Marketing Management

MARKETING
MANAGEMENT
2011 Fall

- Part I -

Assoc. Prof. Dr. Şebnem Burnaz

Understanding
Marketing Concept and
Marketing Management

‖The aim of marketing is to know and
understand the customer so well that the
product or service fits him and sells itself.‖
Peter Drucker

Overview

 What is marketing?
 Why is marketing important?
 What is the scope of marketing?
 What are some fundamental
marketing concepts?
 What are the tasks necessary for
successful marketing management?

What is Marketing?

 Selling?

 Advertising?

 Making products available in stores?

All of the above, plus much more!

Marketing…is about…

 ―Identifying and meeting human and
social needs‖

 ―Meeting needs profitably‖

 ―Generating customer value at a profit‖
 ―Managing profitable customer relationships by
delivering superior value to customers‖

What is Marketing?
 No single correct definition or approach
 Common subject matters:
 The ability to satisfy customers,
 The identification of favorable marketing
opportunities,
 The need to create an edge over competitors,
 The capacity to make profits to enable a viable
future for the organization,
 The use of resources to maximize a business‘ market
position,
 The aim to increase market share mainly in target
markets…

What is Marketing?
Marketing as a Process Capture
value from
Create value for customers customers
and build customer in return
relationships

Capture
Understand Design a Construct a Build value from
the customer- marketing profitable customers
marketplace driven program relationships to create
and customer marketing that delivers and create profits and
needs&wants strategy superior customer customer
value delight quality

What Is Marketing?
Marketing is an organizational function and a
set of processes for creating, communicating,
and delivering value to customers and for
managing customer relationships in ways that
benefit the organization and its stakeholders

The ________ is the United States‘ 24th
largest advertiser with an annual budget of
more than $1 billion.
1. Procter & Gamble Company
2. Boeing Company
3. U.S. Government
4. Levi Strauss & Co.

Core Concepts of Marketing

Needs, wants,
and demands

Markets Products
and services

Exchange, Value and
and relationships satisfaction

 Need
 Needs, wants, and  State of felt deprivation
demands  Basic human requirements
 Marketing offers:  e.g. needs food
including products,  Wants
services and experiences  Needs directed to specific
objects
 Value and satisfaction  The form of needs as
 Exchange and shaped by culture and the
relationships individual
 e.g. wants a BigMac
 Markets  Demands
 Wants which are backed by
buying power

 Needs, wants, and  Marketing offering
demands  Combination of
 Marketing offers: products, services,
information or
products, services, experiences offered to a
experiences… market that satisfy a
 Value and satisfaction need or want.
Offer may include
 Exchange and 

services, activities,
relationships people, places,
 Markets information or ideas.

 Marketing myopia is
focusing only on existing
offers and losing sight
of underlying consumer
needs.

 Market offerings are
not limited to
physical products:
 UNCF markets the
idea that ―A mind is
terrible thing to
waste‖.

What is Marketed?
Products
Anything that can be Offered to a Market to Satisfy a Need or Want

Events Places Persons

Experiences Properties Information

Organizations Ideas

Services
Activities or Benefits Offered for Sale That Are Essentially
Intangible and Don‘t Result in the Ownership of Anything

 Value
 Needs, wants, and  Customers form expectations
demands regarding value
 Marketing offers:
including products,  Value:
services and experiences  the customer‘s estimate of the
product‘s overall capacity to
 Value and satisfaction satisfy his or her needs.
 Exchange and  the satisfaction of customer
relationships requirements at the lowest
possible cost
 Markets Satisfaction

Value - Satisfaction
 Customer benefits  Customer satisfaction
Anything desired by the The feeling that a product
customer that is received in has met or exceeded the
an exchange customer‘s expectations
 Customer costs
Anything a customer gives up
in an exchange for benefits
What is the benefit of
 Monetary price of the
benefit
a satisfied customer to
 Search costs (time and
the company?
effort) to locate the product
 Risks associated with the

exchange

Exchange
Needs, wants, and


 The act of obtaining a desired
demands object from someone by
 Marketing offers: offering something in return
including products,  The response may be more

services and experiences than simply buying or trading
products and services
 Value and satisfaction  One exchange is not the goal,
 Exchange and relationships with several
relationships exchanges are the goal
 Markets
 Relationships are built through
delivering value and satisfaction
 Marketing network 
consists of the company and all
its supporting stakeholders

Relationship Marketing

 Relationship marketing aims to build
mutually satisfying long-term
relationships with key constituents in
order to earn and retain their
businesses.

Managing Relationships: Customers
 Customer Relationship Management (CRM)
 Using information about customers to create
marketing strategies that develop and sustain
desirable customer relationships

 Identifying buying-behavior patterns of customers
 Using behavioral information to
focus on the most profitable customers

Managing Customer Relationships

Relationship Building Blocks
• AIM  to increase
Customer Customer CLV (consumer
perceived value satisfaction lifetime value)!
• The difference • The extent to • to gain a greater
between total which a product‘s proportion of an
customer value perceived existing
and total performance customer‘s
customer cost matches a purchases over a
buyer‘s long period
expectations

 Needs, wants, and  Market
demands  Set of actual and
 Marketing offers: potential buyers of a
including products, product
services and experiences  These buyers share a
particular need or want
 Value and satisfaction that can be satisfied
 Exchange and through exchange relshps
relationships
Marketing means
 Markets 

managing markets to
bring about profitable
customer relshps

Marketing defined as...

Process by which individuals and groups
obtain what they need and want through
creating and exchanging products and
value with others.

Simply put: Marketing  the delivery of
customer satisfaction at a profit.

―Good marketing is no accident, but a result of careful
planning and execution…But marketing excellence is
rare and difficult to achieve. Marketing is both an ‗art‘
and a ‗science‘ –there is constant tension between the
formulated side of marketing and the creative side ‖

More Definitions of Marketing
(cont.)
 From the societal perspective; some marketers
describe marketing as the creation and delivery of
a standart of living.

 From the managerial perspective; marketing
(management) is the process of planning and
executing the conception, pricing, promotion and
distribution of goods and services to create
exchanges that satisfy individual and organizational
goals.

What Is Marketing Management?

 Marketing management is the art
and science of choosing target markets
and building profitable relationships by
getting, keeping, and growing customers through
creating, delivering, and communicating
superior customer value

 This definition must include answers to 2 questions:
 What customers will we serve?
 How can we best serve these customers?

 Marketing management involves  managing
demand  involves managing customer
relationships
 Marketers aim to influence the level, timing and
composition of demand to meet organizational goals.

