Introducing MarketingLearning Objectives1. Define marketing and outline the steps in the marketing process.2. Explain the importance of understanding customers and the marketplace, and identify the core marketplace concepts.3. Identify the key elements of a customer-drive marketing strategy and discuss the marketing management orientations that guide marketing strategy.1. Introduction1.1. arketing defined1.1.1. arketing is the process !y "hich companies create value for customersand !uild strong customer relationships in order to capture value from customers in return. 1.1.2. arketing continues throughout a product#s life, trying to find ne" customers and keep current customers !y improving product appeal and performance, learning from product sales results and managing repeat performance.1.2. $he marketing process1.2.1. %ompanies "ork to understand consumers, create customer value, and !uild strong customer relationships. 1.2.2. &y creating value for consumers, they in turn capture value from consumers in the form of sales, profits, and long-term customer e'uity.2. (nderstanding the arketplace and %onsumer )eeds$here are five core customer and marketplace concepts* 1+ needs, "ants, and demands, 2+ market offerings, 3+ value, satisfaction, and 'uality, -+ exchanges, transactions, and relationships, and .+ markets and the marketing system.2.1. )eeds, "ants, and demands2.1.1. /uman needs are states of felt deprivation. $hey include !asic physical needs, social needs, and individual needs.2.1.2. 0ants are the form human needs take as they are shaped !y culture and individual personality.NDER COPY CENTER Sayfa 12.1.3. 0hen !acked !y !uying po"er, "ants !ecome demands. 1iven their "ants and resources, people demand products "ith !enefits that add up to the most value and satisfaction.2.1.-. 2utstanding companies go to great lengths to learn a!out and understand customers# needs, "ants, and demands. $hey conduct consumer research and analyse mountains of customer data.2.2. $he market offering 3products, services, and experiences2.2.1. %ompanies address needs !y putting forth a value proposition. $he value proposition is fulfilled through a market offering - some com!ination of products, services, information, or experiences offered to a market to satisfy a need or "ant.2.2.2. arketing offerings are not limited to physical products. $hey also include services and other entities, such as persons, places, organisations, information, and ideas.2.2.3. 4ellers "ho are so taken "ith their products that they focus only on existing "ants and lose sight of underlying customer needs suffer from 5marketing myopia.62.2.-. &y orchestrating several services and products, companies create !rand meaning and experiences for consumers.2.3. 7alue, satisfaction and 'uality2.3.1. %ustomers form expectations a!out the value and satisfaction that various marketing offers "ill deliver and !uy accordingly.2.3.2. arketers must !e careful to set the right level of expectations. If they set expectations too lo", they may satisfy those "ho !uy !ut fail to attract enough !uyers. If they raise expectations too high, !uyers "ill !e disappointed.2.3.3. %ustomer value and satisfaction are key !uilding !locks for developing and managing customer relationships.2.3.-. %ustomer satisfaction depends on a product#s perceived performance in delivering value relative to a !uyer#s expectations.2.-. arkets and the marketing system2.-.1. 8 market is the set of actual and potential !uyers of a product.2.-.2. arketing means managing markets to !ring a!out profita!le customer relationships.2.-.3. &uyers also carry on marketing. %onsumers do marketing "hen they search for the goods they need at prices they can afford. %ompany purchasing agents do marketing "hen they track do"n sellers and !argain for good terms. NDER COPY CENTER Sayfa 23. Designing a %ustomer-Driven arketing 4trategy0e define marketing management as the art and science of choosing target markets and !uilding profita!le customer relationships "ith them. $he marketing manager#s aim is to find, attract, keep, and gro" target customers !y creating, delivering, and communicating superior customer value.3.1. 4electing customers to serve3.1.1. $he company must first decide "hom it "ill serve. It does this !y dividing the market into segments of customers 9market segmentation+ and selecting "hich segments it "ill go after 9target marketing+.3.1.2. arketing management is customer management and demand management.3.2. %hoosing a value proposition3.2.1. $he company must also decide ho" it "ill serve targeted customers3ho" it "ill differentiate and position itself in the marketplace.3.2.2. 8 company#s value proposition is the set of !enefits or values it promises to deliver to consumers to satisfy their needs. 3.2.3. 7alue propositions differentiate one !rand from another and ans"er the 'uestion, 50hy should I !uy your !rand rather than a competitor#s:63.3. arketing management orientations$here are six alternative concepts under "hich organisations design and carry out their marketing strategies* 1+ production, 2+ product, 3+ selling, -+ marketing, .+ societal marketing, and ;+ sustaina!le marketing.3.3.1. $he production concept holds that consumers "ill favor products that are availa!le and highly afforda!le. anagement focuses on improving production and distri!ution efficiency. $he production concept can lead to marketing myopia.3.3.2. $he product concept holds that consumers "ill favor products that offer the most in 'uality, performance, and innovative features. arketing strategy focuses on making continuous product improvements. $he product concept canalso lead to marketing myopia.3.3.3. $he selling concept holds that consumers "ill not !uy enough of the firm#s products unless it undertakes a large-scale selling and promotion effort. $his concept is typically practiced "ith unsought goods3those that !uyers normally do not think of !uying. ost firms practice the selling concept "hen they face overcapacity.3.3.-. $he marketing concept holds that achieving organisational goals depends on kno"ing the needs and "ants of target markets and delivering the NDER COPY CENTER Sayfa 3desired satisfactions !etter than competitors do. $his concept is customer centered. 3.3... $he societal marketing concept holds that marketing strategy should deliver value to customers in a "ay that maintains or improves !oth the consumer#s and the society#s "ell-!eing. 3.3.;. $he sustaina!le marketing concept holds that an organisation should meet the needs of its present consumers "ithout compromising the a!ility of future generations to fulfill their o"n needs. 3.-. &uilding profita!le customer relationships3.-.1. Demand comes from t"o groups* 1+ ne" customers and repeat customers. It costs five times as much to attract a ne" customer as it does to keep a customer. or trends in the firm#s natural and technological environments.