Chapter 19: Personal Selling and Sales Management

Objectives: 

• Describe the value added of personal selling,
• Define the steps in the personal selling process,
• Describe the key functions involved in managing a sales force,
• Describe the ethical and legal issues in personal selling. 

I. The Scope and Nature of Personal Selling

Personal Selling: The two-way flow of communication between a buyer and a seller that is designed to influence the buyer's purchase decision. Can take place face to face or via video teleconferencing, telephone, or over the internet. 15 million people are employed in sales position in the US.

• Personal Selling as a Career
• Salespeople are normally on their own. Although they may have to collaborate with management and other salespeople, they manage their own time. 
• As long as they meet or exceed their daily sales goals, they are minimally supervised. 
• Great variety of of the job is attracting. Everyday is different. Meet many new people. 
• Can be very lucrative. Sales are among the highest paying careers for college graduates.
• Their performance is easily measured therefore promotion to management is highly likely. 
• The value added by Personal Selling: Personal Selling is worth more than it costs for some firms who have integrated a sales force into their marketing communications program.
• Salespeople provide Information and Advice
• Most customers find value in and are willing to pay for the education and advice that salespeople provide. 
• Salespeople save time and Simplify Buying
• Customers perceive value in time and labor savings. To appeal to consumers, manufacturers might send salespeople into stores to provide cooking demonstrations or free samples in the case of grocery stores, or trunk or made to measure shows in the case of apparel or shoe retailers. 
• Salespeople Build Relationships
• Building strong marketing channel relationships is a critical success factor. 
• Relationship Selling: A sales philosophy and process that emphasize a commitment to maintaining the relationship over the long term and investing in opportunities that are mutually beneficial to all parties. 

II. The Personal Selling Process

• Step 1: Generate and Qualify Leads
• Leads: A list of potential customers.
• Qualify: The process of assessing the potential of sales leads.
• Trade Shows: Major events attended by buyers who choose to be exposed to products and services offered by potential suppliers in an industry. 
• Cold Calls: A method of prospecting in which salespeople telephone or go to see potential customers without appointments. 
• Telemarketing: A method of prospecting in which salespeople telephone potential customers. 
• Step 2: Preapproach and the Use of C.R.M. Systems
• Preapproach: In the personal selling process, occurs prior to meeting the customer for the first time and extends the qualification of leads procedure; in this step, the salesperson conducts additional research and develops plans for meeting with the customer. 
• Role Playing: A good technique for practicing the sales presentation prior to meeting with a customer; the salesperson acts out a simulated buying situation while a colleague or manager acts as the buyer. 
• Step 3: Sales Presentation and Overcoming Reservations
• The Presentation
• Asking questions is only half the battle; carefully listening to the answers is equally important. Once the salesperson has a feel for where the customer stands, he or she can apply the knowledge to help the customer solve their problem or satisfy a need. 
• Handling Reservations
• An integral art of the sales presentation is handling reservations or objections that the buyer might have about the product or service. 
• Good salespeople know the types of reservations buyers are likely to raise. The best way to handle reservations is to relax and listen, then ask questions to clarify the reservations. 
• Step 4: Closing the Sale
• Closing the sale: Obtaining a commitment from the customer to make a purchase. 
• An unsuccessful close one day may just be a means of laying the groundwork for a successful close during the next meeting. 
• Step 5: Follow Up
• With relationship selling, it is never really over, even after the sale. 
• Reliability
• Responsiveness
• Assurance
• Empathy
• Tangibles
• When customer expectations are not met, they often complain - about deliveries, about the billing amount or process, the product's performance, and after sales services such as installation or training. 
• The best way to nip a post sale problem in the bud is to check in with the customer right after he or she is in possession of the product or immediately after the service has been completed. 

III. Managing the Sales Force

Sales Management: Involves the planning, direction, and control of personal selling activities, including recruiting, selecting, training, motivating, compensating, and evaluating, as they apply to the sales force.

• Sales Force Structure
• Company Sales Force or Manufacturer's Representative
• Company Sales Force: Comprised of people who are employees of the selling company and are engaged in the selling process. 
• Independent Agents: Salespeople who sell a manufacturer's products on an extended contract basis but are not employees of the manufacturer; also known as manufacturer's representatives, or Reps.
• Salesperson Duties
• Order Getting: A salesperson whose primary responsibilities are identifying potential customers and engaging those customers in discussions to attempt to make a sale. 
• Order Taking: A salesperson whose primary responsibility is to process routine orders or reorders or rebuys for products.
• Sales Support
• Sales Support Personnel: Employees who enhance and help with a firm's overall selling effort, such as by responding to the customer's technical questions or facilitating repairs. 
• Combination Duties
• Selling Teams: Combinations of sales specialists whose primary duties are order getting, order taking, or sales support but who work together to service important accounts. 
• Recruiting and Selecting Salespeople
• This activity must be performed carefully because firms do not want to hire the wrong person given the expense incurred to train the individual. 
• Determine what the salespeople will be doing and what character traits and abilities align with those services to do the job well. 
• Many firms give candidate personality tests, but stress different personality attributes, depending on the requisite traits for the position and the personality traits of their most successful salespeople.
• Personality: Friendly, sociable, and like being around people. 
• Optimism: Look on the bright side. Also help keep them resilient. 
• Resilience: Don't easily take no for an answer. Keep coming back until they get a yes. 
• Self-Motivated: Free to schedule one's time. So must be motivated to get the job done, otherwise, it won't get done. 
• Empathy: Must care about their customers, their issues, and their problems. One of the Five Service Quality Dimensions discussed in Chapter 13.
• Sales Training
• All salespeople benefit from training about selling and negotiation techniques, products and service knowledge, technologies used in the selling process, time and territory management, and company policies and procedures. 
• The internet is a good tool to use for training programs. Is quite effective and efficient for many aspects of the sales training tasks, but may never replace the face to face. 
• Motivating and Compensating Salespeople
• Financial Rewards
• Salary: Compensation in the form of a fixed sum of money regularly paid at regular intervals. 
• Commission: Compensation for financial incentive for salespeople based on a fixed percentage of their sales. 
• Bonus: A payment made at management's discretion when the salesperson attains certain goals; usually given only periodically, such as at the end of the year.
• Sales Contests: : A short term incentive designed to elicit a specific response from the sales force.
• Non-financial Rewards
• Non-financial rewards should have high symbolic value, as plaques, pens, and rings do. Also, free trips make great rewards.
• Evaluating Salespeople by Using Marketing Metrics
• On the basis of monthly alone fails to consider how profitable the sales were. 
• Whether any progress was made to build new business that will be realized sometime in the future.
• Or level of customer service provided by salesperson. 
• Sales, profits, and number of orders. [Objective measures]
• Profit per customer, orders per call, sales per hour, or expenses compared to sales.
• Subjective measures seek to assess salespeople's behaviors; can be biased and should be used in conjunction with objective measures. 

IV. Ethical and Legal Issues in Personal Selling

• The Sales Manager and the Sales Force
• Sales Managers must be fair in hiring, promotion, supervision, training, assigning duties and quotas, compensation and incentives, and firing. 
• The Sales Force and Corporate Policy
• Sometimes salespeople face a conflict between what they believe represents ethical selling and what their company asks them to do to make a sale. 
• Salespeople must live within their own ethical comfort zone. 
• Salespeople can also be held accountable for illegal actions sanctioned by the employer. 
• The Salesperson and the Customer. 
• Salespeople have a duty to be ethically and legally correct in all of their dealings with their customers. 
• Not only is it the right thing to do, it's good business. 
• Formal guidelines can help deter miscommunications between managers and their salespeople and the relationships formed between the salespeople and the customer. Sales manager must lead by example. If managers are known to cut ethical corners, this behavior could trickle down to the salespeople and create great problems for the firm. 

Chapter 18: Advertising, Public Relations, and Sales Promotion

Objectives:

• Describe the steps in designing and executing and advertising campaign,
• Identify three objectives of advertising,
• Describe the different ways that advertisers appeal to consumers,
• Identify the various types of media,
• Identify agencies that regulate advertising,
• Describe the elements of a public relations toolkit,
• Identify the various types of sales promotion.

Advertising: A paid form of communication from an identifiable source, delivered through a communication channel, and designed to persuade the receiver to take some action, now or in the future. 

I. Step 1: Identify Target Audience

The success of an advertising program depends on how well the advertiser can identify the target audience. 