 Marketing management is concerned
 not only with finding and increasing demand,
 but also with changing or even reducing it in some
cases

Marketing management:
 Customer management & Demand management

 Choosing a Value Proposition

The value proposition is the set of benefits
or values a company promises to deliver to
customers to satisfy their needs

Company Orientations towards
the Marketplace
Consumers prefer products that are
Production Concept widely available and inexpensive

Consumers favor products that
Product Concept offer the most quality, performance,
or innovative features

Consumers will buy products only if
Selling Concept the company aggressively
promotes/sells these products

Focuses on needs/ wants of target
Marketing Concept markets & delivering value
better than competitors

Focuses on delivering the desired
Societal Marketing satisfaction more effectively and efficiently
than competitors in a way that preserves or
Concept enhances the well-being of both consumer
and society

Marketing Concept
 Achieving organizational goals depends on
knowing the needs and wants of the target
markets and delivering the desired satisfactions
better than competitors do

 4 pillars of modern marketing :
1. Target market
2. Customer needs
3. Integrated marketing
4. Profitability through customer satisfaction

Marketing and Sales Concepts Contrasted
Starting
point Focus Means Ends

Existing Selling and Profits through
Factory products promotion sales volume

(a) The selling concept

Customer Integrated Profits through
Market needs marketing customer
satisfaction

(b) The marketing concept

Marketing Concept
1) Target market  homogenous group of
customers to whom the company wishes to appeal

2) Customer needs
 Consumers may not be fully conscious of their needs /
it may not be easy to articulate these needs OR they
may use words that require some interpretation
 Customer-oriented thinking  to define customer
needs from the customer‘s point of view
 Sales revenue  New customers + Repeat customers
 ―Customer Retention‖ vs. ―Customer Attraction‖
 Customer value and customer satisfaction  building
blocks of customer relationship management

Marketing Concept
3) Integrated Marketing  Various marketing
functions must work together for customer satisfaction
(coordination of marketing mix elements: 4Ps)
 Marketing Mix  controllable variables the company
puts together to satisfy its target market(s).
Goods, services, or ideas that satisfy customer
Product needs
Decisions and actions that establish pricing
Pricing objectives and policies and set product prices
Place The ready, convenient, and timely availability
(Distribution) of products
Activities that inform customers about the
Promotion organization and its products

Marketing Concept - The 4 Ps  The 4 Cs

Marketing
Mix

Product Place

Convenience
Customer
Solution Price
Promotion

Customer
Cost Communication

Marketing Concept

Integrated Marketing  Marketing must be
well coordinated with other departments in
the company;
all departments have to work together to satisfy
customers‘ needs and wants

“Marketing is too important
to be left to the marketing department.”
David Packard,
Hewlett-Packard

Marketing Concept

4) Profitability through customer
satisfaction
 To achieve profits as a result of
creating superior customer value

Selling – Marketing...

―There will always be need for
some selling. But the aim of marketing
is to make selling unnecessary. The aim
of marketing is to know and understand
the customer so well that the product or
service fits him and sells itself. Ideally,
marketing should result in a customer
who is ready to buy.‖
Peter Drucker

Societal Marketing Concept

 Company‘s negative effects on
society
 Conflict between consumer
wants and long-term social
welfare

 The company should make good
marketing decisions by
considering consumers‘ wants,
the company‘s requirements,
consumers‘ long-term interests,
and society‘s long-run interests

Societal Marketing Concept
Society
(Human Welfare)

Societal
Marketing
Concept

Consumers Company
(Want Satisfaction) (Profits)

Evolution of Marketing Thought

 How marketing has become
“marketing” as we understand it
and apply its practices today?

Evolution of Marketing Thought
 Production Era (1850s-1920s)
 Industrial revolution; mass production
 Few products and little competition
 Sales Era (1920s-1950s)
 The focus was on personal selling and advertising
 Sales seen as the major means for increasing profits
 Mktg Era (1950s-present)
 Customer orientation replaced the ―hard sell‖ of the sales-led era
 Determination of the needs and wants of customers before
introducing products or services
 Relationship Marketing Era: 1990s-
 Marketing era has recently shifted from being ―transaction-based‖
 to focusing on ―relationships‖
 Both attracting and ―retaining‖ customers

Evolution of Marketing Thought:
New Era(s) in Marketing (The Millenium)

..from Relationship Marketing to...
 Network marketing

 E-marketing

 Community marketing

 Buzz marketing

 Digital marketing

 Mobile marketing

 ... ... ...

Holistic Marketing Concept
 New marketing…
 A need to think about how to operate and compete
in a new marketing environment
 Holistic marketing  based on the
development, design, and implementation of
marketing programs, processes, and activities that
recognize their breadth and interdependencies

 Premise: ―everything matters‖ with marketing!

The New Four Ps

People

Processes

Programs

Performance

Marketing Management Tasks
 Develop market strategies and plans
 Capture marketing insights
 Connect with customers
 Build strong brands
 Shape market offerings
 Deliver value
 Communicate value
 Create long-term growth

Shifts in Marketing Management

 from marketing does the marketing  to… everyone does
the marketing
 from organizing by product units  to… organizing by
customer segments
 from making everything  to… buying more goods and
services from outside
 from using many suppliers  to… working with fewer
suppliers in a ‗partnership‘
 from relying on old market positions  to… uncovering
new ones
 from emphasizing tangible assets  to… emphasizing
intangible assets

Shifts in Marketing Management

 from building brands through advertising  to… building
brands through integrated communications
 from organizing by product units  to… organizing by
customer segments
 from attracting customers through stores and salespeople
 to...making products available online
 from trying to sell everyone  to... be the best firm
serving well-defined target markets
 from focusing on profitable transactions  to… focusing
on customer lifetime value
 from focusing on shareholders  to… focusing on
stakeholders

Marketing Management Tasks
 Developing
 Shaping the market
marketing strategies
offerings
and plans
 Delivering value
 Capturing marketing
insights  Communicating
value
 Connecting with
customers  Creating long-term
growth
 Building strong
brands

Strategic Marketing
Planning

―The company without a strategy is willing to try anything.‖

Michael Porter

Major Questions
 How does marketing affect customer
value?
 How is strategic planning carried out at
different levels of the organization?
 What is the role of marketing in the
overall strategic direction of the
company?
 What does a marketing plan include?

Phases of Value Creation and Delivery

Choosing the value

Providing the value

Communicating the value

What is the Value Chain?

The value chain is a tool to create
more customer value because every
firm is a synthesis of primary and
support activities performed to design,
produce, market, deliver, and support
its product.

Core Business Processes

 Market-sensing process
 New-offering realization process
 Customer acquisition process
 Customer relationship management
process
 Fulfillment management process

Characteristics of Core Competencies

 A source of competitive advantage
 Applications in a wide variety of
markets
 Difficult to imitate

Maximizing Core Competencies

 (Re)define the business concept
 (Re)shaping the business scope
 (Re)positioning the company‘s brand
identity

What is Holistic Marketing?

Holistic marketing sees itself as
integrating the value exploration, value
creation, and value delivery activities
with the purpose of building long-term,
mutually satisfying relationships and
co-prosperity among key stakeholders.

Questions to Address in Holistic
Marketing

What value opportunities are available?

How can we create new value offerings
efficiently?

How can we delivery the new offerings
efficiently?

Strategic Planning

 Strategic Planning  Managerial
process of developing and maintaining
a match between the organization‘s
resources and the market opportunities.