- Explain the key changes in the political and cultural environments.. Discuss ho" companies can react to the marketing environment.1 Introduction1 8 company#s marketing environment consists of the factors and forces outside marketing that affect marketing management#s a!ility to !uild and maintain successfulrelationships "ith target customers.2 $he marketing environment consists of a microenvironment and a macroenvironment.1 icroenvironment includes those actors close to the company that affect its a!ility to serve its customers. It includes the company, its suppliers, marketing intermediaries, customer markets, competitors, and pu!lics.2 $he macroenvironment is the larger societal forces that affect the "hole microenvironment ? demographic, economic, natural, technological, political, and cultural forces. 2 $he company#s microenvironment$he ma>or actors in the marketer#s microenvironment*1 $he company1 In designing marketing plans, marketing management takes other companygroups into account. $hese interrelated groups form the internal environment2 4uppliers1 4uppliers are those firms and individuals that provide the resources needed!y the company and its competitors to produce goods and service. NDER COPY CENTER Sayfa 52 4uppliersformanimportant linkinthecompany#soverallcustomervaluedelivery system.3 %ustomers1 $he company needs to study the customer markets closely.- %ompetitors1 arketersmust gainstrategicadvantage!ypositioningtheiroffersstronglyagainst competitors# offerings in the minds of consumers.2 )o single competitive marketing strategy is !est for all companies. Each firmshouldconsideritso"nsi@eandindustrypositioncomparedtothoseofitscompetitors.. =u!lics18 pu!lic is any group that has an actual or potential interest in or impact on anorganisation#s a!ility to achieve its o!>ectives.1 Ainancial pu!lics influence the company#s a!ility to o!tain funds.2 edia pu!lics carry ne"s, features, and editorial opinion.3 1overnmentpu!licsregulatepu!lic safety, truth in advertising,andother matters.- %iti@en-action pu!lics include consumer organisations, environmentalgroups, minority groups, and others.. Bocal pu!lics include neigh!orhood residents and communityorganisations.; $he general pu!lic may !e concerned a!out the company#s productsand activities.C Internal pu!lics include "orkers, managers, volunteers, and the !oardof directors.28 company can prepare marketing plans for these pu!lics as "ell as for customermarkets.3 $he %ompany#s acroenvironment$he ma>or forces in the company#s macroenvironment are*1 Demographic environment1Demography is the study of human populations in terms of si@e, density, location,age, gender, race, occupation, and other statistics. NDER COPY CENTER Sayfa 62$he ma>or demographic trends that have implications for marketing includepopulation gro"th, changing age and household structure, pressures formigration, and increasing diversity of population.1 =opulation gro"th trends2 %hanging age structure of the population3 $he changing household- =ressures for migration. Increasing diversity2 Economic environment1$heeconomicenvironment consistsof factors that affect consumer purchasingpo"er and spending patterns.1 )ations vary greatly in their levels of distri!ution of income.2 4u!sistenceeconomiesareonesin"hichthepopulationconsumesmost of their o"n agricultural and industrial output.3 Industrial economies are those "ith rich markets for many differentkinds of goods.2European (nion enlargement and integration1 8goal of Europeanunificationis theachievement of economicintegration among mem!er states. 2 $he single market has several implications including improvedefficiencyof firms, economiesof scale, increasedcompetitiveness,lo"er costs, profita!ility, and the a!ility to !etter compete glo!ally. 3 %onsumers gain cheaper products, more efficient providers, increasedchoice, and !usiness innovation.3Income distri!ution and changes in purchasing po"er1 0here consumer purchasing po"er is reduced, financially s'uee@edconsumers ad>ust !y spending more carefully.2 $heyseekgreater value inthe products they!uyandmarketersrespond "ith value marketing. 3 arketers shouldpayattentiontoincome distri!utionas "ell asaverage income.1 $he upper economic strata of society!ecome primarytargets for expensive luxury goods.2 $he middle income groups are more careful a!outspending !ut can afford the some of the good life. 3 $helo"er strata"ill stickclosetothe!asics of food,clothing, and shelter needs. - $he underclass people permanently on "elfare andDorliving !elo" the poverty line.-%hanging consumer spending patterns1 %onsumers at different income levels have different spendingpatterns.NDER COPY CENTER Sayfa 72 Engel#s la"s are differences in ho" people shift their spending acrossfood, housing, transportation, healthcare, and other goods and servicescategories as family income rises.3 )atural environment1$he natural environment involves the natural resources that are needed as inputs !ymarketers or that are affected !y marketing activities. 2arketers should !e a"are of several trends in the natural environment.1 $he first involves gro"ing shortages of ra" materials. 8ir and "atermayseemto!einfiniteresources, !ut somegroups seelong-rundangers.2 8 second environmental trend is the increased cost of energy.3 8 third trend is increased pollution and climate change. - 8fourth trend is increased government intervention in naturalresource management. - $echnological environment 1$he technological environment includes those forces that create ne" technologies,creating ne" product and market opportunities. 2$hereareseveral trendsaffectingthetechnological environment includingfastpace of technological change and increased regulation.. =olitical environment1$hepolitical environment consistsof la"s, government agencies, andpressuregroups that influence or limit various organisations and individuals in a givensociety.2Begislationhasincreasedsteadilyover theyears andunderstandingthepu!licpolicy implications of legislation can !e complicated. 1 $here are many la"s created at different levels.2 $he regulations change often.3 &usiness legislation has !een enacted for a num!er of reasons.1 $he first is to protect companies from each other.2 $he second purpose of government regulation is to protect consumersfrom unfair !usiness practices.3 $hethirdistoprotect theinterestsofsocietyagainst unrestrained!usiness !ehaviour.- $here is an increased emphasis on ethics and socially responsi!le actions.1 &usiness is also governed !y social codes and rules of professionalethics.2 Enlightenedcompanies encourage their managers tolook !eyond"hatthe regulatory systemallo"sand simply5dotheright thing.6NDER COPY CENTER Sayfa 8$hese socially responsi!le firms actively seek out "ays to protect thelong-run interests of their consumers and the environment.3 %ause-relatedmarketinghas !ecomeaprimaryformof corporategivingascompanieslinkpurchasesofthecompany#sproduct "ithcharita!le organisations. ; %ultural environment1$he cultural environment is made up of institutions and other forces that affect asociety#s !asic values, perceptions, preferences, and !ehaviours. 