II. Step 2: Set Advertising Objectives

Advertising Plan: A section of the firm's overall marketing plan that explicitly outlines the objectives of the advertising campaign, how the campaign might accomplish those objectives, and how the firm can determine whether the campaign was successful.

Pull Strategy: Designed to get consumers to pull the product into the supply chain by demanding it.

Push Strategy: Designed to increase demand by motivating sellers-wholesalers, distributors, or salespeople - to highlight the product, rather than the  products of competitors, and thereby push the product onto consumers. 

• Informative Advertising: Communication used to create and build brand awareness, with the ultimate goal of moving the consumer through the buying cycle to a purchase. 
• Persuasive Advertising: Communication used to motivate consumers to take action. 
• Reminder Advertising: Communication used to remind consumers of a product or to prompt repurchases, especially for products that have gained market acceptance and are in the maturity stage of their life cycle. 
• Focus of Advertisements: 
• Product-focused Advertisements: Used to inform, persuade, or remind consumers about a specific product or service. 
• Institutional Advertisements: A type of advertisement that informs, persuades, or reminds consumers about issues related to places, politics, or an industry (ex: Got Milk? ads).
• Public Service Advertising (PSA): Advertising that focuses on public welfare and generally is sponsored by non-profit institutions, civic groups, religious organizations, trade associations, or political groups; a form of social marketing.
• Social Marketing: The content distributed through online and mobile technologies to facilitate interpersonal interactions. 

III. Step 3: Determine the Advertising Budget

• First, budgeters must recognize the role advertising will play in their overall promotional objectives.
• Second, advertising expenditures vary over a products life cycle. 
• Third, the nature of market and product influence the size of the budget. 
• B2B advertising budgets will be smaller and most likely use personal selling. 

IV. Step 4: Convey the Message

• The Message
• Unique Selling Proposition (USP): A strategy of differentiating a product by communicating its unique attributes; often becomes the common theme or slogan in the entire advertising campaigns. 
• The Appeal - the appeals that an argument may use include logos (logical), ethos (ethical), pathos (emotional)
• Information Appeals: Used in promotion to help consumers make purchase decisions by offering factual information and strong arguments built around relevant issues that encourage them to evaluate the brand favorably on the basis on the key benefits it provides. 
• Emotional Appeals: Aims to satisfy consumers' emotional desires rather than their utilitarian needs. 

V. Evaluate and Select Media

Media Planning: The process of evaluating and selecting the media mix that will deliver a clear, consistent, compelling message to the intended audience.

Media Mix: The combination of the media used and the frequency of the advertising in each medium.

Media Buy: The actual purchase of airtime or print pages. 

• Mass and Niche Media
• Mass Media: Channels that are ideal for reaching large numbers of anonymous audience members; include national newspapers, magazines, radio, television. 
• Niche Media: Channels that are focused and generally used to reach narrow segments, often with unique demographic characteristics or interests. 
• Choosing the Right Medium
• For each class of media, each alternative has specific characteristics that make it suitable for meeting specific objectives. Communication media also vary in their ability to reach the desired audience. 
• Determining the Advertising Schedule
• Advertising Schedule: The specification of the timing and duration of advertising. 
• Continuous Schedule: Runs steadily throughout the year and is therefore suitable for products and services that are consumed continually at relatively steady rates and that require a steady level of persuasive or reminder advertising. 
• Flighting: Refers to and advertising schedule implemented in spurts, with periods of heavy advertising followed by periods of no advertising. 
• Pulsing: Combines the continuous and flighting schedules by maintaining a base level of advertising by increasing advertising intensity during certain periods. 

VI. Create Advertisements

• After the advertiser has decided on the message, type of ad, and appeal, its attention shifts to the actual creation of the advertisement. During this step, the message and appeal are translated into words, pictures, colors, and/or music. Often, the execution of the style will dictate the type of medium used to deliver the message. 
• Advertisers create advertisements by simultaneously considering the objectives of the ad, the target consumer segments, the product's or service's value proposition or the unique selling proposition, and how the ad will coordinate with other IMC elements. 
• Visual, identify the subject, show product use and unique features, create favorable impression or product or advertiser, and arouse interest in headline. 
• Headline: In advertising, large type designed to draw attention. 
• Subhead: An additional smaller headline in an ad that provides a great deal of information through use of short and simple words. 
• Body Copy: The main text portion of an ad. 
• Brand Elements: Characteristics that identify the sponsor of the specific ad. 
• Although creativity plays a major role in the advertisement, advertisers must not let their creativity overpower their message. 

VII. Assess Impact using Marketing Metrics

• Pretesting: Assessments performed before and ad campaign is implemented to ensure that the various elements are working in an integrated fashion and doing what they are intended to do. 
• Tracking: Includes monitoring key indicators, such as daily or weekly sales volume, while the advertisement is running to shed light on any problems with the message or the medium. 
• Posttesting: The evaluation of an IMC campaign's impact after it has been implemented. 

VIII. Regulatory and Ethical Issues in Advertising

• Federal Trade Commission: Enforces federal consumer protection laws; enforces truth in advertising laws, defines deceptive and unfair advertising practices. 
• Federal Communications Commission: Regulates interstate and international communications by radio, television, wire, satellite, and cable; enforces restrictions on broadcasting material that promotes lotteries (with some exceptions),; cigarettes, little cigars, or smokeless tobacco products; or that perpetuates a fraud. Also enforces laws that limit or prohibit obscene, indecent, or profane language. 
• Food and Drug Administration: Regulates food, dietary supplements, drugs, cosmetics, medical devices (including radiation emitting devices such as cell phones), biologics (biological issues), and blood products; regulates package labeling and inserts, definition such as terms such as light and organic, and required disclosure statements (warning labels, dosage requirements, etc.).
• Puffery: The legal exaggeration of praise, stopping just short of deception, lavished on a product. 

IX. Public Relations

• Public Relations (PR): The organizational function that manages the firms communications to achieve a variety of objectives, including building and maintaining a positive image, handling or heading off unfavorable stories or events, and maintaining positive relationships with the media. 
• Cause-related Marketing: Commercial activity in which businesses and charities form a partnership to market an image, a product, or a service for their mutual benefit; a type of promotional campaign. 
• Event Sponsorship: Popular PR tool; occurs when corporations support various activities (financially or otherwise), usually in the cultural or sports and entertainment sectors. 

X. Sales Promotion

Sales Promotion: Special incentives or excitement building programs that encourage the purchase of a product or service, such as coupons, rebates, contests, free samples, and point of purchase displays. 

• Types of Sales Promotion
• Coupons: Provides a stated discount to consumers on the final selling price of a specific item; the retailer handles the discount. 
• Deals: A type of short term price reduction that can take several forms, such as a "featured price", a price lower than the regular price; a "buy one get one ..." offer; or a certain percentage "more free" offer contained in larger packaging; can involve a special financing arrangement, such as reduced percentage interest rates or extended repayment terms. 
• Premiums: An item offered for free or at a bargain price to reward some type of behavior, such as buying, sampling, or testing. 
• Contests: A brand sponsored competition that requires some form of skill and effort.
• Sweepstakes: A form of sales promotion that offers prizes based on a chance drawing of entrants' names. 
• Samples: Offers potential customers the opportunity to try a product or service before they make a buying decision. 
• Loyalty Programs: Specifically designed to retain customers by offering premiums or other incentives to customers who make multiple purchases over time. 
• Point of Purchase Displays: A merchandise display located at the point of purchase, such as at the checkout counter in a grocery store. 
• Rebates: A consumer discount on which a portion of the purchase price is returned to the buyer in cash; the manufacturer, not the retailer, issues the refund.
• Product Placement: Inclusion of a product in nontraditional situations, such as in a scene in a movie or television program. 
• Using Sales Promotion Tools
• Be aware that lowering prices on a non-perishable product may increase sales in the short run, but may lead to consumers stockpiling the item and diminishing demand in the long-run. But on a perishable item, may provide an opportunity to beat a competitors price and increase sales over the competition. 
• Cross-Promoting: Efforts of two or more firms joining together to reach a specific target market. 
• The goal of any sales promotion is to create value for the consumer and the firm. 

Chapter 17: Integrated Marketing Communications

Objectives:

• Identify the components of the communication process,
• Explain the 4 steps in the AIDA model,
• Describe the various integrative communication channels,
• Explain the methods used to allocate the integrated marketing communications (IMC) budget,
• Identify marketing metrics used to measure IMC success. 

