretive consumer research,
to dig deeper into consumer psyches and develop better marketing strategies.
Abraham Maslow sought to explain why people are driven by particular needs at particular
times: human needs are arranged in a hierarchy. Once the marketer know that customers use
this hierarchy to buy, he/she can exploit this factor to dig advantages.

Perception
How the person acts is influenced by his or her own perception of the situation. However,
each of us receives interprets information in an individual way. Perception is the process by
which people select, organize, and interpret information to form a meaningful picture of the
world.
People can form different perceptions because of three perceptual processes:
• Selective attention: screen out most of the information to which they are exposed that
marketers must work especially hard to attract the consumer’s attention.
• Selective distortion: interpret information in a way that will support what they already
believe.
• Selective retention: remember good points made about a brand they favor and forget good
points made about competing brands.

Learning
It describes changes in an individual’s behavior arising from experience.
A drive is a strong internal stimulus that calls for action.
Cues are minor stimuli that determine when, where, and how the person responds. Cues that
might influence a consumer’s response to his or her interest in buying the product.
Marketers is that they can build up demand for a product by associating it with strong drives,
using motivating cues, and providing positive reinforcement.

Beliefs and Attitudes

A belief may be based on real knowledge and may or may not carry an emotional charge.
Marketers are interested in the beliefs that people formulate because these beliefs make up
product and brand images that affect buying behavior.
Attitude describes a person’s relatively consistent evaluations toward an object or idea. They
put people liking or disliking things.
Attitudes are difficult to change. A company should usually try to fit its products into existing
attitude patterns rather than attempt to change attitudes.

Buying Decision Behavior and the Buyer Decision Process

Types of Buying Decision Behavior
Buying behavior differs greatly. More complex
decisions usually involve more buying participants
and more buyer deliberation. The types of consumer
buying behavior based on the degree of buyer
involvement and the degree of differences among
brands.
Complex Buying Behavior
Consumers undertake complex buying behavior
when they are highly involved in a purchase and perceive significant differences among
brands. They may be highly involved when the product is expensive, risky, purchased
infrequently.
This buyer will pass through a learning process, first developing beliefs about the product,
then attitudes, and then make a thoughtful purchase choice.
Marketers need to help buyers learn about product-class attributes and their relative
importance. They need to differentiate their brand’s features.

Dissonance-Reducing Buying Behavior

When consumers are highly involved but see little difference among brands.
In this case, because perceived brand differences are not large, buyers may shop around to
learn what is available but buy relatively quickly.
After the purchase, consumers might experience postpurchase dissonance, when they notice
certain disadvantages of the purchased brand.
Habitual Buying Behavior
Occurs under conditions of low-consumer involvement and little significant brand difference.
They simply go to the store and reach for a brand.Consumers appear to have low involvement
with most low-cost, frequently purchased products and do not search extensively for
information about the brands. Marketers can add product features or enhancements to
differentiate their brands from the rest of the pack and raise involvement.

Variety-Seeking Buying Behavior

Situations characterized by low consumer involvement but significant perceived brand
differences. Consumers often do a lot of brand switching. Brand switching occurs for the sake
of variety rather than because of dissatisfaction.
The market leader will try to encourage habitual buying behavior by dominating shelf space.

The Buyer Decision Process

How consumers make buying decisions. The buyer decision process consists of five stages:
• need recognition
• information search
• evaluation of alternatives
• purchase decision
• postpurchase behavior

Need Recognition
The buying process starts with need recognition.
The need can be triggered by internal stimuli when one of the person’s normal needs rises to
a level high enough to become a drive.
A need can also be triggered by external stimuli; at this stage, the marketer should research
consumers to find out what kinds of needs or problems arise.

Information Search
An interested consumer may or may not search for more information. If the consumer’s drive
is strong and a satisfying product is near at hand, he or she is likely to buy it then. If not, the
consumer may store the need an information search related to the need. As more information
is obtained, the consumer’s awareness and knowledge of the available brands and features
increase. A company must design its marketing mix and it should carefully identify
consumers’ sources of information and the importance of each source.
Consumers can obtain information from any of several sources:
• personal sources: legitimize or evaluate products for the buyer
• commercial sources: inform the buyer
• public sources
• experiential sources

Evaluation of Alternatives
Marketers need to know about alternative evaluation, that is, how consumers process
information to choose among alternative brands. Several evaluation processes are at work and
they depends on the individual consumer and the specific buying situation. Marketers should
study buyers to find out how they actually evaluate brand alternatives.