2$here are several characteristics that affect marketing decision making.1 =ersistence of cultural values 1 %ore!eliefs andvalues arepassedonfromparents tochildren and are reinforced !y schools, churches, !usiness,and government.2 4econdary !eliefs and values are more open to change.2 $he ma>or cultural values of a society are expressed in people#s vie"sof themselves and others, organisations, society, nature, and theuniverse.- Eesponding to the marketing environment1 anycompaniesvie"themarketingenvironment asanuncontrolla!leelement in"hich they must react and adapt. $hey passively accept the marketing environmentand do not try to change it.2 2thercompaniestakeaproactivestanceto"ardthemarketingenvironment. 4uchcompanies hire lo!!yists to influence legislation affecting their industries and stagemedia events to gain favora!le press coverage. $hey press la"suits and filecomplaints"ithregulatorstokeepcompetitorsinline, andtheyformcontractualagreements to !etter control their distri!ution channels.NDER COPY CENTER Sayfa 9Consumer marketsLearning Objectives1 Define the consumer market and construct a simple model of consumer !uyer!ehaviour.2 $ell ho" culture, su!culture, and social class influence consumer !uyer !ehaviour.3 Descri!e ho" consumers# personal characteristics and primary psychological factorsaffect their !uying decisions.- Bist and understand the ma>or types of !uying decision !ehaviour and the stages in the!uyer decision process.. Discuss ho" consumer decision making varies "ith the type of !uying decision. . Introduction1 any factors affect consumer !uying !ehaviour. 2 %onsumer !uyer !ehaviour refers tothe !uying!ehaviour of final consumers3individuals and households "ho !uy goods and services for personal consumption.3 8ll of these final consumers com!ined make up the consumer market.; odel of %onsumer &ehaviour1 4ix 'uestions remain an excellent guide to analysing consumer !ehaviour including"hat consumers !uy, "here they !uy, ho" and ho" much they !uy, "hen they !uy,and "hy they !uy.2 /o"doconsumers respondtovarious marketingefforts: $hestartingpoint forans"ering this 'uestion is the stimulus-response model of !uyer !ehavior.1 arketingandother stimuli entertheconsumer#s5!lack!ox6andproducecertain responses.2 arketing stimuli consist of the - =s* product, price, place, and promotion.NDER COPY CENTER Sayfa 103 2ther stimuli include ma>or forces and events in the !uyer#s environment.- $he !uyer#s characteristics influence ho" he or she perceives and reacts to thestimuli.. $he !uyer#s decision process itself affects the !uyer#s !ehaviour.C %haracteristics affecting consumer !ehaviour%onsumer purchasesareinfluencedstrongly!yseveral characteristics. $heseincludecultural, social, personal, and psychological factors. 1 %ultural factors%ultural factors exert a !road and deep influence on consumer !ehaviour.1 %ulture is the most !asic cause of a person#s "ants and !ehaviour. %ulture isthe set of !asic values, perceptions, "ants and !ehaviours learned !y a mem!erof society from family and other important institutions.2 Eachculturecontainssmaller su!cultures, or groupsof people"ithsharedvalue systems !ased on common life experiences and situations. 4u!culturesinclude nationalities, religions, racial groups, and geographic regions.3 4ocial classes are society#s relatively permanent and ordered divisions "hosemem!erssharesimilar values, interests, and!ehaviours. 4ocial classisnotdetermined !y a single factor, such as income, !ut is measured as acom!ination of occupation, income, education, "ealth, and other varia!les.- 4ocial factors, such as small groups, family, social roles, and status can alsoaffect consumer !ehaviour. 1 1roups that have a direct influence and to "hich a person !elongs arecalled mem!ership groups.2 Incontrast, referencegroups serveas direct or indirect points ofcomparison or reference in forming a person#s attitudes or !ehaviour.8n aspirational group is one to "hich the individual "ishes to !elong.3 anufacturers of products and !rands su!>ected to strong groupinfluence must figure out ho"to reach opinion leaders3people"ithin a reference group "ho, !ecause of special skills, kno"ledge,personality, or other characteristics, exert influence on others. - 4ocial net"orking, social interaction carried out over Internet media,illustrates the importance of social influence on consumer !ehaviour. . Aamily mem!ers can strongly influence !uyer !ehaviour. 1 $he !uyer#s parents make up the family of orientation. 2 $hefamilyof procreation9the!uyer#sspouseandchildren+ hasamore direct influence on everyday !uying !ehaviour. 3 8 person#s position "ithin each group can !e determined in terms ofrole and status. 1 8 role consists of the activities that people are expected toperform according to the persons around them. NDER COPY CENTER Sayfa 112 4tatus is the general esteem given to a role !y society.; =ersonal factors include influences like the !uyer#s age, life-cycle stage,occupation, economic situation, lifestyle, and personality, and self-concept. 1 &uyingisshaped!ythestageofthefamilylifecycle3thestagesthrough "hich families might pass as they mature over time.2 8 person#s occupation affects the goods and services !ought.3 8 person#s economic situation "ill affect product choice.- =eople coming from the same su!culture, social class, and occupationmay have 'uite different lifestyles.. Bifestyleisaperson#spatternoflivingasexpressedinhisorherpsychographics.1 $omeasurelifestyles, one canusepsychographics ?atechni'ueformeasuringlifestylesusing 8I2 dimensions9activities, interests, and opinions+.C Each person#s distinct personality influences his or her !uying !ehaviour.1 =ersonality refers to the uni'ue psychological characteristics that leadto relatively consistent and lasting responses to one#s o"nenvironment.2 Eelated to personalityis a person#s self-concept. $he !asic self-concept premise is that people#s possessions contri!ute to and reflecttheir identities.F =sychological factors1 8person#s !uying choices are further influenced !yfour ma>orpsychological factors* motivation, perception, learning, and!eliefsand attitudes.1 8personhasmanyneedsat anygiventime. 4omeare!iological, others psychological.2 8 need !ecomes a motive "hen it is aroused to a sufficientlevel of intensity.3 8 motive or drive is a need that is sufficiently pressing todirect the person to seek satisfaction.2 8!rahamaslo"sought to explain "hy people are driven !yparticular needs at particular times. 