 The aim  to shape and reshape
company‘s businesses and products in
order to reach to targeted profits and
growth.

The Strategic Planning, Implementation,
and Control Processes

Steps in Strategic Planning
Business unit,
Corporate Level product,
and market
level

1) Defining the corporate mission
2) Setting objectives and goals Planning,
3) Designing business portfolio marketing,
Determining SBUs and other
Assigning resources to SBUs functional
4) Assessing growth opportunities strategies

Defining the Corporate Mission
 A mission statement 
a statement of the
organization‘s purpose --  ―Mission statement 
what it wants to accomplish to be guided by a
in the larger environment ―vision‖—an almost
―impossible dream‖
 A clear mission statement that provides a
 acts as ―invisible hand‖ direction for the
that guides employees to company for the next
work toward realizing the 10 to 20 years
organization‘s goals

Defining the Corporate Mission

 What is our business?
 Who is the customer?
 What is the value to the customer?
 What will our business be?
 What should our business be?

Good Mission Statements
 Focus on a limited number of goals
 Stress major policies and values
 Define major competitive spheres
 Take a long-term view
 Short, memorable, meaningful

What is our business:
Product Orientation vs. Market Orientation
Company Product Market

Disney We run theme parks We create fantasies—a place where
dreams come true
Xerox We make copying We improve office productivity
equipment
Columbia Pictures We make movies We entertain people

Amazon.com We sell books, videos, We make the Internet buying
CDs, toys, consumer experience fast, easy, and
electronics and other enjoyable— we‘re the place where
products online you can find and discover anything
you want to buy online
Nike We sell athletic shoes and We bring inspiration and innovation
apparel to every athlete* in the world (*if
you have a body, you are an
athlete)

Company Goals and Objectives

Mission  hierarchy of objectives

Mission
Statement

Marketing Marketing Marketing
Objective # 1 Objective # 2 Objective # 3

Marketing Marketing
Strategy Strategy

―We will provide branded products
and services of superior quality
and value that improve the lives
of the world's consumers, now
and for generations to come.

As a result, consumers will reward us with leadership
sales, profit, and value creation, allowing our people,
our shareholders, and the communities in which we
live and work to prosper.‖

Business Portfolio Analysis

Identify key businesses (SBUs)
that make up the company

Assess the attractiveness of its
various SBUs

Decide how much support
each SBU deserves

The Boston Consulting Group‘s
Growth-Share Matrix
20%- Stars Question marks
Market Growth Rate

?2
18%- 4
16%-
14%-
3 ? 1
12%- 5
10%-
8%- Cash cow Dogs
6%- 8
4%-
2%- 6 7
0
10x 4x 2x 1.5x 1x .5x .4x .3x .2x .1x
Relative Market Share

Boston Consulting Group Approach

Relative Market Share
High Low
Stars Question Marks
?
High
Market Growth Rate

• High growth & share • High growth, low share
• Profit potential • Build into Stars or phase out
• May need heavy • Require cash to hold
investment to grow market share

Cash Cows Dogs
• Low growth, high share • Low growth & share
Low

• Established, successful • Low profit potential
SBU‘s
•Produce cash

Boston Consulting Group Approach
and Strategies
 After the classification of SBUs  determine
what role each will play in the future
 Build  to invest more in the SBU in order to build
its share
 Hold  to invest enough just to hold at the current
level
 Harvest to increase the SBU‘s short-term cash
flow
 Divest  to sell or to liquidate the business

The SBU Life Cycle

SBUs have a life cycle in general:
a) Question marks
b) Stars
c) Cash cows
d) Dogs

Examine not only the business‘ current
positions, but also its moving positions.

Problems With Matrix Approaches

Can be Difficult, Time-Consuming, & Costly to Implement

Difficult to Define SBU‘s & Measure Market Share/ Growth

Focus on Current Businesses, But Not future Planning

Can Lead to Unwise Expansion or Diversification

The Strategic-Planning Gap
Desired
sales
Diversification growth
Strategic-
planning
Integrative growth gap
Sales

Intensive growth

Current
Portfolio sales

0 5 10
Time (years)

Planning New Business, Downsizing
Older Businesses

GROWTH STRATEGIES – 3 alternatives :

1. Intensive Growth
2. Integrative Growth
3. Diversification Growth

Growth Strategies: Ansoff‘s
Product/Market Expansion Grid
Existing New
products products

Existing 1. Market 3. Product
markets penetration development

New 2. Market
markets development 4. Diversification

Downsizing

 Some reasons that a company might want to
abandon products or markets:
 The market environment might change (making some
of the company‘s product or markets less profitable – e.g.
economic recession)

 The company may have grown too fast or entered
areas where it lacks experience

 Some of the company‘s products or business units
age and die.

Marketing‘s Key Role in
Strategic Planning

 Provide a guiding philosophy
 Identify attractive opportunities
 Design effective strategies
 Build strong value chains
 Form superior value delivery networks

The Business Unit Strategic Planning


 Business Mission  each SBU needs to define its
specific mission within the broader company
mission
 External Environment Analysis  to build a
MIS to monitor:
 Key external macroenvironment forces
 Significant microenvironment actors
 Trends and important developments  to identify
the associated opportunities and threats


 Internal Environment Analysis  Each
business needs to evaluate its internal strengths
and weaknesses periodically
 ―Checklistfor Performing Strengths/Weaknesses
Analysis‖
 Management or an outside consultant  reviews the
business‘s marketing, financial, manufacturing and
organizational competencies and rates each factor
as strength or weakness
 SWOT ANALYSIS

The Business Unit Strategic Planning /
Example of a Checklist
ı PERFORMANCE IMPORTANCE
Main 2nd Moderate 2nd Main High Medium Low
Strength Strength Weakness Weakness
MARKETING
Firm's reputation
Market share
Product/service quality
Pricing
Distribution
Promotion
Sales force
R&D / Innovation
Geographical location
FINANCE
High profitability
Low cost of capital
Cash flow
Financial stability
PRODUCTION
Scale economies
Capacity of meeting demand
Talented productive power
Timely production
Technical competence
ORGANIZATION
Skillful managers
Loyal employees
Entrepreneurship orientation
Flexibility degree
Rapid adaptation

SWOT Analysis
Marketing Analysis – SWOT Analysis

Market Opportunity Analysis (MOA)

 Can the benefits involved in the opportunity
be articulated convincingly to a defined
target market?
 Can the target market be located and
reached with cost-effective media and trade
channels?
 Does the company possess or have access
to the critical capabilities and resources
needed to deliver the customer benefits?

Market Opportunity Analysis (MOA)

 Can the company deliver the benefits better
than any actual or potential competitors?
 Will the financial rate of return meet or
exceed the company‘s required threshold for
investment?