Integrated Marketing Communications (IMC): Represents the promotion dimension of the four Ps; encompasses a variety of communication disciplines - general advertising, personal selling, sales promotion, public relations, direct marketing, and electronic media - in combination to provide clarity, consistency, and maximum communicative impact. 

I. Communicating with Consumers

• The Communication Process
• The Sender: The firm from which the IMC message originates; the sender must be clearly identified to the intended audience. 
• The Transmitter: An agent or intermediary with which the sender works to develop the marketing communications; for example, a firm's creative department or an advertising agency.
• Encoding: The process of converting the sender's ideas into a message, which could be verbal , visual, or both.
• The Communication Channel: The medium - print, broadcast, the internet - that carries the message.
• The Receiver: The person who reads, hears, sees and processes the information contained in the message or advertisement. 
• Decoder: The process by which the receiver interprets the sender's message.
• Noise: Any interference that stems from competing messages, a lack of clarity in the message, or a flaw in the medium; a problem for all communication channels. 
• Feedback Loop: Allows the receiver to communicate with the sender and thereby informs the sender whether the message was received and decoded properly.
• How Consumers Perceive Communication
• Receivers Decode Messages Differently
• Base on the receiver's own sentiments and current position in the world, messages can be received differently. 
• Senders Adjust Messages According to the Medium and Receivers' Traits
• The adjustments made based on the specific target the message is directed toward. For example, is the message towards, suppliers, retailers, consumers....?
• The AIDA Model: A common model of the series of mental stages through which consumers move as a result of marketing communications: Awareness leads to Interest, which lead to Desire, which lead to  Action. There is not always a direct link between a particular marketing communication and a consumer's purchase. Generally, marketing communications move consumers stepwise through a series of mental stages, for which there are several models. 

• Awareness: 
• Brand Awareness: Measures how many consumers in the market are familiar with the brand and what it stands for; created through repeated exposures of the various brand elements (brand name, logo, symbol, character, packaging, or slogan) in the firm's communications to consumers. 
• Aided Recall: Occurs when consumers recognize a name (a brand name) that has been presented to them.
• Top-of-mind Awareness: A prominent place in people's memories that triggers a response without them having to put any thought into it. 
• Interest: It isn't enough to let people know the product exists, consumers must be persuaded that it is a product worth investigating. 
• Desire: After the firm has piqued the interest of its target market, the goal of the subsequent IMC messages should move the consumer from "I like it" to "I want it".
• Action: If the message has caught consumers' attention and made them interest enough to consider the product as a means to satisfy a specific desire of theirs, they likely will act on that interest by either searching for that product or making a purchase. 
• The Lagged Effect: A delayed response to a marketing communication campaign. 

II. Elements of an Integrated Marketing Communication Strategy

• Advertising: A paid form of communication from an identifiable source, delivered through a communication channel, and designed to persuade the receiver to take some action, now or in the future. Advertising must break through the clutter of other messages and reach its intended audience. 
• Public Relations: The organizational function that manages the firm's communication to achieve a variety of objectives, including building and maintaining a positive image, handling or heading off unfavorable stories or events, and maintaining positive relationships with the media. 
• Sales Promotions: Special incentives or excitement-building programs that encourage the purchase of a product or service, such as coupons, rebates, contests, free samples, and point of purchase displays. 
• Personal Selling: The two way flow of communication between a buyer and a seller that is designed to influence the buyer's purchase decision. 
• Direct Marketing: Sales and promotional techniques that deliver promotional materials individually. 
• Mobile Marketing: Marketing through handheld wireless devices. 
• Online Marketing
• Websites:Websites are used to build brand image and educate consumers about their products or services as well as where they can be purchased. 
• Blogs: A webpage that contains periodic posts: corporate blogs are a new form of marketing communications. A well received blog can communicate trends, announce special events, create positive word of mouth, connect consumers by forming a community, allow the company to respond directly to customer's comments, and develop a long term relationship with the company. 
• Social Media: Media content used for social interactions such as Youtube, Facebook, and Twitter. 

III. Planning and Measuring IMC Success

• Goals: Goals can be short term, such as generating inquiries, increasing awareness, and prompting trial. Or they can be long-term in nature, such as increasing sales, market share, and customer loyalty. Goals should be explicitly defined and measured. 
• Setting and Allocating IMC Budget
• Objective-and-Task Method: An IMC budgeting method that determines the cost required to undertake specific tasks to accomplish communication objectives; process entails setting objectives, choosing media, and determining costs. 
• Rule-of-Thumb Methods: Budgeting methods that base the IMC budget on either the firm's share of the market in relation to competition, a fixed percentage of forecasted sales, or what is left after other operating costs and forecasted sales have been budgeted. 
• Measuring Success using Marketing Metrics: Each step in the IMC process can be measured to determine how effective it has been in motivating consumers to move to the next step in the buying process. 
• Traditional Media
• Frequency of Exposure: MEasure of how often the audience is exposed to a communication within a specific period of time. 
• Reach: Measure of consumers' exposure to marketing communications; the percentage of the target population exposed to a specific marketing communication, such as and advertisement, at least once. 
• GRP - Gross Rating Points: Measure used for various media advertising - print, radio, or television; GRP = (Reach) x (Frequency)
• Web-based Media: Sites who use special systems to deliver messages that contribute to defining changing consumer trends based on how the consumers are interacting on the social systems. 
• Planning, Implementing, and Evaluating IMC Programs - An Illustration of Google Advertising
• Search Engine Marketing: A type pf web advertising whereby companies pay for keywords that are used to catch consumers' attention while browsing a search engine. 
• Impressions: The number of times an advertisement appears in front of the user. 
• Click Through Rate: The number of times the user clicks on an online ad divided by the number of impressions. 
• Relevance: The context of search engine marketing (SEM), it is a metric used to determined how useful an advertisement is to the consumer.  
• Return on Investment: The amount of profile divided by the initial amount of investment. In the case of an advertisemnt, the ROI = (Sales) - (Cost of Advertising needed to generate sales) / (The Ad Cost).

Chapter 16: Retailing and Multichannel Marketing

Objectives: 

• Discuss the four factors manufacturers should consider as they develop their strategy for working with retailers,
• Outline the considerations associated with choosing retail partners,
• List the three levels of distribution intensity,
• Describe the various types of retailers,
• Describe the components of a retail strategy,
• Identify the benefits of stores,
• Identify the benefits of multichannel retailing,
• detail the challenges of multilevel retailing.

Retailing: The set of business activities that add value to products and services sold to consumers for their personal or family use; includes products bought at stores, through catalogs, and over the internet, as well as services like fast-food restaurants, airlines, and hotels. 

Factors for Establishing a Relationship with Retailers:

1. Choosing Retail Partners
2. Identifying Types of Retailers
3. Develop a Retail Strategy
4. Managing a Multichannel Strategy

Multichannel Strategy: Selling in more than one channel (ex: stores, internet, catalog).

I. Choosing Retail Partners

• Channel Structure
• Customer Expectations
• Channel Member Characteristics
• Distribution Intensity: The number of Supply chain members to use at each level of the supply chain.
• Intensive Distribution: A strategy designed to get products into as many outlets as possible.
• Exclusive Distribution: A strategy in which selected retailers can sell a manufacturer's brand.
• Selective Distribution: Lies between the intensive and exclusive distribution strategies; uses a few selected customers in a territory.

II. Identifying Types of Retailers

• Food Retailers
• Supermarkets
• Conventional Supermarkets: Type of retailer that offers groceries, meat, produce, with limited sales of nonfood items, such as beauty and health aids and general merchandise, in a self service format.
• Stock Keeping Units: (SKUs) Individual items within each product category; the smallest unit available for inventory control.
• Limited Assortment Supermarkets: (Extreme Value Food Retailers) Retailers that offer only one or two brands or sizes of most products (usually including a store brand) and attempt to achieve great efficiency to lower costs and prices.
• Super-centers: Large stores combining full-line discount stores with supermarkets in one place. 
• Warehouse Clubs: Large retailers with an irregular assortment, low service levels, and low prices that often require membership for shoppers.
• Convenience Stores: Type of retailer that provides a limited number of items at a convenient location in a small store with a speedy checkout. 
• General Merchandise Retailers
• Department Stores: A retailer that carries many different types of merchandise (broad variety) and lots of items within each type (deep assortment); offers some customer services, and is organized into separate departments to display its merchandise.
• Full-Line Discount Stores: Retailers that offer low prices, limited service, and a broad variety of merchandise.
• Specialty Stores: A type of retailer that concentrates on a limited number of complimentary merchandise categories in a relatively small store.
• Drugstores: A specialty store that concentrates on health and personal grooming merchandise, though pharmaceuticals may represent more than 60 percent of its sales.
• Category Specialists: A retailer that offers a narrow variety but a deep assortment of merchandise.
• Big-Box Retailers: Discount stores that offer a narrow but deep assortment of merchandise.
• Category Killers: A specialist that offers an extensive assortment in a particular category, so much so that other retailers cannot compete. 
• Extreme Value Retailers: A general merchandise discount store found in lower income urban or rural areas.
• Off-Price Retailers: A type of retailer that offers inconsistent assortment of merchandise at relatively low prices. 
• Services Retailers: A firm that primarily sells services rather than merchandise. 
• Auto Rental
• Health Spa
• Vision Center
• Bank