Purchase Decision
The consumer’s purchase decision will be to buy the most preferred brand, but two factors
can come between the purchase intention and the purchase decision:
• The attitudes of others
• The unexpected situational factors because unexpected events may change the purchase
intention.

Postpurchase Behavior
The marketer’s job does not end when the product is bought. After, the consumer will either
be satisfied or dissatisfied and will engage in postpurchase behavior.
If the product falls short of expectations, the consumer is disappointed; if it meets
expectations, he/she will be satisfied.This suggests that sellers should promise only what their
brands can deliver so that buyers are satisfied. Almost all major purchases, result in cognitive
dissonance, caused by postpurchase conflict.
Customer satisfaction is a key to building profitable relationships with consumers, bear use
he/she will buy a product again, talk favorably.
A dissatisfied consumer responds differently; it can quickly damage consumer attitudes about
a company and its products.
A company should set up systems that encourage customers to complain. In this way, the
company can learn.

The Buyer Decision Process for New Products

A new product is a good or service perceived by some potential customers as new.
We define the adoption process as the mental process through which an individual passes
from first learning about an innovation to final adoption.
Adoption is the decision by an individual to become a regular user of the product.

Stages in the Adoption Process

Consumers go through five stages in the process of adopting a new product and marketers
should think about how to help consumers move through these stages:

• Awareness: becomes aware of the new product but lacks information about it.
• Interest: seeks information about the new product.
• Evaluation. considers whether trying the new product makes sense.
• Trial. tries the new product on a small scale to improve his or her estimate of its value.
• Adoption. decides to make full and regular use of the new product.

Individual Differences in Innovativeness

In each product area, there are “consumption pioneers” and early adopters.
People can be classified into 5 adopter categories:
I. Innovators: are venturesome
II.Early adopters: are opinion leaders and adopt new ideas
early but carefully
III.Early mainstream: rarely are leaders, they adopt new ideas
before the average person
IV.Late mainstream: are skeptical and adopt an innovation
only after a majority of people have tried it
V.Lagging adopters: are tradition bound and suspicious of
changes and adopt the innovation only when it has become
something of a tradition itself.

Influence of Product Characteristics on Rate of Adoption

5 characteristics are especially important in influencing an innovation’s rate of adoption:

1. Relative advantage: The degree to which the innovation appears superior to existing
products. They have limited driving range before recharging and cost more initially, which
will slow the adoption rate.
2. Compatibility: The degree to which the innovation fits the values and experiences of
potential consumers. Increased adoption will depend on the development of a national
network of recharging stations, which may take considerable time.

3. Complexity: The degree to which the innovation is difficult to understand or use. The
“conceptual complexity” of the new technologies will slow down the adoption rate.

4. Divisibility: The degree to which the innovation may be tried on a limited basis. Current
high prices to own and fully experience these new technologies will likely slow adoption.

5. Communicability: The degree to which the results of using the innovation can be ob-
served or described to others. Their use will spread faster among consumer.

6) Business Markets and Business Buyer

Behavior
Companies sell most of their products to other businesses.
Business buyer behavior refers to the buying behavior of organizations that buy goods and
services for use in the production of other products and services. In the business buying
process, business buyers determine which products and services their organizations need to
purchase.
Business- to-business (B-to-B) marketers must do their best to understand business markets
and business buyer behavior.

Business Markets
The business market is huge and involves far more dollars and items than do consumer
markets. Thus, many sets of business purchases were made for only one set of consumer
purchases.
Business markets differ in many ways from consumer markets. The main differences are:
1. Market structure and demand
2. Nature of the buying unit
3. Types of decisions and the decision process

1) Market Structure and Demand

The business marketer normally deals with far fewer but far larger buyers than the consumer
marketer does. Many business markets have inelastic and more fluctuating demand.
The demand for many business goods and services tends to change more.
Business demand is derived demand, it derives from the demand for consumer goods.
Therefore, B-to-B marketers sometimes promote their products directly to final consumers to
increase business demand.
2) Nature of the Buying Unit
A business purchase usually involves more decision participants and a more professional
purchasing effort done by trained purchasing agents.
B-to-B marketers now face a new breed of higher-level, better-trained supply managers.
Therefore, companies must have well-trained marketers and salespeople to deal with these
well-trained buyers.