Opportunity Matrix
Success Probability Opportunities
High Low
1. Company develops a more
powerful lighting system
Attractiveness

2. Company develops a device
High 1 2 for measuring the energy
efficiency of any lighting
system
3. Company develops a device
for measuring illumination
level
Low 3 4. Company develops a
4 software program to teach
lighting fundamentals to TV
studio personnel

Threat Matrix
Probability of Occurrence Threats
High Low
1. Competitor develops
a superior lighting
Seriousness

High system
1 2
2. Economic depression
3. Higher costs
4. Legislation to reduce
number of TV studio
Low 3 4 licenses


 Goal Formulation (Goals  objectives that are
specific with respect to magnitude and time)
 Turning objectives  into measurable goals  facilitates
management planning, implementation and control

The Business Unit Strategic Planning:
Strategy Formulation

Overall Cost Leadership

Differentiation

Michael Porter
Focus

The Marketing Process

 Analyzing marketing opportunities
 Researching and selecting target
markets
 Designing marketing strategies

 Planning marketing programs

 Organizing, implementing, controlling

the marketing effort

The Marketing Process
Managing the Marketing Effort


Marketing Functions
 Finding opportunities : the
company must analyze
• Analysis  its market & mktg
• Planning 
environment
company strengths &
• Implementation weaknesses
 current and possible mktg
• Control actions
 Avoiding threats
 Understanding strengths
 Analyzing weaknesses


Marketing Functions

• Analysis  Marketing planning 
involves deciding on
• Planning marketing strategies
• Implementation that will help the
company reach its
• Control strategic objectives

What is a Marketing Plan?

A marketing plan is the
central instrument for
directing and coordinating
the marketing effort.
It operates at a strategic and tactical
level.

Levels of a Marketing Plan

 Strategic  Tactical
 Target marketing  Product features
decisions  Promotion
 Value proposition  Merchandising
 Analysis of marketing  Pricing
opportunities  Sales channels
 Service

Marketing plan
The application of marketing resources to achieve marketing objectives

Executive Marketing Threats and
summary situation opportunities

Objective Marketing Action
and issues strategy programs

Budgets Controls

Marketing Functions
 The process that turns
mktg plans into mktg
• Analysis actions to accomplish
strategic mktg objectives
• Planning  Successful implementation
• Implementation depends on how well the
company blends its people,
• Control organizational structure,
decision and reward
system, and company
culture into a cohesive
action plan that supports its
strategies

Marketing Department Organization
Functional organization

Geographic organization

Product management organization

Market or customer management

Marketing Functions
 Measurement and
evaluation of the
• Analysis results of marketing
• Planning strategies
• Implementation  Checking for
differences between
• Control goals and
performance
 Taking of corrective
action as needed

Measuring Marketing Plan
Performance

 Sales analysis
 Market share analysis
 Marketing expense-to-sales ratio
 Financial analysis


 Return on marketing investment
(Marketing ROI) is the net return from a
marketing investment divided by the costs
of the marketing investment.

 provides a measurement of the profits generated
by investments in marketing activities.

Marketing Analysis of Company‘s Situation

Marketing Marketing Control
Planning Implementation
Measure
Results
Develop Strategic Carry Out
Plans The
Evaluate
Plans Results
Develop
Marketing Take
Plans Corrective
Action

The Marketing Environment
 Marketing Environment 
the actors and forces outside marketing that
affect marketing management‘s ability to develop
and maintain successful relationships with its
target customers.
 Microenvironment actors - forces close to
the company that affect its ability to serve its
customers.
 Macroenvironment forces - larger societal
forces that affect all the microenvironment.

The Marketing Environment

Demographic- Marketing Technological-
Economic Intermediaries Natural
Environment Environment

Product
Profitable
Suppliers Place Customer Price Publics
Relshps.
Promotion

Political- Social-
Legal Competitors Cultural
Environment Environment

The Microenvironment
Customer Markets

Company

Internal
Environment

The Microenvironment:
Company‘s Internal Environment
 Functional areas inside a company that have an
impact on the marketing department‘s plans
 Top management  responsible for setting
company‘s mission, objectives, broad strategies and
policies
 Marketing managers;
 make decisions within the parameters

established by top management
 must also work closely with other company

departments

Suppliers
 Firms and individuals providing resources to the
company and its competitors to produce goods
and services.
 Important link in the company‘s overall
customer ―value delivery system‖
 to watch supply availability
 to monitor price trends of key inputs

Intermediaries
 Firms that help the company to promote, sell,
and distribute its goods to final buyers
 Resellers

 Physical distribution firms

 Marketing service agencies

 Financial intermediaries

Customer Markets
 Consumer markets  Individuals & households that
buy goods & services for personal consumption
 Business markets  Buy goods & services for
further processing in their production process
 Resellers markets  Buy goods & services in order
to resell them at a profit
 Government markets  Buy goods & services in
order to produce public services or transfer them to
those that need them
 International markets  Buyers of all types in
foreign countries

Competitors

 Every company faces a wide range of
competitors.
 A company must secure a strategic advantage
over competitors to be successful in the
marketplace.
 No single competitive strategy is best for all
companies

Publics
 Any group that has actual or potential interest
in or impact on an organization‘s ability to
achieve its objectives.
 Financial publics (banks, stockholders)
 Media publics (newsp.,magazines, radio&TV)
 Government publics
 Citizen-action publics (consumer org.,
environmental groups
 Local publics
 General publics
 Internal publics

The Macroenvironment

 Demographic
 Economic
 Natural
 Technological
 Political-Legal
 Social-Cultural

Demographic Environment
Worldwide Population Growth

Age Structure of the Population

Household Patterns

Geographical Shifts in Population

Educational Groups

Shift from Mass Market to Micromarkets

Ethnic Markets

Economic Environment

Economic
Development

Key
Changes in Income Economic
Concerns for
Marketers

Changing Consumer
Spending Patterns

Economic Environment
Income Distribution
Subsistence economies  The vast majority of people engage in simple
agriculture, consume most of their output and barter the rest for simple goods
and services.

Raw-material-exporting economies  are rich in one or more natural
resources but poor in other respects. Much of their revenue comes from
exporting these resources.

Industrializing economies  Manufacturing accounts for 10 to 20% of
gross domestic product. Industrialization creates a new rich class and a small
but growing middle class, both demanding new types of goods.

Industrial economies  are major exporters of manufactured goods and
investment funds. They buy manufactured goods from one another & export them
to other types of economies in exchange for raw materials & semi-finished goods.

Savings, Debt, & Credit Availability

Natural Environment
Shortages of
Raw Materials

Factors
Increased Energy Affecting Increased
Costs the Pollution
Natural
Environment

Changing Role of
Governments

Technological Environment
Accelerating Pace Unlimited Opportunities
of Change for Innovation

Issues in the Technological
Environment

Varying Increased
R & D Budgets Regulation

Legal Environment

Includes laws, government agencies, etc. that influence
& limit organizations/individuals in a given society

Growth of
Legislation
Special-
Regulating
Interest
Business
Groups

Social/Cultural Environment

People‘s View of
Themselves

People‘s View of People‘s View of
the Universe Cultural Values Others
of a
People‘s View of Society
People‘s View of
Nature
Organizations
People‘s View
of Society

Understanding Markets
through Marketing
Information Systems

Marketing is becoming a battle based more
on information than on sales power

Major Questions
 What are the components of a modern
marketing information system?
 What are useful internal records?
 What makes up a marketing intelligence
system?
 How can companies accurately measure
and forecast demand?