1 /uman needs are arranged in a hierarchy.2 $hey include physiological needs, safety needs, socialneeds, esteem needs, cognitive needs, aesthetic needs, andself-actualisation needs.G =erception is the process !y"hich people select, organise, and interpretinformation to form a meaningful picture of the "orld.1 4elective attention is the tendency for people to screen out most of theinformation to "hich they are exposed.2 4elective distortion descri!es the tendencyof people to interpretinformation in a "ay that "ill support "hat they already !elieve.NDER COPY CENTER Sayfa 123 &ecauseof selective retention, consumers are likelytoremem!ergood points a!out a !rand they favor and to forget good points madea!out competing !rands.1H Bearning descri!es changes in an individual#s !ehaviour arising fromexperience.1 Bearning occurs through the interplay of drives, stimuli, cues,responses, and reinforcement.2 $he practical significance of learning theory for marketers is that theycan!uildupdemandfor a product !yassociatingit "ithstrongdrives, using motivating cues, and providing positive reinforcement.11 8 !elief is a descriptive thought that a person has a!out something. 8n attitudedescri!es a person#s relatively consistent evaluations, feelings, and tendenciesto"ard an o!>ect or idea.F %onsumer decision process1 %onsumer choice results from a complex interplay of cultural, social, personal, andpsychological factors.2 arketers cannot influence many of these factors, they can !e useful in identifyinginterested !uyers and in shaping products and appeals to serve their needs !etter.G $ypes of !uying decision !ehaviour%onsumer !uying !ehaviour models are !ased on the degree of !uyer involvement and thedegree of differences among !rands.1 %omplex !uying !ehaviour1 %onsumers undertake complex !uying !ehaviour "hen they are highlyinvolved in a purchase and perceive significant differences among !rands.2 %onsumers may!ehighlyinvolved"hentheproduct is expensive, risky,purchased infre'uently, and highly self-expressive.2 Dissonance-reducing !uying !ehaviour1 Dissonance-reducing !uying !ehaviour occurs "hen consumers are highlyinvolved "ith an expensive, infre'uent, or risky purchase, !ut see littledifference among !rands.2 8fter the purchase, consumers might experience postpurchase dissonance9after-sale discomfort+ "hen they notice certain disadvantages of the purchased!rand or hear favora!le things a!out !rands not purchased.3 /a!itual !uying !ehaviourNDER COPY CENTER Sayfa 131 /a!itual !uying !ehaviour occurs under conditions of lo" consumerinvolvement and little significant !rand difference.2 %onsumers do not search extensively for information a!out the !rands, evaluate!rand characteristics, and make "eighty decisions a!out "hich !rands to !uy. - 7ariety-seeking !uying !ehaviour1 %onsumers undertake variety-seeking !uying !ehaviour in situationscharacterised!ylo"consumerinvolvement !ut significant perceived!randdifferences.2 In such cases, consumers often do a lot of !rand s"itching.1H $he !uyer decision process$he!uyerdecisionprocessconsistsoffivestages*1+needrecognition, 2+informationsearch, 3+ evaluation of alternatives, -+ purchase decision, and .+ postpurchase !ehaviour. 1 )eed recognition1 $he !uying process starts "hen the !uyer recognises a pro!lem or need.2 $he need can !e triggered !y internal stimuli "hen one of the person#s normalneeds3hunger, thirst, or sex3rises to a level high enough to !ecome a drive.3 8 need can also !e triggered !y external stimuli, e.g., an advertisement or adiscussion "ith a friend.2 Information search1 $he amount of searching a consumer "ill do depends on the strength of drive,the amount of information already availa!le, the ease of o!taining moreinformation, thevalueplacedonadditional information, andthesatisfactionone gets from searching.2 %onsumers can o!tain information from several sources.1 =ersonal sources.2 %ommercial sources.3 =u!lic sources.3 Experiential sources.3 Evaluation of alternatives1 8lternative evaluation is the stage of the !uyer decision process in "hich theconsumer uses information to evaluate alternative !rands in the choice set. 2 ost !uyers consider several attri!utes, !ut assign different importance to each.- =urchase decisionNDER COPY CENTER Sayfa 141 In the evaluation stage, the consumer ranks !rands and forms purchaseintentions.2 1enerally, the consumer#s purchase decision "ill !e to !uy the most preferred!rand, !ut t"ofactors can come !et"eenthe purchase intentionandthepurchasedecision* 1+ theattitudes of others and2+ unexpectedsituationalfactors.3 8 consumer#s decision is influenced heavily !y perceived risk. . =ostpurchase !ehaviour1 8fter purchasing the product, the consumer "ill !e satisfied or dissatisfied and"ill engage in postpurchase !ehaviour of interest to the marketer.2 Determining if the consumer is satisfied or not depends upon the relationship!et"een the consumer#s expectations and the product#s perceived performance.$helarger thegap!et"eenexpectations andperformance, thegreater theconsumer#s dissatisfaction.3 8lmost all ma>or purchases result in cognitive dissonance, or discomfort caused!y postpurchase conflict.11 $he !uyer decision process for ne" products1 8ne"product is a good, service, or idea that is perceived!ysome potentialcustomers as ne". It may have !een around for a "hile, !ut our interest is in ho"consumers learn a!out products for the first time and make decisions on "hether toadopt them.2 $he adoption processis defined as the mental process through "hich an individualpasses from first learning a!out an innovation to final adoption. 3 Adoptionis defined as the decision !y an individual to !ecome a regular user of theproduct.- 4tages in the adoption process1 %onsumers go through five stages in the process of adopting a ne" product* 1+8"areness, 2+ Interest, 3+ Evaluation, -+ $rial, and .+ 8doption.2 $his model suggests that the ne"-product marketer should think a!out ho" tohelp consumers move through these stages.. Individual differences in innovativeness1 =eople differ greatly in their readiness to try ne" products.2 =eople can !e classified into the ma>or adopter categories*1 Innovators2 Early adoptersNDER COPY CENTER Sayfa 153 Early ma>ority- Bate ma>ority. Baggards; Influence of product characteristics on rate of adoption1 $he characteristics of the ne" product affect its rate of adoption.1 Eelativeadvantageis thedegreeto"hichtheinnovationappearssuperior to existing products.2 %ompati!ility is the degree to "hich the innovation fits the values andexperiences of potential consumers.3 %omplexityis the degree to "hich the innovation is difficult tounderstand or use.- Divisi!ility is the degree to "hich the innovation may !e tried on alimited !asis.. %ommunica!ilityis the degree to"hichthe results of usingtheinnovation can !e o!served or descri!ed !y others.2 2ther characteristicsalso influence the rateof adoptionincluding initialandongoing costs, risk and uncertainty, and social approval. 