III. Developing a Retail Strategy using the Four Ps

• Product
• Exclusive Co-brand: Developed by national brand vendor and retailer and sold only by that retailer. 
• Price
• Promotion
• Mobile Commerce: (m-commerce) Communicating with or selling to consumers through wireless handheld devices such as cellular devices. 
• Cooperative Advertising (Co-op): An agreement between a retailer and a manufacturer in which the manufacturer agrees to defray some advertising costs. 
• Share of Wallet:  The percentage of the customer's purchases made from a particular retailer. 
• Place

IV. Benefits of Stores for Consumers

• Browsing
• Touching and Feeling Products
• Personal Service
• Cash and Credit Payment
• Entertainment and Social Experience
• Immediate Gratification

V. The Benefits of the Internet and Multichannel Retailing

• Deeper and Broader Selection
• Personalization
• Personalized Customer Service
• Online Chats: Instant messaging or voice conversation with an online sales representative.
• Personalized Offering
• Expand Market Presence

VI. Effective Multichannel Retailing

• Integrated CRM
• Brand Image
• Pricing
• Supply Chain

Chapter 15: Supply Chain and Channel Management

Objectives:

• Understand the importance of marketing channels and supply chain management,
• Understand the difference between direct and indirect marketing channels,
• Describe how marketing channels are managed,
• Describe the flow of information and merchandise in the market channel.

Marketing Channel Management: Also called supply chain management, refers to a set of approaches and techniques firms employ to efficiently and effectively integrate their suppliers.

Supply Chain Management: Refers to the set of approaches and techniques firms employ to efficiently and effectively integrate their suppliers, manufacturers, warehouses, stores, and transportation intermediaries into a seamless value chain in which merchandise is produced and distributed in the right quantities, to the right locations, and at the right time, as well as to minimize system wide costs while satisfying the service levels their customers require.

I. The Importance of Market Channel/Supply Chain Management

"Even if firms execute [establishing a great marketing mix for Price, Promotion, and Product] flawlessly, unless they can secure the [Place] of products in appropriate outlets in sufficient quantities exactly when customers want them, they are likely to fail."

Wholesalers: Those firms engaged in buying, taking title to, often storing, and physically handling goods in large quantities, then reselling the goods (usually in smaller quantities) to retailers or industrial or business users.

• Marketing Channels Add Value: Each participant in the chain adds value in what they do for the customer, from providing a local resource that allows the customer options of products similar to their current needs as well as services above and beyond the product and it's purchase. At each step, the products do become more costly, but also begin to add value as they become more convenient to the customer when wanting to make a choice. 
• Marketing Channel Management Affects other Aspects of Marketing: When products are designed and manufactured, how and when the critical components reach the factory must be coordinated with production. 
• Distribution Centers: A facility for receipt, storage, and redistribution of goods to company stores or customers; may be operated by retailers, manufacturers, or distribution specialists.

**The importance of Marketing Channels and Supply Chain Management is all about coordinating services from product production through to delivery of product to places in which make it more accessible for consumers in order to achieve the perceived value required by the consumer to purchase.**

II. Designing Marketing Channels

• Direct Marketing Channel: A direct channel is one in which there are no intermediaries between manufacturer and customer. 
• Indirect Marketing Channel:  When one or more intermediaries work with manufacturers to provide goods and services to customers. 

III. Managing the Marketing Channel and Supply Chain

Vertical Channel Conflict: A type of channel conflict in which members of the same marketing channel, for example, manufacturers, wholesalers, and retailers are in disagreement or discord.

Horizontal Channel Conflict: A type of conflict in which members at the same level of a marketing channel, for example, two competing retailers or two competing manufacturers, are in disagreement or discord, such as when they are in a price war.

• Managing the Marketing Channel and Supply Chain through Vertical Marketing Systems: Marketing channels that are more closely aligned, whether by contract or ownership, share common goals and therefore are less prone to conflict. 
• In an Independent (Conventional) Marketing channel, several independent entities each attempts to satisfy their own objectives and maximize profits usually at the expense of the other members within the channel. 
• In a Vertical Marketing Channel, all members act as a unified system.
• Administered Vertical Marketing System: A supply chain system in which there is no common ownership and no contractual relationships, but the dominant channel member controls the channel relationship.
• Power: A situation that occurs in a marketing channel in which one member has the means or ability to have control over the actions of another member in a channel at a different level of distribution, such as if a retailer has power or control over a supplier.
• Reward Power: A type of marketing channel power that occurs when the channel member exerting the power offers rewards to gain power, often a monetary incentive, for getting another channel member to do what it wants it to do. 
• Coercive Power: Threatening or punishing the other channel member for not undertaking certain tasks. Delaying payment for late delivery would be an example. 
• Referent Power: A type of marketing channel power that occurs if one channel member wants to be associated with another channel member. The channel member with whom the others wish to be associated has the power and can get them to do what they want.
• Expertise Power: When a channel member uses its expertise as leverage to influence the actions of another channel member.
• Information Power: A type of marketing channel power that occurs if the channel member exerting the power has information that the other channel members want or needs and can therefore get them to do what they want.
• Legitimate Power: A type of marketing channel power that occurs if the channel member exerting the power has a contractual agreement with the other channel member that requires the other channel member to behave in a certain way. This type of power occurs in an administered vertical marketing system.
• Contractual Vertical Marketing System: A system in which independent firms at different levels of the supply chain join together through contracts to obtain economies of scale and coordination and to reduce conflict.
• Franchising: A contractual agreement between a franchisor and a franchisee that allows the franchisee to operate a business using a name and format developed and supported by the franchisor. A franchise system combines the entrepreneurial advantages of owning a business with the efficiencies of vertical marketing systems that function under a single ownership.
• Corporate Vertical Marketing System: A system in which the parent company has complete control and can dictate the priorities and objectives of the supply chain; it may own facilities such as manufacturing plants, warehouse facilities, retail outlets, and design studios.

• Managing Marketing Channels and Supply Chains Through Strategic Relationships
• A Strategic Relationship (Partnering Relationship) is a supply chain relationship in which the members are committed to maintaining long term, investing in opportunities that are mutually beneficial; requires mutual trust, open communication, common goals, and credible commitments.
• Mutual Trust: Holds a strategic relationship together. With trust, there is also less need for the supply chain members to constantly monitor and check up on each other's actions because each believes the other won't take advantage.
• Open Communication: To share information, develop sales forecasts together, and coordinate deliveries.
• Common Goals: Shared goals give members of the relationship an incentive to pool their strengths and abilities and exploit potential opportunities together. 
• Interdependence: Interdependence between supply chain members that is based on mutual benefits is key to developing and sustaining the relationship. 
• Credible Commitments: Successful relationships develop because both parties make credible commitments to, or tangible investments in, the relationship. 

IV. Making Information flow Through Marketing Channels

Flow 1: Customer to store; use of UPC to track sales of products.
Flow 2: Store to buyer; All sales of merchandise are recorded and used in the inventory management system and more.
Flow 3: Buyer to manufacturer; Used to facilitate possible buying deals and possible breaks in the flow of merchandise.
Flow 4: Store to manufacturer; sales are sent directly to manufacturer to establish when more shipments need to be sent. BY working together, retailer and manufacturer can better satisfy customer needs.
Flow 5: Store to distribution center; Used to coordinate delivers and check inventory supplies.
Flow 6: Manufacturer to distribution center and buyer; a means to communicate expected deliveries to help facilitate planning of deliveries and expedite the payment process upon delivery of expected merchandise. 