Importance of Market Information
 Companies need information about their
marketing environment, competition, customer needs
 Reasons for the need for real-time market
information
 Global marketing
 Buyer needs & wants
 Price competition vs. nonprice competition

 Companies with superior information;
 choose its markets better
 develop better offerings
 execute better marketing planning

The Marketing Information System

 A marketing information system (MkIS)
 consists of people, equipment, and procedures
 to gather, sort, analyze, evaluate, and distribute

 needed, timely, and accurate info. to marketing
decision makers.
 The MkIS helps managers to:
1. Assess information needs,
2. Develop needed information,
3. Distribute information.

The Marketing Information System

Useful questions to determine information
needs of marketing managers

 What decisions do you regularly make?
 What information do you need to make these
decisions?
 What information do you regularly get?
 What studies do you periodically request?
 What information would you want that you are
not getting now?
 What are the four most helpful improvements
that could be made in the present marketing
information system?

Functions of a MkIS:
Developing Information
Information Needed by Managers Can be Obtained From:

Computerized Collection of Information
Internal Data from Data Sources (i.e. accounting)
within the Company.

Marketing Collection and Analysis of Publicly
Available Information about Competitors
Intelligence and the Marketing Environment
Design, Collection, Analysis, and
Marketing Reporting of Data about a Specific
Research Marketing Situation Facing the
Organization.

Internal Record System
 Consists of computerized collections of info.
obtained from data sources within the company
(internal data);
 Includes reports on orders, sales, prices, costs,
inventory levels, receivables, payables, etc.
 ―opportunities‖ and ―problems‖ can be determined by
analyzing these information
 Can usually be accessed more quickly and cheaply
 May be incomplete or data may be in the wrong
form.

Internal Record System
 The order-to-payment cycle
 Sales representatives, dealers, and customers
send orders to the firm
 The sales department prepares invoices, transmits
copies to various departments, and back-orders
out-of-stock items
 Shipped items generate shipping and billing
documents that go to various departments.
 Sales Information Systems
 Marketing managers need timely and accurate
reports on current sales.

Marketing Intelligence System
 A set of procedures and sources used by
managers to obtain everyday information about
developments in the marketing environment

 Competitive info. gathering sources:
 Company sales representatives
 Suppliers, resellers, customers (―mystery shoppers‖)
 Annual reports, speeches, press releases, and
advertisements
 Business publications, web pages
 Trade show exhibits
 Outside companies (e.g. mktg research company)

Sources of Competitive Information

 Independent customer goods and service
review forums
 Distributor or sales agent feedback sites
 Combination sites offering customer reviews
and expert opinions
 Customer complaint sites
 Public blogs

Steps to Quality Marketing Intelligence

 Train sales force to scan for new developments
 Motivate channel members to share intelligence
 Hire external experts to collect intelligence
 Network externally
 Utilize a customer advisory panel
 Utilize government data sources
 Purchase information

Additional Information
Forecasting and Demand Measurement

 Which market to measure?
 Potential market
 Available market

 Target market

 Penetrated market

A Vocabulary for Demand Measurement
Market Demand
Market Forecast
Market Potential
Company Demand
Company Sales Forecast
Company Sales Potential

Demand Measurement
 Market demand—the total volume for a
product that would be bought by a defined
customer group in a defined geographical area in
a defined time period in a defined marketing
environment under a defined marketing
program.
 Market potential—the limit approached by
market demand as industry marketing
expenditures approach infinity for a given
marketing environment.

Company Demand and Sales Forecast

 Company demand—the company‘s
estimated share of market demand at
alternative levels of company marketing effort
in a given time period.
 Company sales forecast—the expected
level of company sales based on a chosen
marketing plan and an assumed marketing
environment.

Estimating Current Demand
 Total market potential—the maximum
number of sales that might be available to all of
the industry‘s firms during a given period, under
a given level of industry marketing effort and
environmental conditions.
 Area market potential—the market potential
of a specific location:
 Market buildup method

 Multiple-factor method

Estimating Current Demand:
Total Market Potential

 Calculations
 Multiple potential number
of buyers by average
quantity each purchases
times price
 Chain-ratio method

Area Market Potential
Market-Buildup

Area Market Potential
Multiple-Factor Index

Sales Forecasting Techniques

 Time Series Methods  Correlational
 Naive Forecasting Methods
 Trend Analysis  Simple regression
 Linear trends  Multiple regression
Non-linear trends
Judgemental


 Seasonal adjustments
Methods
 Moving Averages
 Jury of Executive
 Exponential
Opinion
Smoothing
 Sales Force
Composite

Marketing Research System

 Marketing research  the systematic
design, collection, analysis, and reporting of
data and findings relevant to a specific
marketing situation facing an organization.
 Market research  research into a
particular market !
 just one component of mktg research

Types of research

• Quantitative Research: Seeks to quantify the data
and typically applies some form of statistical analysis.
 It is based on large number of representative sample
 Data collection is structured
 Recommend a final course of action

• Qualitative Research: The main objective is to gain
qualitative understanding of the underlying reasons &
motives.
 It is based on large number of representative sample
 Sample consists of small number of nonrepresentative cases.
 Data collection is unstructured
 Data analysis is nonstatistical
 It is possible to develop an initial understanding

Types of Marketing Research Firms

Syndicated

Custom

Specialty-line

The Marketing Research Process
Defining the Implementing
the research
problem and Developing the
plan: collecting
research research plan the data
objectives

Implementing
Interpreting the research
and reporting plan: analyzing
the findings the data

Step 1: Defining the Problem &
Research Objectives
Example: ABC Airlines Case
 ABC Airlines is constantly looking for new ways to
serve the needs of air travelers:

 One manager came up with the idea of offering
phone service to passengers.
 The other managers got excited about this idea
and agreed that it should be researched further.
 The marketing manager volunteered to do
some preliminary research
 The marketing manager then asked the company‘s
research manager to find out how air travelers
would respond to this new service.

Defining the Problem & Research Objectives
Example: ABC Airlines Case (cont.)

 Research Problem ?
 “to find out everything about air travelers’ need” – too broad!
 “to find out if enough passengers aboard a B-747 flying
between East Coast and West Coast would be willing to pay $
25” to make a phone call so that the company would break
even on the cost of offering this service” – too narrow!

 Research Problem is finally defined as: “Will offering an in-
flight phone service create enough incremental preference
and profit for ABC Airlines to justify its cost against other
possible investments that the company might make?”

Defining the Problem & Research Objectives
Example: ABC Airlines Case (cont.)