12 %onsumer !ehaviour across international !orders1 Aor companies operating in many countries, understanding and serving the needs ofconsumers can !e daunting.2 8lthough consumers in different countries may have some things in common, theirvalues, attitudes, and !ehaviours often vary greatly.3 arketersmust decideonthedegreeto"hichthey"ill adapt theirproductsandmarketing programmes to meet the uni'ue cultures and needs of consumers in variousmarkets.- 2nthe one hand, they"ant tostandardise their offerings inorder tosimplifyoperations and take advantage of cost economies. 2nthe other hand, adaptingmarketing efforts "ithin each country results in products and programmes that !ettersatisfy the needs of local consumers.NDER COPY CENTER Sayfa 16Segmentation and positioning Learning Objectives; Define the four steps in designing a customer-driven market strategy* marketsegmentation, market targeting, differentiation, and market positioning.C Bist and discuss the ma>or !ases for segmenting consumer and !usiness markets.F Explain ho"companies identifyattractive market segments and choose a targetmarketing strategy.G Discuss ho" companies position their products for maximum competitive advantage inthe marketplace.13 Introduction1 ost companies have moved a"ay frommass marketing and to"ard marketsegmentation and targeting3identifying market segments, selecting one or more ofthem, and developing products and marketing programmes tailored to each.2 $he four ma>or steps in designing a customer-driven marketing strategy.1 $hefirst ismarket segmentation3dividingamarket intosmallergroupsof!uyers"ithdistinct needs, characteristics, or!ehaviours"homight re'uireseparate products or marketing mixes. $he company identifies different "ays tosegment the market and develops profiles of the resulting marketing segments.2 $he second step is target marketing3evaluating each market segment#sattractiveness and selecting one or more of the market segments to enter.3 $he third step is differentiation3differentiating the firm#s market offering tocreate superior customer value.- $he fourth and final step is market positioning3setting the competitivepositioning for the product and creating a detailed marketing mix.1- arket 4egmentation1 arkets consist of !uyers, and !uyers differ in one or more "ays.1 $heymaydiffer intheir "ants, resources, locations, !uyingattitudes, and!uying practices.NDER COPY CENTER Sayfa 172 $hrough market segmentation, companies divide large, heterogeneous marketsinto smaller segments that can !e reached more efficiently and effectively "ithproducts and services that match their uni'ue needs.2 4egmenting consumer markets1 $he ma>or varia!les that might !e used in segmenting consumer markets are*2 1eographic segmentation calls for dividing the market into differentgeographical unitssuchasnations, regions, states, counties, cities, or evenneigh!orhoods. any companies today are locali@ing their products,advertising, promotion, and sales efforts to fit the needs of individual regions,cities, and even neigh!orhoods.3 Demographic segmentation divides the market into groups !ased on varia!lessuch as age, gender, family si@e, family life cycle, income, occupation,education, religion, race, generation, and nationality.1 Demographic factors are the most popular !asis for segmentingcustomer groups. 2ne reasonis that consumer needs, "ants, andusage rates often vary closely "ith demographic varia!les. 8nother isthat demographicvaria!les areeasier tomeasurethanmost othertypes of varia!les.2 4ome companies use age and life-cycle segmentation, offeringdifferent products or using different marketing approaches fordifferent age andlife-cycle groups. arketers must !e careful toguard against stereotypes "hen using age and life-cycle segmentation.8ge is often a poor predictor of a person#s life cycle, health, "ork orfamily status, needs, and !uying po"er.3 1ender segmentation has long !een used in clothing, cosmetics,toiletries, and magasines.- Income segmentation has long !een used !y the marketers of productsand services such as automo!iles, !oats, clothing, cosmetics, financialservices, and travel. any companies target affluent consumers "ithluxurygoods andconvenience services. any retailerssuccessfullytarget lo"er income groups.. =sychographic segmentation divides !uyers into different groups!ased on social class, lifestyle, or personality characteristics. ; &ehavioural segmentation divides !uyers into groups !ased on theirkno"ledge, attitudes, uses, or responses to a product.1 &uyers can !e grouped according to occasions "hen theyget the idea to !uy, actually make their purchase, or use thepurchased item. 2 arketscan!esegmentedintogroupsofnonusers, ex-users, potential users, first-time users, and regular users ofa product. arkets can also !e segmented into light,medium, and heavy product users.NDER COPY CENTER Sayfa 183 8market can additionally!e segmented !yconsumerloyalty. C arketers rarely limit their segmentation analysis to only one or a fe"varia!les. $hey are increasingly using multiple segmentation !ases inan effort to identify smaller, !etter defined target groups.3 Ee'uirements for effective segmentation1 )ot all segmentations are effective. 2 $o !e useful, market segments must !e*1 easura!le* $he si@e, purchasing po"er, and profiles of the segmentscan !e measured.2 8ccessi!le* $he market segments can !e effectivelyreachedandserved.3 4u!stantial* $hemarket segmentsarelargeorprofita!leenoughtoserve.- Differentia!le* $he segments are conceptuallydistinguisha!le andrespond differently to different marketing mix elements andprogrammes.. 8ctiona!le* Effective programmes can !e designed for attracting andserving the segments.1. arket targeting1 Evaluating market segments1 Inevaluating differentmarket segments, afirm mustlookatthree factors*segment si@eandgro"th, segment structural attractiveness, andcompanyo!>ectives and resources.2 $he company also needs to examine ma>or structural factors that affect long-run segment attractiveness. 1 8 segment is less attractive if it already contains many strong andaggressive competitors.2 $he existence of many actual or potential su!stitute products maylimit prices and the profits that can !e earned in a segment.3 $he relative po"er of !uyers also affects segment attractiveness.- 8 segment may !e less attractive if it contains po"erful suppliers"ho can control prices or reduce the 'uality or 'uantity of orderedgoods and services.3 Even if a segment has the right si@e and gro"th and is structurally attractive,the company must consider its o"n o!>ectives and resources.2 4electing target market segmentsNDER COPY CENTER Sayfa 191 8target market consistsof aset of !uyers"hosharecommonneedsorcharacteristics that the company decides to serve.2 (singanundifferentiatedmarketing9or mass-marketing+ strategy, afirmmight decidetoignoremarket segment differences andtarget the"holemarket "ithoneoffer. $his mass-marketingstrategyfocuses on"hat iscommon in the needs of consumers rather than on "hat is different.3 (sing a differentiated marketing 9or segmented marketing+ strategy, a firmdecidestotarget several market segmentsanddesignsseparateoffersforeach.