• Data Warehouse: A place where sales recorded from point of sale. 
• Electronic Data Interchange: The computer-to-computer exchange of business documents from a retailer to a vendor and back.
• Vendor Managed Inventory: An approach for improving supply chain efficiency in which the manufacturer is responsible for maintaining the retailers inventory levels in each of it's stores.  
• Push Versus Pull Marketing Channels
• Push Marketing Strategy: Designed to increase demand by motivating sellors -- wholesalers, distributors, or salespeople -- to highlight the product, rather than the products of competitors, and thereby push the product onto customers.
• Pull Marketing Strategy: Designed to get consumers to pull the product into the supply chain by demanding it. 

V. Making Merchandise flow Through MArketing Channels

• Distribution Centers versus Direct Store Delivery
• Benefits of Distribution systems: 
  
  • More accurate sales forecasts are possible.
  • Distribution centers enable the retailer to carry less inventory, which lowers investment costs.
  • Easier to avoid running out of stock or having too much stock on hand.
  • More cost effective given space at retail stores tend to be more expensive than that at distribution centers. 
• The Distribution Center
• Management of Inbound Transportation
• Planners: In a retailing context, employees who are responsible for the financial planning and analysis of merchandise, and it's allocation to stores.
• Receiving and Checking using UPC
• Receiving: The process of recording the receipt of merchandise as it arrives at a distribution center or store. 
• Radio Frequency Identification Tags (RFID): Tiny computer chips that automatically transmit to a special scanner all the information about a containers contents or individual products. 
• Storing and Cross-Docking: Either gets placed in storage till delivery to vendor is set or is transferred from unloading dock to loading dock to be sent immediately to retailers or consumer. 
• Getting Merchandise Floor Ready
• Ticketing and Marketing: Creating price and identification labels and placing them on the merchandise. 
• Preparing to Ship Merchandise to a Store
• Pick Ticket: A document or display on a screen on a forklift truck indicating how much of each item to get from specific storage areas. 
• Shipping Merchandise to Stores: 
• Inventory Management Through Just-in-Time Inventory Systems
• Just-In-Time Inventory Systems: (Quick Response; QR) : Inventory management systems designed to deliver less merchandise on a more frequent basis than traditional inventory systems; the firm gets the merchandise "just in time" for it to be used in the manufacture of another product, in the case of parts or components, or for sale when the customer wants it, in the case of consumer goods.

Chapter 14: Pricing Concepts for Establishing Value

Objectives:

• List the four pricing orientations,
• Explain the relationship between price and quantity sold,
• Explain price elasticity,
• Describe how to calculate a product's break-even point,
• Indicate the four types of price competitive levels,
• Describe the difference between an everyday low price strategy (EDLP) and a high/low strategy,
• Explain the difference a price skimming and a market penetration pricing strategy,
• List pricing practices that have the potential to deceive customers.

I. The Five Cs of Pricing

Price: The overall sacrifice a customer is willing to make -- money, time, energy -- to acquire a specific product or service.

• Company Objectives
• Profit Orientation: A company objective that can be implemented by focusing on target profit pricing, maximizing profits, or target return pricing.
• Target profit pricing: A pricing strategy implemented by firms when they have a particular profit goal as their overriding concern; uses price to simulate a certain level of sales at a certain profit per unit. 
• Maximizing profits: A profit strategy that relies primarily on economic theory. If a firm can accurately specify a mathematical model that captures all the factors to explain and predict sales and profits, it should be able to identify the price at which its profits are maximized.  
• Target return pricing: A pricing strategy implemented by firms less concerned with the absolute level of profits and more interested in the rate at which their profits are generated relative to their investments; designed to produce a specific return on investment, usually expressed as a percentage of sales. 
• Sales Orientation: A company objective based on the belief that increasing sales will help the firm more than will increasing profits.
• Premium Pricing: A competitor-based pricing method by which the firm deliberately prices a product above the prices set for competing products to capture those consumers who always shop for the best or for whom price does not matter. 
• Competitor Orientation: A company objective based on the premise that the firm should measure itself primarily against its competition. 
• Competitive Parity: A firm's strategy of setting prices that are similar to those of major competitors. 
• Status Quo Pricing: A competitor-oriented strategy in which a firm changes prices only to meet those of competition. 
• Customer Orientation: A company objective based on the premise that the firm should measure itself primarily according to whether it meets its customers' needs. 

• Customers
• Demand Curves and Pricing
• Demand Curve: Shows how many units of a product or service consumers will demand during a specific period at different prices. 
• Prestige Products or Services: Those that consumers purchase for status rather than functionality.
• Price Elasticity of Demand: Measures how changes in price affect the quantity of the product demanded; specifically, the ratio of the percentage change in quantity demanded to the percentage change in price. 
• PEOD = % Change Quantity Demanded / % Change in Price
• Elastic: Refers to a market for a product or service that is price sensitive; that is, relatively small changes in price will generate fairly large changes in the quantity demanded. 
• Inelastic: Refers to a market for a product or service that is price insensitive; that is, relatively small changes in price will not generate large changes in the quantity demanded. 
• Factors Influencing Price Elasticity of Demand
• Income Effect: Refers to the change in the quality of the product demanded by consumers due to a change in their income. 
• Substitution Effect: Refers to the consumers' ability to substitute other products for the focal brand, thus increasing the price elasticity of demand for the focal brand. 
• Cross-Price Elasticity: The percentage change in demand for product A that occurs ion response to a percentage change in the price of product B.
• Complimentary Products: Products whose demand curves are positively related, such that they rise and fall together; a percentage increase in demand for one results in a percentage increase in demand for the other.
• Substitute Products: Products for which changes in demand are negatively related; that is, a percentage increase in the quantity demanded for product A results in a percentage decrease in the quantity demanded of product B. 

• Costs
• Variable Costs: Those costs, primarily labor and materials, that vary with production volume. 
• TVC = Variable cost per unit X quantity produced
• Fixed Costs: Those costs that remain constant regardless of any change in volume of production.
• Total Costs: The sum of the variable costs and fixed costs. 
• TC = Variable Cost + Fixed Costs
• Total Revenue = Selling Price X quantity sold

• Break-Even Analysis and Decision Making
• Break-even Analysis: Technique used to examine the relationships among cost, price, revenue, and profit over different levels of production and sales to determine the Break-even Point.
• Break-even Point: The point at which the number of units sold generates just enough revenue to equal the total cost; at this point, profits are zero. 
• Contribution per Unit: Equals the price less the variable cost per unit. Variable used to determine the break-even point in units.
• Con/Unit = Selling Price - Variable Cost
• BEP Units = Fixed Costs / (Con/Unit)
• BEP Units = (Fixed Cost + Target Profit) / (Con/Unit)

• Mark-Up and Target Return Pricing
• TRP: (Variable Costs + (Fixed Costs / Expected Unit Sales)) X (1 + Target Return % [expressed as decimal])

• Competition
• Monopoly: One firm provides the product or service in a particular industry. 
• Oligopolistic competition: Occurs when onloy a few firms dominate a market.
• Price war: Occurs when two or more firms compete primarily by lowering price.
• Predatory pricing: A firm's prcatice of setting a very low price for one or more of its products with the intent to drive its competition out of business; illegal under both the sherman antitrust act and the federal trade commission act. 
• Monopolistic Competition: Occurs when there are many firms that sell closely related but not homogenous products; these products may be viewed as substitutes but are not perfect substitutes. 
• Pure Competition: Occurs when different companies sell commodity products that consumers perceive as substitutable; price usually is set according to the laws of supply and demand.

• Channel Members: --Manufacturers, wholesalers, and retailers -- can have a differnet perspective when it comes to pricing strategies. 
• Gray Market: Employ irregular but not necessarily illegal methods; generally, it legally circumvents authorized channels of distribution to sell goods at prices lower than those intended by the manufacturer. 

II. Pricing Strategies

• Everyday Low Pricing (EDLP): A strategy companies use to emphasise the continuity of their retail prices at a level somewhere between the regular, non-sale price and the deep-discount sale prices their competitors may offer. 
• High/Low Pricing: A pricing strategy that relies on the promotion of sales, during which prices are temporarily reduced to encourage purchases. 
• Reference Pricing: The price at which buyers compare the actual selling price of the product and that facilitate their evaluation process. 

III. New Product Pricing Strategies / Market Penetration Pricing

Market Penetration Strategy: A growth strategy that employ the current marketing mix and focuses the firm's efforts on existing customers. 

• Experience Curve Effect: Refers to the drop in unit cost as the accumulated volume sold increase; as sales continue to grow, the cost continue to drop, allowing even further reductions in the price.
• Price Skimming: A strategy of selling a new product or service at a high price that innovators and early adopters are willing to pay in order to obtain it; after the high-price market segment becomes saturated and sales begin to slow down, the firm generally lowers price to capture (skim) the next most price sensitive segment. 