3)Types of Decisions and the Decision Process

Business buyers usually face more complex buying decisions than do consumer buyers. This
involve large sums of money, complex technical and also tends to be longer and more
formalized.
The buyer and seller are often much more dependent on each other and they have to work
closely with customers during all stages of the buying process:

- In the short run, sales go to suppliers who meet buyers’ immediate product and service
needs.
- In the long run, business-to-business marketers keep customers by meeting current needs
and by partnering with them to help solve their problems.
Many customer companies are now practicing supplier development, systematically
developing networks of supplier-partners to ensure a dependable supply of the products and
materials.

Business Buyer Behavior

Marketers want to know how business buyers will respond to various marketing stimuli.
Marketing and other stimuli affect the buying organization and produce certain buyer
responses. Buying activity consists of two major parts:
• Buying center
• Buying decision

The model shows that the buying center and the

buying decision process are influenced by internal
organizational, interpersonal, and individual
factors as well as external environmental factors.
Four questions about business buyer behavior must
to be done:
• What buying decisions do business buyers make?
• Who participates in the business buying pro- cess?
• What are the major influences on buyers?
• How do business buyers make their buying decisions?

Major Types of Buying Situations

There are three major types of buying situations:

I. Straight rebuy, the buyer reorders something without any modifications.“In” suppliers try
to maintain customer engagement. “Out” suppliers try to find new ways to add value so
that the buyer will consider them.

II. Modified rebuy, the buyer wants to modify product specifications. “In” suppliers may
become nervous and feel pressured. “Out” suppliers may see the modified rebuy situation
as an opportunity.

III. New task, a company buying a product or service for the first time faces. The greater the
cost or risk, the larger the number of decision participants.

The buyer makes the fewest decisions in the straight rebuy and the most in the new task
decision. The sale often goes to the firm that engages business customers deeply and provides
the most complete system for meeting a customer’s needs and solving its problems. Such
systems selling or solutions selling is a key business marketing strategy for winning and
holding accounts.
Participants in the Business Buying Process
The decision-making unit of a buying organization is called its buying center. It consists of all
the individuals and units that play a role in the business purchase decision-making process.
There are 5 roles in the purchase decision process:
1. Users are members of the organization who will use the product or service.
2. Influencers provide information for evaluating alternatives.
3. Buyers have formal authority to select the supplier and arrange terms of purchase. Their
major role is in selecting vendors and negotiating.
4. Deciders have formal or informal power to select or approve the final suppliers.
5. Gatekeepers control the flow of information to others.

The buying center is a set of buying roles assumed by different people for different purchases.
The buying center concept presents a major marketing challenge. The business marketer must
learn who participates usually includes some obvious participants, but also less obvious.

Major Influences on Business Buyers

Business buyers are subject to many influences when they make their buying decisions. The
major influences are economic: they concentrate on offering strong economic benefits to
buyers. However, business buyers actually respond to both economic and personal factors
and other various groups of influences.

a. Business buyers are heavily influenced by factors in the economic environment, such as
the cost of money. Another factor is the supply of key materials, technological, political,
and competitive developments in the environment.

b. Organizational factors: each buying organization has its own objectives, strategies,
structure, systems and procedures, and the business marketer must understand these
factors well.

c. The buying center usually includes many participants who influence each other, so
interpersonal factors. Participants may influence the buying decision because they control
rewards and punishments.

d. Each participant in the business buying decision process brings in personal motives,
perceptions, and preferences. These individual factors are affected by personal
characteristics.
The Business Buyer Decision Process
The eight stages of the business buyer decision process.

1) Problem Recognition
The buying process begins when someone in the company recognizes a problem or need that
can be met by acquiring a specific product or service. Problem recognition can result from
internal or external stimuli. Internally, the company may decide to launch a new product.
Externally, the buyer may get some new ideas. Business marketers often alert customers to
potential problems and then show how their products and services provide solutions.

2) General Need Description

The buyer next prepares a general need description that describes the characteristics and
quantity of the needed item. For standard items, this presents few problems. For complex
items, the buyer may need to work with others participants to define the item.

3) Product Specification
The next step is to develop the item’s technical product specifications.
Product value analysis is an approach to cost reduction in which components are studied
carefully to determine if they can be redesigned or made by less costly methods.
By showing buyers a better way to make an object, outside sellers can turn straight rebuy
situations into new task situations that give them a chance to obtain new business.