- 8 third market-coverage strategy, concentrated marketing 9or nichemarketing+, is especiallyappealing"hencompanyresources arelimited.Instead of going after a small share of a large market, the firm goes after alarge share of one or a fe" segments or niches.. icromarketing is the practice of tailoring products and marketingprogrammestosuit thetastesofspecificindividualsandlocations. Eatherthan seeing a customer in every individual, micromarketers see the individualin every customer. 1 Bocal marketinginvolvestailoring!randsandpromotionstotheneeds and "ants of local customer groups3cities, neigh!orhoods,and even specific stores. 2 Intheextreme, micromarketing!ecomes individual marketing3tailoring products andmarketingprogrammes to the needs andpreferencesof individual customers. Individualmarketing has also!een la!eled one-to-one marketing, mass customisation, andmarkets-of-one marketing. ; %ompanies need to consider many factors "hen choosing a target-marketingstrategy. 0hich strategy is !est depends on company resources. 1 0hen the firm#s resources are limited, concentrated marketing makesthe most sense.2 $he !est strategy also depends on the degree of product varia!ility.(ndifferentiated marketing is more suited for uniform products suchas grapefruit or steel. =roducts that can varyindesign, suchascameras and automo!iles, are more suited to differentiation orconcentration.3 $he product#s life-cycle stage also must !e considered. 0hen a firmintroduces ane"product, it may!epractical tolaunchonlyoneversion, andundifferentiatedmarketingor concentratedmarketingmay make the most sense.- 8notherfactorismarket varia!ility.Ifmost !uyershavethesametastes, !uy the same amounts, and react the same "ay to marketingefforts, undifferentiated marketing is appropriate.. Ainally, competitors# marketing strategies are important. 0hencompetitors use differentiated or concentrated marketing,undifferentiated marketing can !e suicidal.NDER COPY CENTER Sayfa 203 4ocially responsi!le target marketing1 4mart targeting helps companies to !e more efficient and effective !y focusingon the segments that can satisfy !est and most profita!ly. $he !iggest issuesusuallyinvolvethe targetingofvulnera!le or disadvantaged consumers"ithcontroversial or potentially harmful products.2 4ocially responsi!le marketing calls for segmentation and targeting that servenot >ust the interests of the company !ut also the interests of those targeted.1; Differentiation and positioning1 8 product#s position is the "ay the product is defined !y consumers on importantattri!utes3the place the product occupies in consumers# minds relative to competingproducts. =ositioning involves implanting the !rand#s uni'ue !enefits anddifferentiation in customers# minds.2 =ositioning maps1 arketersoftenprepareperceptual positioningmaps that sho"consumerperceptionsoftheir!randversuscompetingproductsonimportant!uyingdimensions. 3 %hoosing a differentiation and positioning strategy1 $hepositioningtaskconsistsofthreesteps* 1+identifyingaset ofpossi!lecustomer value differences that provide competitive advantages upon "hich to!uild a position, 2+ choosing the right competitive advantages, and 3+ selectingan overall positioning strategy.2 $o !uild profita!le relationships "ith target customers, marketers mustunderstand customer needs !etter than competitors do and deliver more value.$o the extent that a company can position itself as providing superior value, itgains competitive advantage.3 Differentiation can !e !ased on product, services, channels, people, and image.- 2nceacompanyidentifiesseveral potentialcompetitiveadvantages, it mustchoose the ones on "hich it "ill !uild its positioning strategy. It must decideho" many differences to promote and "hich ones.. )ot all !rand differences are meaningful or "orth"hile, not every differencemakes a good differentiator. 8 difference is "orth esta!lishing to the extent thatit satisfies the follo"ing criteria*1 Important3thedifferencedeliversahighlyvalued!enefittotarget!uyers.2 Distinctive3competitors do not offer the difference, or the companycan offer it in a more distinctive "ay.NDER COPY CENTER Sayfa 213 4uperior3thedifferenceis superior toother "ays that customersmight o!tain the same !enefit.- %ommunica!le3the difference is communica!le and visi!le to!uyers.. =reemptive3competitors cannot easily copy the difference.; 8fforda!le3!uyers can afford to pay for the difference.C =rofita!le3the company can introduce the difference profita!ly.; %onsumers typically choose products and services that give them the greatestvalue. $he full positioning of a !rand is called the !rand#s value proposition3the full mix of !enefits upon "hich the !rand is positioned. 1 5orefor more6positioninginvolves providingthemost upscaleproduct orserviceandchargingahigherpricetocoverthehighercosts. 2 %ompaniescanattackacompetitor#smore-for-morepositioning!yintroducing a !rand offering compara!le 'uality !ut at a lo"er price.$his is 5more for the same.63 2ffering the 5same for less6 can !e a po"erful value proposition3everyone likes a good deal.- 8market almost al"ays exists for products that offer less andthereforecostless. Ae" peopleneed,"ant,orcanafford 5thevery!est6 in everything they !uy. In many cases, consumers "ill gladlysettle for less than optimal performance or give up some of the !ellsand"histles inexchange for alo"er price. 5Bess-for-much-less6positioning involves meeting consumers# lo"er performance or'uality re'uirements at a much lo"er price.. 2f course, the "inning value proposition "ould !e to offer 5more forless.6 any companies claimto do this. Iet in the long run,companies "ill find it difficult to sustain such !est-of-!othpositioning. 2ffering more usually costs more, making it difficult todeliver on the 5for less6 promise. %ompanies that try to deliver !othmay lose out to more focused competitors.C %ompany and !rand positioning should !e summed up in a positioningstatement. 1 $he statement should follo" the form* 5$o 9target segment and need+our 9!rand+ is 9concept+ that 9point of difference+.6 2 )otethatthepositioningfirststatestheproduct#smem!ershipinacategory, and then sho"s its point-of-difference from other mem!ersof the category.- %ommunicating and delivering the chosen position1 2nce it has chosen a position, the company must take strong steps to deliverand communicate the desired position to target consumers.2 =ositioning the company calls for concrete action, not >ust talk. If the companydecides to !uild a position on !etter 'uality and service, it must first deliver thatNDER COPY CENTER Sayfa 22position. Designing the marketing mix3product, price, place, and promotion3involves "orking out the tactical details of the positioning strategy.Product lifec!cle strategies Learning Objectives1H Descri!e the stages of the product life-cycle.11 Explain ho" marketing strategy changes during a product#s life-cycle.1C Introduction1 Every product seems to go through a life cycle. 