 Research Objectives:
 What are the main reasons that airline passengers
might place phone calls while flying?
 What kinds of passengers would be the most likely
to make phone calls?
 How many passengers are likely to make phone
calls, given different price levels?
 How many extra customers might choose this
company because of this new service?
 How important will phone service be relative to
other factors? (such as flight schedules, food quality,
baggage handling, etc.)

Defining the Problem & Research
Objectives
•Sheds light on problem - suggest
Exploratory solutions or new ideas.
•Gathers preliminary information
Research that will help define the problem
and suggest hypotheses

•Ascertain magnitudes
Descriptive •Describes things as market
Research potential for a product or the
demographics and consumers’
attitudes.

•Test cause- and-effect
Causal relationships.
Research •Tests hypotheses about cause-
and-effect relationships.

Step 2: Developing the Research Plan

Data Research
Sources Approach

Research Sampling
Instruments Plan

Contact
Methods

Developing the Research Plan:
Data Sources
both must
be:
Data that were
collected for another Relevant Data gathered for
purpose, and already a specific purpose
exist somewhere Accurate or for a specific
research project
(+)Obtained more quikcly Current
/ at lower cost

(-)Might not be Impartial
usable data.

A classification of marketing research data

Developing the Research Plan
Secondary Data Collection
 Internal Sources
 Company profit-loss statements, balance sheets,
sales figures, sales-call reports, invoices, inventory
records, and prior research reports.
 Government Publications
 Statistical Abstract
 County and City Data Book
 Industrial Outlook
 Marketing Information Guide
 Periodicals and Books
 Business Periodicals Index
 Standard and Poor‘s Industry
 On-Line Databases (e.g. Lexis-Nexis, Compuserve, Dialog)

Applications of Secondary Data

 Demand Estimation
 Monitoring the environment
 Segmentation and Targeting

Sources of Secondary Data (examples)
 ESOMAR website - www.esomar.org
 founded in 1948
 4,400 members in 100 countries
 mission : "ESOMAR is the world organisation for enabling better
research into markets, consumers and societies."
 the aim is to promote the value of market and opinion research in
illuminating real issues and bringing about effective decision-
making.
 creates and manages a comprehensive programme of industry-
specific and thematic conferences, publications and
communications
 www.arastirmacilar.org in Turkey
(TÜAD – Türkiye Araştırmacılar Derneği)
 Other useful sources:
 AMA website – www.marketingpower.com
 AMS website – www.ams-web.org
 www.trendwatching.com

Research Approaches

Observation Ethnographic
research
Focus Group

In-depth Interview

Projective techniques

Survey

Experimentation

Contact Methods
 Mail
 Telephone
 Personal (arranged or intercept interviews)
 Individual or group interviewing
 CAPI and CATI
 On-line (Internet research)
 the data are not representative of a target population
 people in the target market who do not use the Internet
or who don‘t want to answer a questionnaire can bias the
results.

Pros and Cons of Online Research
Advantages Disadvantages
 Inexpensive  Small samples

 Fast  Skewed samples

 Accuracy of data  Technological

 Versatility problems
 Inconsistencies

Sampling Plan

Sample -
representative
segment of the
How should the Who is to be
population
sample be surveyed?
chosen? (Sampling
(Sampl.procedure) Unit)

How many
should be
surveyed?
(Sample size)

Research Instruments

 Questionnaires  Technological
devices
 What questions to
ask?  Galvanometers
 Form of each  Tachistoscope
question?  Eye cameras
 Closed-end  Audiometers
 Open-end  GPS
 Wording?
 Ordering?

Questionnaire Do‘s and Don‘ts

 Ensure questions are  Avoid negatives
free of bias  Avoid hypotheticals
 Make questions simple  Avoid words that could be
 Make questions specific misheard
 Avoid jargon  Use response bands
 Avoid sophisticated  Use mutually exclusive
words categories
 Avoid ambiguous words  Allow for ―other‖ in fixed
response questions

Additional Information:
Question Types - Dichotomous

In arranging this trip, did you contact ABC
Airlines?
 Yes  No

Question Types – Multiple Choice

With whom are you traveling on this trip?
 No one
 Spouse
 Spouse and children
 Children only
 Business associates/friends/relatives
 An organized tour group

Question Types – Likert Scale

Indicate your level of agreement with the
following statement: Small airlines generally
give better service than large ones.
 Strongly disagree
 Disagree
 Neither agree nor disagree
 Agree
 Strongly agree

Question Types – Semantic Differential

ABC Airlines
Large ………………………………...…….Small
Experienced………………….….Inexperienced
Modern……………………….…..Old-fashioned

Question Types – Importance Scale

Airline food service is _____ to me.
 Extremely important
 Very important
 Somewhat important
 Not very important
 Not at all important

Question Types – Rating Scale

ABC Airlines‘ food service is _____.
 Excellent
 Very good
 Good
 Fair
 Poor

Question Types – Intention to Buy Scale

How likely are you to purchase tickets on
ABC Airlines if in-flight Internet access were
available?
 Definitely buy
 Probably buy
 Not sure
 Probably not buy
 Definitely not buy

Qualitative Techniques
Word Association

Sentence completion

Third person technique

Visualization

Brand Personification

Laddering

Characteristics of Good Marketing
Research

 Scientific method
 Research creativity
 Multiple methods
 Interdependence
 Value and cost of information
 Healthy skepticism
 Ethical marketing

Analyzing Marketing Information
 Information gathered in internal databases and
through marketing intelligence and marketing
research  may require more analysis
 Managers may need help in applying the info. to
their mktg problems and decisions

 Marketing decision support sysytems (MDSS) 
―coordinated collection of data, systems, tools and
techniques with supporting software and hardware, by
which an organization gathers and interprets relevant
information from business and environment and turns it
into a basis for marketing action‖
 marketing and sales software programs

 decision models

Interpreting and Reporting Findings

Researcher should present important findings that are
useful in the major decisions faced by management.

Step 1. Interpret the Findings

Step 2. Draw Conclusions

Step 3. Report to Management

Appendices--
Marketing metrics are the set of
measures that helps marketers
quantify, compare, and interpret
marketing performance.

Marketing Metrics
External Internal
 Awareness  Awareness of goals
 Market share  Commitment to goals
 Relative price  Active support
 Number of complaints  Resource adequacy
 Customer satisfaction  Staffing levels
 Distribution  Desire to learn
 Total number of  Willingness to change
customers  Freedom to fail
 Loyalty  Autonomy

Marketing-Mix Modeling

Marketing-mix models analyze data
from a variety of sources, such as
retailer scanner data, company
shipment data, pricing, media, and
promotion spending data, to
understand more precisely the effects
of specific marketing activities.

Example of some Customer-Performance
Scorecard Measures

 % of new customers to average #
 % of lost customers to average #
 % of win-back customers to average #
 % of customers in various levels of satisfaction
 % of customers who would repurchase
 % of target market members with brand recall
 % of customers who say brand is most preferred

Analyzing Consumer
Markets and
Buyer Behavior

―The most important ingredient in the success of an
organization is a satisfied customer‖

Consumer Buying Behavior

The central question for marketers :

―How do consumers respond
to various marketing efforts
the company might use?”