IV. Legal and Ethical Aspects of Pricing

• Deceptive or Illegal Price Advertising: 
• Deceptive Reference Prices
• Loss Leader Pricing
• Bait and Switch
• Predatory Pricing
• Price Discrimination
• Price Fixing

Chapter 13: Services; The Intangible Product

Objectives:

• Describe how the marketing of services differs from the marketing of products,
• Discuss the 4 gaps in the Service Gaps Model,
• Examine the 5 service quality dimensions,
• Explain the zone of tolerance,
• Identify 3 service recovery strategies.

"Services account for 76 percent of the U.S. GDP, a much higher percentage than they did 50, 20, or even 10 years ago."

Service: Any intangible offering that involves a deed, performance, or effort that cannot be physically possessed; intangible customer benefits that are produced by people or machines and cannot be separated from the producer.

Customer Service: Specifically refers to human or mechanical activities firms undertake to help satisfy their customers' needs and wants.

I. Services Marketing Differs from Product Marketing:

• Intangible: 
• Intangible: A characteristic of a service, it cannot be touched, tasted, or seen like a pure product can. 
• A service that cannot be shown directly to potential customers is more difficult to promote. Because of intangibility of services, the images that marketers use must reinforce the benefit or value that a service provides. 
• Inseparable Production and Consumption: 
• Inseparable: A characteristic of a service: it is produced and consumed at the same time; that is, service and consumption are inseparable. 
• The interaction with the service provider may have an important impact on the customers perception of the service outcome. Services cannot be tried first and come with a great deal of risk.
• Heterogeneous:
• Heterogeneity: As it refers to the differences between the marketing products and services, the delivery of services is more variable. 
• Marketers can use this variability to their advantage. 
• "An inferior service can't be recalled; by the time the firm recognizes a problem, the damage has been done."
• Perishable:
• Perishable: A characteristic of a service: it cannot be stored for use in the future.
• As long as the demand for the supply of the service match closely, there is no problem, but unfortunately, this perfect matching rarely occurs. 

II. Providing Great Service: The Gaps Model

Service Gap: Results when a service fails to meet the expectations that customers have about how it should be delivered.

• Knowledge Gap: A type of service gap; reflects the difference between customers' expectations and the firms' perception of those expectations. Firms can close this gap by determining what customers want by doing research using marketing metrics such as service quality and the zone of tolerance.
• Understanding Customer Expectations: Customers' expectations are based on their knowledge and experiences. Expectations vary according to the type of service. Peoples expectations also vary depending on the situation.
• Evaluating Service Quality using Well-Established Marketing Metrics:
• Service Quality: Customers perceptions of how well a service meets or exceeds their expectations. 
• Building Blocks of Service Quality:
• Reliability: the ability to perform the service dependably and accurately.
• Responsiveness: The willingness to help customers and provide prompt service.
• Assurance: The knowledge of and courtesy by employees and their ability to convey trust and confidence.
• Empathy: The caring, individualized attention provided to customers.
• Tangibles: The appearance of physical facilities, equipment, personnel, and communication material. 
• Voice-of-Customer (VOC) Program: An ongoing marketing research system that collects customer inputs and integrates them into managerial decisions. 
• Zone of Tolerance: The area between customers' expectation regarding their desired service and the minimum level of acceptable service -- That is, the difference between what the customer really wants and what he or she will accept before going elsewhere.

• Standards Gap:pertains to the difference between the firms' perceptions of the customers' expectations and the service standards it sets. By setting appropriate service standards, training employees to meet or exceed those standards, and measuring service performance, firms can attempt to close the gap. 
• Service Providers generally want to do a good job as long as they know what is expected of them. The employees must be thoroughly trained not only to complete their specific tasks but also how to treat guests, and managers need to set an example of high service standards, which will permeate through the entire organization. In extreme cases, such training becomes even more crucial. 

• Delivery Gap: The difference between the firm's service standards and the actual service it provides. This gap can be closed by getting employees to meet or exceed service standards when the service is being delivered by empowering service providers, providing support and incentives, and using technology where appropriate. 
• Methods to Reduce Delivery Gaps:
• Empower Employees
• Empowerment: In context of service delivery, means allowing employees to make decisions about how service is provided to customers.
• Provide Support and Incentives
• Emotional Support: Concern for others' well-being and support of their decision in a job setting.
• Instrumental Support: Providing the equipment or systems needed to perform a task in a job setting.
• Plus, the support that managers provide must be consistent and coherent throughout the organization. 
• Finally, Provide rewards to employees for their excellent service abilities. 
• Use of Technology
• Technology has become an increasingly important factor in the delivery of services. Technological advances that help close the delivery gap are expanding.
• But, they can also create problems. Some people do not support replacing human interaction with  machines or have problems using technology. 

• Communication Gap: refers to the difference between the actual service provided to customers and the service that the firm's promotion program promises. If firms are more realistic about the services they can provide and at the same time manage customer expectations effectively, they generally can close this gap. 
• The communications gap can be reduced by managing customer expectations and by promising only what you can deliver, or possibly even a little less. A relatively easy way to manage customer expectations is to coordinate how the expectation is created and the way the service is provided. 
• Service Quality and Customer Satisfaction and Loyalty: Good service leads to satisfied and loyal customers. Assuming that none of the service gaps discussed earlier occur, or are not too wide, customers should be more or less satisfied. 

III. Service Recovery

• Listening to the Customers and Involving them in the Service Recovery
• Customers can become very emotional about a service failure, whether the failure is serious, or minor. When the customer and company work together, the outcome is often better than either could achieve on their own. 
• Finding a fair Solution
• Distributive Fairness: Pertains to a customer's perception of the benefits he or she received compared with the costs (inconvenience or loss) that resulted from a service failure. 
• Procedural Fairness: Refers to the customers perception of the fairness of the process used to resolve complaints about service. 
• Resolving Problems Quickly
• The longer it takes to resolve a service failure, the more irritated the customer will become and the more people he or she is likely to tell about the problem. 

Chapter 12: Developing New Products

Objectives:

• Identify the reasons why firms create new products,
• Describe the different groups of adopters articulated by the diffusion of innovation theory,
• Describe the various stages involved in developing a new product or service,
• Explain the product life cycle. 

I. Why do Firms Create new products:

• Innovation: The process by which ideas are transformed into new products and services that will help firms grow. 

"Without innovation and its resulting new products and services, firms would have only two choices: continue to market current products to current customers or take the same product to another market with similar customers."

Changing Customer Needs: Firms can create and deliver value more effectively by satisfying the changing needs of their current and new customers or by keeping customers from getting bored with the current product or service offering.

Market Saturation: The longer a product exists in the marketplace, the more likely it is that the market will become saturated, and without new products or services, the value of the firm will ultimately decline.

Managing Risk Through Diversity: Through innovation, firms often create a broader portfolio of products, which help them diversify their risk and enhance firm value better than a single product can. Firms with multiple products can withstand external shocks, including changes in consumer preferences or intensive competitive activity.

Fashion Cycles: Industries that rely on fashion trends and experience short product life cycles - including apparel, arts, books, and software markets - most sales come from new products.

"Consumers of computer software and video games demand new offers because one they have beaten the game, they want to be challenged by another game or experience the most recent version."

Improving Business Relationships: New products do not always target end consumers; sometimes they function to improve relationships with suppliers.

II. Diffusion of Innovation:

• Diffusion of Innovation: The process by which the use of innovation, whether a product or a service, spreads throughout the market group over time and over various categories of adopters. 

The theory surrounding diffusion of innovation helps marketers understand the rate at which consumers are likely to adopt a new product or service. It also gives them means to identify potential markets for their new products or services and predict their potential sales, even before they introduce the innovations.

• Pioneers/breakthroughs: New product introductions that establish a completely new market or radically change both of the rules of competition and consumer preferences in a market.
• First Movers: Product pioneers that are the first to create a market or product category, making them readily recognizable to consumers and thus establishing a commanding and early market share lead.

Innovators: Those buyers who want to be the first to have the new product or service. These buyers enjoy taking risks and are considered highly knowledgeable. Innovators keep themselves very well informed about the product category. Are crucial to the success of any new product or service. 

Early Adopters: The second subgroup of consumers in the diffusion of innovation model, after innovators, to use a product or service innovation; generally don't like to take as much risk but instead wait and purchase the product after careful review. Often regarded as the opinion leaders for particular product categories.