2 $he life cycle presents t"o ma>or challenges.1 8 firm must !e good at developing ne" products to replace aging and dying ones.2 $he firm must !e good at adapting its marketing strategies as the product moves through the life-cycle stages.1F =roduct life-cycle strategies1 8fter launching the ne" product, management "ants the product to en>oy a long and happy life. 1 =roduct development !egins "hen the company finds and develops a ne"-product idea. During product development, sales are @ero and the company#s investment costs mount.2 Introduction is a period of slo" sales gro"th as the product is introduced in the market. =rofits are nonexistent in this stage !ecause of the heavy expenses of product introduction.3 1ro"th is a period of rapid market acceptance and increasing profits.- aturity is a period of slo"do"n in sales gro"th !ecause the product has achieved acceptance !y most potential !uyers. =rofits level off or decline !ecause of increased marketing outlays to defend the product against competition.. Decline is the period "hen sales fall off and profits drop.NDER COPY CENTER Sayfa 232 )ot all products follo" this product life cycle. 4ome products are introduced and die 'uickly, others stay in the mature stage for a long, long time. 4ome enter the decline stage and are then cycled !ack into the gro"th stage through strong promotion or repositioning.3 $he =B% concept can descri!e a product class, a product form, or a !rand. $he =B% concept applies differently in each case.1 =roduct classes have the longest life cycles3the sales of many product classes stay in the maturity stage for a long time.2 =roduct forms, in contrast, tend to have the standard =B% shape.3 8 specific !rand#s life cycle can change 'uickly !ecause of changing competitive attacks and responses.- Introduction stage1 $he introduction stage starts "hen the ne" product is first launched.2 In this stage, as compared to other stages, profits are negative or lo" !ecause ofthe lo" sales and high distri!ution and promotion stage.3 8 company, especially the market pioneer, must choose a launch strategy that isconsistent "ith the intended product positioning. It should realise that the initialstrategy is >ust the first step in a grander marketing plan for the product#s entire life cycle.. 1ro"th stage1 If the ne" product satisfies the market, it "ill enter a gro"th stage, in "hich sales start clim!ing 'uickly.2 $he early adopters "ill continue to !uy, and later !uyers "ill start follo"ing their lead, especially if they hear favora!le "ord of mouth.3 8ttracted !y the opportunities for profit, ne" competitors "ill enter the market.$hey "ill introduce ne" product features, and the market "ill expand.- =rofits increase during the gro"th stage, as promotion costs are spread over a large volume and as unit manufacturing costs fall.. $he firm uses several strategies to sustain rapid market gro"th as long as possi!le.1 It improves product 'uality and adds ne" product features and models.2 It enters ne" market segments and ne" distri!ution channels.3 It shifts some advertising from !uilding product a"areness to !uildingproduct conviction and purchase, and it lo"ers prices at the right time to attract more !uyers.NDER COPY CENTER Sayfa 24; In the gro"th stage, the firm faces a trade-off !et"een high market share and high current profit.; aturity stage1 8t some point, a product#s sales gro"th "ill slo" do"n, and the product "ill enter a maturity stage. 2 $his maturity stage normally lasts longer than the previous stages, and it poses strong challenges to marketing management.3 ost products are in the maturity stage of the life cycle, and therefore most of marketing management deals "ith the mature product.- 8lthough many products in the mature stage appear to remain unchanged for long periods, most successful ones are actually evolving to meet changing consumer needs.1 In modifying the market, the company tries to increase the consumption of the current product. 2r the company may reposition the !rand to appeal to a larger or faster-gro"ing market segment. $he manager may also look for "ays to increase usage among present customers.2 $he company might also try modifying the product3changing characteristics such as 'uality, features, or style to attract ne" users and to inspire more usage.3 Ainally, the company can try modifying the marketing mix3improving sales !y changing one or more marketing mix elements. It can cut prices to attract ne" users and competitors# customers. It can launch a !etter advertising campaign or use aggressive sales promotions3trade deals, cents-off, premiums, and contests. In addition to pricing and promotion, the company can also move into large market channels, using mass merchandisers, if these channels are gro"ing. $he company can offer ne" or improved services to !uyers.C Decline stage1 $he sales of most product forms and !rands eventually dip. $he decline may !eslo". 2r sales may plunge to @ero, or they may drop to a lo" level "here they continue for many years. $his is the decline stage.2 4ales may decline for many reasons, including technological advances, shifts inconsumer tastes, and increased competition.3 %arrying a "eak product can !e very costly to a firm, and not >ust in profit terms. %ompanies need to pay more attention to their aging products.1 $he firm#s first task is to identify those products in the decline stage !y regularly revie"ing sales, market shares, costs, and profit trends.2 $hen, management must decide "hether to maintain, harvest, or drop each of these declining products.NDER COPY CENTER Sayfa 25Product strateg! Learning Objectives1. Define the term product including the core, actual, and augmented product.-. Introduction-.1. =roduct is the first and most !asic marketing consideration.-.2. =roducts are much more than >ust the good or service. .. 0hat is a product:..1. 0hat is a product:..1.1. 0edefineaproduct asanythingthat can!eofferedtoamarket forattention, ac'uisition, use, orconsumptionandthat might satisfyaneedor"ant...1.2. &roadlydefined, products includephysical o!>ects, services, events,persons, places, organisations, ideas, or mixes of these entities...1.3. 4ervices are products that consist of activities, !enefits, or satisfactionsoffered for sale that are essentially intangi!le and do not result in the o"nershipof anything...1.-. 8product isalsodefinedas aneed-satisfier, apro!lemsolver or a!enefit giver...2. =roducts, services, and experiences..2.1. =roduct is a key element in the market offering. ..2.2. arketing mix planning !egins "ith formulating an offering that !ringsvalue to target customers. ..2.3. 8company#s market offering often includes tangi!le goods andservices...2.-. 