Model of Buyer Behavior
Marketing and Buyer’s Black Box Buyer Responses
Other Stimuli
Buyer Characteristics Product Choice
Marketing Cultural
Product Social Brand Choice
Price Personal Dealer Choice
Psychological
Place
Promotion
Other Purchase Timing
Buyer Decision Process Purchase Amount
Economic Problem recognition
Technological Information search
Political Evaluation
Decision
Cultural Postpurchase behavior

Factors Influencing Consumer
Behavior
Cultural
Social
Personal
•Age and Psycho-
•Culture •Reference life-cycle logical
groups
•Occupation •Motivation
•Sub- •Economic •Perception BUYER
culture •Family situation •Learning
•Lifestyle •Beliefs and
•Roles attitudes
•Social •Personality
and and
class status self-concept

Factors Influencing
Consumer Behavior:Cultural
• Culture
Cultural Forms a person‘s wants and behavior

•Culture • Subculture
Groups with shared value systems

•Subculture
• Social Class
Society‘s divisions who share values,
•Social class interests and behaviors

Factors Influencing
• Subculture
Groups with shared value systems
Cultural
e.g. Hispanic subculture in the US
•Culture

•Subculture

•Social class

Factors Influencing
• Culture
Cultural Forms a person‘s wants and behavior

• Subculture
•Culture Groups with shared value systems

•Subculture • Social Class
Society‘s divisions who share values,
•Social class interests and behaviors

Factors Influencing
• Social Class
Cultural Society‘s divisions who share values,
interests and behaviors

•Culture
 Measured by a combination of
occupation, income, education, wealth,
•Subculture
and other variables
 Turkey  introduced first by PIAR
•Social class  SES analyses (www.arastirmacilar.org)

Behavior: Social
• Reference Groups
• Membership
Social
• Aspirational
• Opinion Leaders
•Reference • Buzz marketing
groups
• Family
•Family • Many influencers
• Buyers vs. users
•Roles & status

• Roles and Status

Behavior: Social (cont.)
• Ref. Groups : have a direct or
indirect influence on the
person’s attitudes or behavior
Social
• Membership Groups  groups
•Reference to which a person belongs
groups
• primary groups
• secondary groups
•Family
• Aspirational Groups  groups
•Roles & status to which a person would like to
belong


• Opinion Leader person
within a reference group
who exert influence on
Social others

•Reference • Also called influentials or
groups
leading adopters
• offers advice or information about
•Family a specific product or product
category,
•Roles & status • can be found in all social classes

Groups and Social Networks

 Online Social Networks /
online communities where
people socialize or exchange
information and opinions
 blogs, social networking sites
(facebook), virtual worlds
(second life)

• The most important consumer-
buying organization in the
society
Social
• Roles and relative influence of
•Reference family members in buying
groups decisions
• Buying roles vary in different
countries and social classes
•Family
• Buying roles change with evolving
life-styles
•Roles & status • joint decision making
• women arising as active buyers
• increasing role of children

• The person‘s position in each
group  can be defined in
Social terms of both role and status:

•Reference • A Role  consists of the
groups activities that a person is
expected to perform according to
•Family the people around him
• Each role  carries a status
•Roles & status • A Status  is the general
esteem given a role by society

Behavior: Personal
• Family Life Cycle  stages
throughout which families pass as they
Personal mature over time
•Age and
life-cycle 1. bachelor stage
2. newly married couples, no children
•Occupation
3. full nest 1; youngest child under 6
•Economic 4. full nest 2; youngest child 6 or over
situation
5. full nest 3; older married couples with
•Lifestyle dependent children
•Personality 6. empty nest 1; older married couples no
and children with them
self-concept 7. empty nest 1; older married couples no
children at home; retired
8. solitary survivor, working
9. solitary survivor, retired

Stages in Family Life Cycle

1. Bachelor stage: Few financial burdens. Fashion opinion leaders.
Young, single, not living Recreation oriented. Buy: basic home equipment,
at home furniture, cars, equipment for the mating game;
vacations.
2. Newly married Highest purchase rate and highest average
couples: purchase of durables: cars, appliances, furniture,
Young, no children vacations.

3. Full nest I: Home purchasing at peak. Liquid assets low.
Youngest child under six Interested in new products, advertised products.
Buy: washers, dryers, TV, baby food, chest rubs
and cough medicines, vitamins, dolls, wagons,
sleds, skates.
4. Full nest II: Financial position better. Less influenced by
Youngest child six or over advertising. Buy larger-size packages, multiple-unit
deals. Buy: many foods, cleaning materials,
bicycles, music lessons, pianos.
See text for complete table

Behavior: Personal (cont.)

• Consumption patterns often
Personal shaped by:
•Age and
life-cycle • occupation &
•Occupation
•Economic
• economic circumstances:
situation
•Lifestyle • spendable income,
•Personality • savings and assets,
and • debts,
self-concept
• attitudes towards spending &
saving.

• Lifestyle  a person‘s pattern of
living as expressed in his activities,
Personal
interests and opinions
•Age and • Psychographics  technique of
life-cycle measuring lifestyles and developing lifestyle
•Occupation classifications
•Economic • Major dimensions measured are:
situation • Activities (work, hobbies, social
•Lifestyle events, entertainment, shopping,
sports,vacation)
•Personality
and • Interests (family, home, job,
self-concept recreation, fashion, food, media,
achievements)
• Opinions (themselves, social issues,
politics, business, economics, products,
future)

The VALS segmentation system:
An 8-part typology

Excerpts from AIO Inventory

Instructions: Please read each statement and place an “x” in the box that best
indicates how strongly you “agree” or “disagree” with the statement.
Agree Disagree
Completely Completely
I feel that my life is moving faster and faster,
sometimes just too fast. [1] [2] [3] [4] [5] [6] [7]

If I could consider the “pluses” and “minuses,”
[1] [2] [3] [4] [5] [6] [7]
technology has been good for me.
[1] [2] [3] [4] [5] [6] [7]
I find that I have to pull myself away from e-mail.

Given my lifestyle, I have more of a shortage of [1] [2] [3] [4] [5] [6] [7]
time than money.

I like the benefits of the Internet, but I often don’t [1] [2] [3] [4] [5] [6] [7]
have the time to take advantage of them.