Early Majority: A group of consumers in the diffusion of innovation model that represents approximately 34 percent of the population; members don't like to take much risk and therefore tend to wait until bugs are worked out of a particular product or service; few new products and services can be profitable until this large group buys them. When early majority consumers enter the market, the number of competitors in the marketplace usually also reaches it's peak, so these buyers have many price and quality choices.

Late Majority: The last group of buyers to enter a new product or service market; when they do, the product has achieved it's full market potential.

Laggards: Consumers who like to avoid change and rely on traditional products until they are no longer available.

Using the Diffusion of Innovation Theory: Firms can predict which types of consumers will buy their product or services immediately after its introduction as well as later as the product is more and more accepted by the market. With this knowledge, the firm can develop effective promotion, pricing, and other marketing strategies to push acceptance among each customer group. However, because different products diffuse at different rates, marketers must work to understand the diffusion curve for each new product and service as well the characteristics of the target customers in each stage of diffusion.

"If the early adopter group is small, the number of people who ultimately adopt the innovation likely will also be small."

• Relative Advantage: If a product or service is perceived to be better than substitutes, then the diffusion will be relatively quick. 
• Compatibility: A diffusion process may be faster or slower depending on various consumer features, including international cultural differences. 
• Observability: When products are easily observed, their benefits or uses are easily communicated to others, which enhances the diffusion process. 
• Complexity and Trialability: Products that are relatively less complex are also relatively easy to try. These products will generally diffuse more quickly and lead to greater/faster adoption than those that are not so easy to try. 

III. How Firms Develop New Products:

Idea Generation: Development of viable new product ideas. Firms that want to be pioneers rely more extensively on R&D efforts, whereas those who adopt a follower strategy are more likely to scan the market for ideas. 

• Internal Research and Development: Where scientists work to solve complex problems and develop new ideas. For firms that use R&D, the cost for product development are high and the resulting product or service is likely to be a technological or market breakthrough. 
• R&D Consortia: Groups of other firms and institutions, possibly including government and educational institutions, to explore new ideas or obtain solutions for developing new products. Here, the R&D investments come from the group as a whole. 
• Licensing: Firms buy the rights to use the technology or items  from other research-intensive firms through a licensing agreement. 
• Brainstorming: Firms often engage in brainstorming sessions during which a group works together to generate ideas; where no idea can be either rejected or accepted until the end of the session. 
• Outsourcing: What companies use when they have trouble doing any of the above mentioned techniques. 
• Competitors' products: A new product entry by a competitor may trigger a market opportunity for a firm, which can use reverse engineering to understand the competitor's product and then bring an improved version to market.
• Reverse Engineering: Involves the taking apart of a product, analyzing it, and creating an improved product that does not infringe upon the competitors patents, if any exist. 
• Consumer Input:  Listening to customers in both B2B and B2C markets is essential for successful idea generation. B2B customers are few so following their trends and needs to improve products and services is relatively easy. 
• Lead Users: Innovative product users who modify existing products according to their own ideas to suit their specific needs. 

Concept Testing:

• Concepts: Brief written description of a product or service; it's technology, working principles, and forms; and what consumer needs it would satisfy. 
• Concept Testing: The process in which a concept statement that describes a product or a service is presented to potential buyers or users to obtain their reaction. 

"If the concept fails to meet customers' expectations, it is doubtful it would succeed if it were to be produced and marketed."

Product Development:

• Product Development/Product Design: Entails a process of balancing various engineering, manufacturing, marketing, and economic considerations to develop a product's form and features or a services features.

"Ben and Jerry's Ice Cream alpha tests all of its proposed new flavors on its own (lucky) employees at its corporate headquarters in Vermont."

• Prototype: The first physical form or service description of a new product, still in rough or tentative form, that has the same properties as the new product but is produced through different manufacturing processes, sometimes even crafted individually. 
• Alpha Testing: An attempt by the firm to determine whether a product or service will perform according to it's design and whether it satisfies the need for which it was intended; occurs in the firm's R&D department.
• Beta Testing: Having potential consumers examine a product prototype in a real-use setting to determine its functionality, performance, potential problems, and other issues specific to it's use.

Market Testing:

• Premarket tests: Conducted before a firm brings a product or service to market to determine how many customers will try and then continue to use the product or service according to s mall group of potential consumers. 
• Test Marketing: Introduces a new product or service to a limited geographical area (usually a few cities) prior to a national launch. 

Product Launch: if the parket testing returns with positive results, the firm is ready to introduce the product to the entire market. Requires extensive financial investment and coordination of all of the marketing mix. 

• Promotion: Test results help the firm determine the appropriate integrated marketing communication strategy. Promotions of new products is required at each step of the supply chain. 
• Trade Promotions: Advertising to wholesalers or retailers to get them to purchase new products, often through special pricing incentives.
• Introductory Price Promotions: Short-Term price discounts designed to encourage trials.
• Trade Show: Major events attended by buyers who choose to be exposed to products or services offered by potential suppliers in an industry. 
• Place: The manufacturer coordinates the delivery and storage of the new products with its retailers to ensure that it is available for sale when the customer wants it, at the stores the customer is expecting it to be sold at, and in sufficient quantities to meet demand. 
• Price: Setting prices is a supply chain-wide decision. 
• Manufacturer's Suggested Retail Price: The price that manufacturers suggest retailers use to sell their merchandise. 
• Slotting Allowance: Fees firms pay to retailers simply to get new products into stores or to gain more or better shelf space for their products. 
• Timing: The timing of the launch may be important, depending on the product.

Evaluation of Results: After product is launched, the marketers must undertake a critical postlaunch review to determine whether the product and its launch were a success or failure and what additional resources or changes to the marketing mix are needed, if any. For products that do move through the system, firms can measure the success of a new product through three interrelated factors: 1) satisfaction of technical requirements, 2) customer acceptance, 3) its satisfaction of the firms financial requirements, such as sales and profits. 

IV. Product Life Cycle:

• Product Life Cycle: Defines the stages that new products move through as they enter, get established in, and ultimately leave the marketplace and thereby offers marketers a starting point for their strategy planning. 

Introduction Stage: Usually starts with a single firm.

• Introduction Stage: Stage of the life cycle when innovators start buying the product.

Growth Stage: Marked by a growing number of product adopters, rapid growth in industry sales, and increases in both the number of competitors and the number of available product versions.

• Growth Stage: Stage of the product life cycle when the product gains acceptance, demand and sales increase, and competitors emerge in the product category. 

Maturity Stage: Characterized by the adoption of the product by the late majority and intense competition for market share among firms.

• Maturity Stage: Stage of the product life cycle when industry sales reach their peak, so firms try to rejuvenate their products by adding new features or repositioning them. 
• Entry into new markets or market segments: Because the market is saturated at this point, firms may attempt to enter new geographical markets, including international markets, that may be less saturated. However, even in mature markets, firms may be able to find new market segments. 
• Development of new products: Despite market saturation, firms continually introduce new products with improved features or find new ones for existing products because they need constant innovation and product proliferation to defend market share from intense competition. 

Decline Stage: Firms with products in the decline stage either position themselves for a niche segment of the diehard consumers or those with special needs, or they completely exit the market.

• Decline: Stage of the product life cycle when sales decline and the product eventually exits the market. 

The Shape of the Product Life Cycle Curve: In theory, is bell shaped with regard to sales over time. However, each product or category has its own individual shape, where some move more rapidly through their product life cycle depending on the product and the market, and other variables.

Strategies based on Product Life Cycle: Some Caveats: Although the product life cycle concept provides a great starting point for marketers, it must be treated and used with care. New research, based on history of dozens of consumer products, suggests that the concept of the product life cycle is indeed valid. 

Chapter 11: Product, Branding, and Packaging Decisions

Objectives:

• Describe the components of a product,
• Identify the types of consumer products,
• Explain the difference between the product mix's breadth and a product line's depth,
• Identify the advantages that brands provide firms and consumers,
• Explain the various components of brand equity,
• Determine the various types of branding strategies used by firms,
• Distinguish between brand extension and line extension,
• Indicate advantages of a product's packaging and labeling strategy.

I. Complexity and Types of Products

Products: Anything that is of value to a customer and can be offered through a voluntary marketing exchange.

Core Customer Value: The basic problem solving benefits that consumers are seeking.

Actual Product: The physical attributes of a product including the brand name, features/design, quality level, and packaging.

Associated Services: (Augmented Product) The non-physical attributes of the product including product warranties, financing, product support, and after-sale service. 