4) Supplier Search
The buyer now conducts a supplier search to find the best vendors. Today, more and more
companies are turning to the internet to find suppliers. For marketers, the newer the buying
task and the more complex and costly the item, the greater the amount of time the buyer will
spend searching for suppliers. Salespeople should watch for companies in the process of
searching for suppliers and make certain that their firm is considered.

5) Proposal Solicitation
In the proposal solicitation stage the buyer invites qualified suppliers to submit proposals.
However, when the item is complex or expensive, the buyer will usually require a detailed
written proposal or formal presentation from each potential supplier.
Presentations should inspire confidence and should make the marketer’s company stand out
from the competition.
6) Supplier Selection
During supplier selection, the buying center often will draw up a list of the desired supplier
attributes and their relative importance.Buyers may attempt to negotiate with preferred
suppliers for better prices and terms. In the end, they may select a single supplier or a few
suppliers.
Today’s supplier development managers want to develop a full network of supplier-partners
to bring more value to its customers.

7) Order-Routine Specification
The buyer now prepares an order-routine specification. It includes the final order with the
chosen supplier or suppliers and lists items.
A blanket contract creates a long-term relationship in which the supplier promises to resupply.
Many large buyers now practice vendor-managed inventory, buyers share sales and inventory
information directly with key suppliers, so they can replenish stock automatically as needed.

8) Performance Review
The performance review may lead the buyer to continue, modify, or drop the arrangement.
In the modified rebuy or straight rebuy situation, some of these stages would be compressed
or bypassed, because each organization buys in its own way.
Often, buyers will repeat certain stages of the process. The seller must manage the total
customer relationship, not just individual purchases.

Engaging Business Buyers with Digital and Social Marketing

The explosion of information technologies has changed the face of the B-to-B buying and
marketing process.
2 important technology advancements:
1. e-procurement and online purchasing
2. B-to-B digital and social media marketing

E-procurement and Online Purchasing

Online purchasing, called e-procurement, has grown rapidly considering that it’s standard
procedure for most companies today. Business marketers can connect with customers online
to share marketing information, sell products and services, provide customer support services,
and maintain ongoing customer relationships.
Companies can do e-procurement in any of several ways:

a. Reverse auctions, in which they put their purchasing requests online and invite suppliers
to bid for the business.
b. Trading exchanges, companies work collectively to facilitate the trading process.
c. Company buying sites, creating their own site like a company trading site.
d. Extranet links, with key suppliers, creating direct procurement accounts with suppliers.
B-2-B e-procurement yields many benefits: it shaves transaction costs and results in more
efficient purchasing for both buyers and suppliers; it helps an organization keep better track of
all purchases.
E-procurement presents some problems, for instance suppliers and customers can share
business data and even collaborate on product design; buyers can pit suppliers against one
another.

Business-to-Business Digital and Social Media Marketing

Today’s B-to-B marketers are now using a wide range of digital and social media marketing
approaches.
B-to-B digital and social media marketing has become the new space for engaging business
customers. Compared with traditional media and sales approaches, digital and social media
can create greater customer engagement and interaction, because they are targeting
individuals. It gives both sellers and buyers more control of and access to important
information.

Institutional and Government Markets

Institutional and government organizations are nonbusiness markets that have also additional
characteristics and needs.

Institutional Markets
The institutional market consists of schools, hospitals that provide goods and services to
people in their care. Each institution has different buying needs and resources and they have a
low budget and captive patrons. Many marketers set up separate divisions to meet the special
characteristics and needs of institutional buyer.

Government Markets
The government market offers large opportunities for many companies. In most countries,
government organizations are major buyers of goods and services.
To succeed in the government market, sellers must locate key decision makers and
understand the buying decision process.
Government organizations tend to favor domestic suppliers over foreign suppliers.
These buyers are affected by environmental, organizational, interpersonal, and individual
factors.
Because their spending decisions are subject to public review, government organizations
require considerable documentation from suppliers. Most governments provide would-be
suppliers with detailed guides “Business Service Centers” that describing how to sell to the
government.
Nowadays just few companies are willing to work in the government market for a bunch of
reason. Moreover several companies, have established separate government marketing
departments and other companies have established customized marketing programs for
government buyers.