• Personality  a person‘s unique
characteristics that lead to relatively
Personal consistent and lasting responses to the
environment
•Age and
life-cycle • Brand personality  specific mix of
human traits that may be attributable to a
• Occupation particular brand
•Economic • Self-concept  the self image or general
situation
picture that people have of themselves
•Lifestyle • Person‘s actual self-concept  how she views
•Personality herself
and • Ideal self-concept  how she would like to view
self-concept herself
• Others‘ self-concept  how she thinks others see
her

Behavior: Psychological
• Freud’s Theory : Psychological
forces shaping people‘s behavior 
largely unconscious
Psychological • A person cannot understand fully his/her
own motivations
•Motivation
• Motivation research  looks for hidden and
subconscious motivation
•Perception • in-depth interviews / laddering
• projective techniques (i.e. word association,
•Learning sentence completion, picture interpretation,
role playing)
•Beliefs &
attitudes
• Maslow’s Theory : Maslow ordered
needs based on how pressing they are
to the consumer

Psychological Factors
Motivation
 A motive is a need that is sufficiently
pressing to direct the person to seek
satisfaction
 Motivation research is based on
Freud. Looks for hidden and
subconscious motivation
 Maslow ordered needs based on how
pressing they are to the consumer

226

Behavior: Psychological(cont)
• Research found:
• Consumers resist prunes because prunes are wrinkled
looking and remind people of old age.
• Men smoke cigars as an adult version of thumb
sucking.
• Women prefer vegetable shortening to animal fats
because the latter arouse a sense of guilt over killing
animals.
• Women don‘t trust cake mixes unless they require
adding an egg, because this helps them feel they are
giving ―birth.‖

• Perception  process by which
people select, organize and interpret
information to form a meaningful
Psychological
picture of the world
•Motivation
1.Selective attention  tendency of people
•Perception to eliminate most of the information to
which they are exposed
•Learning 2.Selective distortion  to interpret
•Beliefs & information in a way that will support what
attitudes they already believe
3.Selective retention  to retain only part
of the information to which they are
exposed

• Learning  changes in a person‘s
behavior, arising from experience
Psychological • Learning occurs through the interplay
of: drives, stimuli, cues, responses and
•Motivation reinforcement
•Perception
• A drive: strong internal stimulus that calls
•Learning for action
• Cues: minor stimuli that determine when,
•Beliefs & where and how the person responds
attitudes • If the experience is rewarding  the
response will be positively reinforced

• Through doing and learning 
people acquire beliefs and
Psychological attitudes  have influence on
buying behavior
•Motivation
• A Belief  descriptive thought that a
•Perception person holds about something
•Learning
• An Attitude  a person‘s consistently
•Beliefs & favorable or unfavorable evaluations,
attitudes
feelings and tendencies toward an
object or idea

The Buying Decision
Process

• Marketers have to identify:

• Who makes the buying decision
• The types of buying decisions
• The steps in the buying process

Buying Roles –
Who makes the buying decision

• Initiator  who first gives the idea of
buying the product or service
• Influencer  whose view or advice influences
the decision
• Decider  who decide on any component
of buying decision
• Buyer  who makes the actual purchase
• User  who uses the product or sevice
purchased

Types of Buying Behavior
High Low
Involvement Involvement
Significant Complex Variety-
differences
between Buying Seeking
brands Behavior Behavior

Few Dissonance- Habitual
differences Reducing Buying Buying
between
brands Behavior Behavior

Stages of the Buying Decision
Process

Purchase
Decision
Evaluation Postpurchase
of Alternatives Behavior
Information
Search
Problem
Recognition

The Buyer Decision Process
Stage 1. Problem Recognition

Buyer
Needs Arising from:
State where the recognizes Internal Stimuli
buyer’s needs are
(hunger)
fulfilled and the a problem
or
buyer is satisfied. or External Stimuli
a need (friends)

Stage 2. Information Search

Personal Sources •Family, friends, neighbors
•Most effective source of
information
Commercial Sources •Advertising, salespeople
•Receives most information
from these sources

Public Sources •Mass Media
•Consumer-rating groups

•Handling the product
Experiential Sources •Examining the product
•Using the product

Successive Sets Involved in Customer Decision Making

Stage 3. Evaluation of Alternatives
Consumer May Use Careful
Calculations & Logical Thinking

Consumers May Buy on Impulse and
Rely on Intuition
Consumers May Make Buying Decisions
on Their Own.

Consumers May Make Buying Decisions
Only After Consulting Others.

Marketers must study buyers to find out how they
evaluate brand alternatives

Consumer Evaluation Process
• The consumer is trying to satisfy a need
• The consumer is looking for certain benefits from the
product solution
• The consumer sees each product as a ―bundle of
attributes‖
• The attributes of interest to buyers vary by product
• Consumers differ as to which product attributes they see
as most relevant and the importance they attach to each
attribute

Consumer Evaluation Process (cont.)

• The consumer develops ―a set of brand beliefs‖ about
where each brand stands on each attribute (see table, next
page)
• The set of beliefs about a brand make up “brand
image‖
• The consumer arrives at attitudes (judgments
/preferences) toward different brands through an
attribute evaluation procedure.

Example: A Consumer’s Brand Beliefs
about Computers

Attribute
Computer Memory Graphics Size and
Capacity Capability Weight Price
A 10 8 6 4
B 8 9 8 3
C 6 8 10 5
D 4 3 7 8
Computer A: 0.4(10)+0.3(8)+0.2(6)+0.1(4) = 8.0

Choice will be made based on the ―highest perceived value‖

Consumer Evaluation Process (cont.)
• Strategies designed to influence buyer decisions:

• Redesign the product – real positioning
• Alter beliefs about the brand – psychological positioning
• Alter beliefs about competitors‘ brands – competitive
positioning
• Alter the importance weights
• Call attention to neglected attributes
• Shift the buyer‘s ideas

Stage 4. Purchase Decision

Stage 5. Postpurchase Behavior

Satisfied Customer!

Consumer’s
Expectations of Product’s Performance ---
Product’s Perceived
Performance.

Dissatisfied Customer

Buyer Decision Process for
New Products

 New Products
 Good, service or idea that is perceived by
customers as new.
 Stages in the Adoption Process
 Marketers should help consumers move
through these stages.

247

Stages in the Adoption Process
Awareness: Consumer is aware of
product, but lacks information.
Interest: Consumer seeks
Information about new product.

Evaluation: Consumer considers
trying new product.
Trial: Consumer tries new
product on a small scale.

Adoption: Consumer decides
to make regular use of product.

New Products

 Individual Differences in Innovativeness:

 Consumers can be classified into five
adopter categories, each of which behaves
differently toward new products

249

Adopter Categories
Percentage of Adopters

Early Majority Late Majority
Innovators

Early
34% 34% Laggards
Adopters

13.5% 16%
2.5%
Early Time of Adoption Late

250

New Products
 Product Characteristics influencing the adoption rate:

 Relative Advantage  Is the innovation superior to
existing products?
 Compatibility  Does the innovation fit the values
and experience of the target market?
 Complexity  Is the innovation difficult to
understand or use?
 Divisibility  Can the innovation be used on a trial
basis?
 Communicability  Can results be easily observed
or described to others?

New Products

 International Consumer Behavior

 Values, attitudes and behaviors differ greatly in other
countries.
 Physical differences exist which require changes in
the marketing mix.
 Customs vary from country to country.
 Marketers must decide the degree to which they will
adapt their marketing efforts.

Analyzing Business
Markets and Business
Buyer Behavior

Many businesses
are wisely turning
their suppliers
and distributors
into ―valued
partners‖.

Marketing Management

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