• Types of Products
• Consumer Products: Products and services used by consumers for their personal use. 
• Specialty Products/Services: Products and services for which a customer shows a strong preference and for which he or she will expend considerable effort to search for the best suppliers.
• Shopping Products/Services: Those for which consumers will spend time comparing alternatives, such as apparel, fragrances, and appliances.
• Convenience Products/Services: Those for which the consumer is not willing to spend any effort to evaluate prior to purchase.
• Unsought Products/Services: Products or services consumers either do not normally thinkk of buying or do not know about.

II. Product Mix and Product Line Decisions

Product Mix: The complete set of products offered by a firm.

Product Lines: Groups of associated items, such as those that consumers use together or think of as part of a group of similar products.

Breadth: Number of product lines offered by a firm; also known as variety.

Depth: The number of categories within a product line.

• Increase Depth: to address changing consumer preferences or preempt competitors while boosting sales. 
• Decrease Depth: to realign firms resources. 
• Increase Breadth: To capture new or evolving markets to increase sales. 
• Decrease Breadth: to address changing market conditions or meet internal strategic priorities. 

III. Branding

"A company lives or dies based on brand awareness. Consumers cannot buy products that they do not know exist."

• Value of Branding for the Consumer
• Brands Facilitate Purchases: usually signify quality level of product or service and therefore help consumer make quick decisions. 
• Brands Establish Loyalty: Over time and use, consumers build trust in brands quality and value added.
• Brands Protect from Competition and Price Competition: Loyalty established create a protective nature from competitors and competitors pricing levels. 
• Brands are Assets: Can be legally protected by trademarks and copyrights and thus constitute a unique form of ownership. 
• Brands Affect Market Value: Having a well know brand can have a direct effect on a firm's bottom line. 
• Brand Equity for the Owner: The set of assets and liabilities linked to a brand that add to or subtract from the value provided by the product or the service. 
• Brand Awareness: Measures how many consumers are familiar with the brand and what it stands for; created through repeated exposures of the various brand elements ( brand name, logo, symbol, character, packaging, or slogan) in the firm's communications to the consumer. 
• Perceived Value: The relationship between a product's or service's benefits and its costs. 
• Brand Associations: The mental links that consumers make between a brand and its key product attributes; can involve a logo, slogan, or famous personality.
• Brand Loyalty: Occurs when a consumer buys the same brand's product or service repeatedly over time rather than buying from multiple suppliers within the same category. 

IV. Branding Strategies

• Brand Ownership
• Manufacturer Brands: (national brands) Brands owned and managed by the manufacturer. 
• Retail/Store Brands: Also called private-label brands, are products developed by retailers.
• Naming Brands and Product Lines
• Family Brands: A firm's own corporate name used to brand it product lines and products.
• Individual Brands: The use of individual brand names for each of a firm's products.
• Brand Line Extensions
• Brand Extension: The use of the same brand name for new products being introduced to the same or new market.
• Line Extension: The use of the same brand name within the same product line and represents an increase in a product line's depth.
• Brand Dilution: Occurs when a brand extension adversely affects consumer perception about the attributes the core brand is believed to hold. 
• Co-Branding: The practice of marketing two or more brands together, on the same package or promotion.
• Brand Licensing: A contractual agreement between firms, whereby one firm allows another to use its brand name, logo, symbols, or characters in exchange for a negotiated fee. 
• Brand Repositioning: (rebranding) A strategy in which marketers change a brand's focus to target new markets or realign the brand's core emphasis with changing market preferences. 

V. Packaging

Primary Package: The packaging the consumer uses, such as the toothpaste tube, from which he or she typically seeks convenience in terms of storage, use, and consumption.

Secondary Package: The wrapper or exterior carton that contains the primary package and provides the UPC Label used by retailer scanners; can contain additional product information that may not be available on the primary package.

• Product Labeling: Provide information the consumer needs for his or her purchase decision and consumption of the product. Many labeling requirements stem from various laws, used to protect the consumer from consuming goods against their lifestyle choices. It is a communication tool.

Chapter 10: Marketing Research

Objectives:

• Identify the five steps in the marketing research process,
• Describe the various secondary data resources,
• Describe the various primary data collection techniques,
• Summarize the difference between secondary data and primary data,
• Examine the circumstances in which collecting information on consumers is ethical.

I. The Marketing Research Process

Marketing Research: A set of techniques and principles for systematically collecting, recording, analyzing, and interpreting data that can aid decision makers involved in marketing goods, services, or ideas.

• Step 1: Defining Objectives and Research Needs
• Step 2: Designing the Research
• Step 3: Data Collection Process
• Secondary Data: Pieces of information that have already been collected from other sources and usually are readily available. Include both external and internal data sources.
• Primary Data: Data collected to address specific research needs. 
• Focus Groups
• In-Depth Interviews
• Surveys
• Sample: A group of customers that represent the customers of interest in a research study.
• Step 4: Analyzing Data and Developing Insights
• Data: Raw numbers or facts
• Information: Organized, analyzed, and interpreted data that offer value to marketers. 
• Step 5: Action Plan and Implementation
• A typical marketing research presentation includes:
• Executive Summary
• The Body of Report
• Includes research Objectives
• Methodology
• Detailed Findings
• Conclusions
• Appropriate Supplemental Tables
• Figures
• Appendixes

II. Secondary Data

• Inexpensive External Secondary Data
• US Census Data
• Google Searches
• Syndicated External Secondary Data
• Syndicated Data: Data available for a fee from a commercial research firm
• Scanner Data: A type of syndicated external secondary data used in quantitative research that is obtained from scanner readings of UPC Codes at check-out counters.
• Panel Data: Information collected from a group of consumers. 
• Internal Secondary Data
• Data Warehouses: Large computer files that store millions or billions of pieces of individual data.
• Data Mining: The use of a variety of statistical analysis tools to uncover previously unknown patterns in the data stored in databases or relationships among variables.
• Churn: The number of consumers who stop using a product or service, divided by the average number of consumers of that product or service. 

III. Primary Data Collection Techniques

Quantitative Research: Informal research methods, including observation, following social media sites, in-depth interviews, focus groups, and projective techniques.

Qualitative Research: Structured responses that can be statistically tested to confirm insights and hypotheses generated via qualitative research or secondary data.

• Observation: An exploratory research method that entails examining purchase and consumption behaviors through personal or video camera scrutiny.
• Social Media
• Sentiment mining: Data gathered by evaluating customer comments posted through social media sites such as facebook and Twitter.
• In-Depth Interviews: An exploratory research method technique in which trained researchers ask questions, listen to and record the answers, and then pose additional questions to clarify and expand on a particular issue.
• Focus Group Interviews: A research technique in which a small group of persons (usually 8-12) comes together for an intensive discussion about a particular topic with the conversation guided by a trained moderator using an unstructured method of inquiry.
• Survey Research
• Survey: A systematic means of collecting information from people that generally uses a questionnaire. 
• Questionnaire: A form that features a set of questions designed to gather information from respondents and thereby accomplish the researcher's objectives; questions can be either structured or unstructured.
• Structured Questions: Closed ended questions for which a discreet set of response alternatives, or specific answers, is provided for respondents to evaluate.
• Unstructured Questions: Open-ended questions that allow respondents to answer in their own words. 
• Developing a Questionnaire is Part Art and Part Science
• Panel and Scanner Based Research
• Experimental Research: A type of conclusive and quantitative research that systematically manipulates one or more variables to determine which variables have a causal effect on another variable. 
• Advantages and Disadvantages of Primary and Secondary Research
• Secondary Research
• Examples
• Census Data
• Sales Invoices
• Internet Information
• Books
• Journal Articles
• Syndicated Data
• Advantages
• Saves time in collecting data because they are readily available
• Free or inexpensive ( except for syndicated data)
• Disadvantages
• May not be precisely relevant to information needs.
• Information may not be timely.
• Sources may not be original, and therefore usefulness is an issue. 
• Methodologies for collecting data may not be appropriate.
• Data sources may be bias.
• Primary Research
• Examples
• Observed Consumer behavior
• Focus group interviews
• Surveys
• Experiments
• Advantages
• Specific to the immediate data needs and topic at hand.
• Offers behavioral insights generally not available from secondary research.
• Disadvantages
• Costly
• Time consuming
• Requires more sophisticated training and experience to design study and collect data.

IV. Emerging Technology and the Ethics of Using Customer Information

• Biometric data: Digital scanning of the behavioral or physiological characteristics of individuals as a means of identification.