8t one extreme, the offer may consist of a pure tangi!le good. 8t theotherextremearepureservices, for"hichtheofferconsistsprimarilyofaservice...2... $o differentiate their offers, !eyond simply making products anddelivering services, companies are staging, marketing, and deliveringmemora!le customer experiences.NDER COPY CENTER Sayfa 26..3. Bevels of product..3.1. =roduct plannersneedtothinka!out productsandservicesonthreelevels. ..3.2. $he most !asic level is the core !enefit, "hich addressed the 'uestion*What is the buyer really buying?..3.3. 8t the second level, product planners must turn the core !enefit into anactual product. $hey need to develop product and service features, design, a'uality level, a !rand name, and packaging...3.-. Ainally, product planners must !uild an augmented product around thecore !enefitandactualproduct!y offering additional customerservicesand!enefits...3... %onsumers see products as complex !undles of !enefits that satisfy theirneeds.NDER COPY CENTER Sayfa 27Pricing Learning Objectives12 Discusstheroleof pricingand"hyit isimportant tounderstandcustomer valueperceptions "hen setting prices. 13 Discuss the importance of company and product costs in setting prices. 1- Identify and define the other important internal and external factors affecting a firm#spricing decisions. 1. Descri!e the ma>or strategies for pricing ne" products.1; Explain ho" companies determine a set of prices that maximise the profits from thetotal product mix.1C Discuss ho" companies ad>ust prices "hich take into account different customer andmarket situations.1F Discuss the key issues related to initiating and responding to price changes.1G 0hat is price:1 In the narro"est sense, price is the amount of money charged for a product or service. 2 ore !roadly, price is the sum of all the values that consumers exchange for the !enefits of having or using the product or service.3 =rice is the only element in the marketing mix that produces revenue, all other elements represent costs. =rice is also one of the most flexi!le elements of the marketing mix.- =ricing is the num!er one pro!lem facing many marketing executives. Iet many companies do not handle pricing "ell.NDER COPY CENTER Sayfa 281 2ne fre'uent pro!lem is that companies are too 'uick to reduce prices in order to get a sale rather than convince !uyers that their products are "orth a higher price.2 2ther common mistakes include pricing that is too cost oriented rather than customer-value oriented, and pricing that does not take the rest of the marketing mix into account.2H Aactors to consider "hen setting prices1 8 company#s pricing decisions are affected !y !oth internal company factors and external environment factors.2 7alue-!ased pricing uses !uyers# perceptions of value, not the seller#s cost, as the key to pricing. 1 It means that the marketer cannot design a product and marketing programme and then set the price. =rice is considered along "ith the other marketing mix varia!les !efore the marketing programme is set.2 %ost-!ased pricing is product driven. 7alue-!ased pricing reverses this process. $he company sets its target price !ased on customer perceptions of the product value.3 8 company using value-!ased pricing must find out "hat value !uyers assign to different competitive offers. easuring perceived value can !e difficult.- $here has !een a fundamental shift in consumer attitudes to"ard price and 'uality. 1ood-value pricing is defined as offering >ust the right com!ination of 'uality and good service at a fair price. 1 In many cases, this has involved introducing less expensive versions of esta!lished, !rand name products.2 Everyday lo" pricing 9EDB=+ involves charging a constant, everyday lo" price "ith fe" or no temporary price discounts.3 In contrast, high-lo" pricing involves charging higher prices on an everyday !asis !ut running fre'uent promotions to lo"er prices temporarily on selected items.- In many !usiness-to-!usiness marketing situations, the challenge is to !uild the company#s pricing po"er3its po"er to escape price competition and to >ustify higher prices and margins "ithout losing market share.3 %ost-!ased pricing involves setting prices !ased on the costs for producing, distri!uting, and selling the product plus a fair rate of return for its effort and risk. 1 8 company#s costs take t"o forms. Aixed costs 9also kno"n as overhead+ are costs that do not vary "ith production or sales level. 7aria!le costs vary directly "ith the level of production. NDER COPY CENTER Sayfa 292 $otal costs are the sum of the fixed and varia!le costs for any given level of production.- $o price "isely, management needs to kno" ho" its costs vary "ith different levels ofproduction. 1 8verage cost tends to fall "ith accumulated production experience. $his drop in the average cost "ith accumulated production experience is called the experience curve 9or the learning curve+. 8 single-minded focus on reducing costs and exploiting the experience curve "ill not al"ays "ork. $he aggressive pricing might give the product a cheap image. $he strategy also assumes that competitors are "eak and not "illing to fight it out !y meeting the company#s price cuts. Ainally, "hile the company is !uilding volume under one technology, a competitor may find a lo"er-cost technology that lets it start at prices lo"er than those of the market leader, "ho still operates on the old experience curve.2 $he simplest pricing method is cost-plus pricing3adding a standard markup to cost of the product. 1 Does using standard markups to set prices make sense: 1enerally, not. 8ny pricing method that ignores demand and competitor prices is not likely to lead to the !est price.2 arkup pricing remains popular for many reasons.1 4ellers are more certain a!out costs than a!out demand. &ytying the price to cost, sellers simplify pricing3they do not have to make fre'uent ad>ustments as demand changes.2 0hen all firms in the industry use this pricing method, prices tend to !e similar and price competition is thus minimised.3 any people feel that cost-plus pricing is fairer to !oth !uyers and sellers. 4ellers earn a fair return on their investment !ut do not take advantage of !uyers "hen !uyers# demand !ecomes great.3 8nother cost-oriented pricing approach is !reak-even pricing, or a variation called target profit pricing.1 $he firm tries to determine the price at "hich it "ill !reak even or make the target profit it is seeking.2 $arget pricing uses the concept of a !reak-even chart that sho"s the total cost and total revenue expected at different sales volume levels. $a!le 1-.1 sho"s a !reak-even analysis.. 2ther internal and external factors affecting price decisions1 0hereas costs set the lo"er limit of prices, customer perceptions of value set the upper limit. /o"ever, the company must consider a num!er of other NDER COPY CENTER Sayfa 30internal and external factors. $hese include the overall marketing strategy, o!>ectives, and mix. 2 &efore setting price, the company must decide on its strategy for the product. Ifthe company has selected its target market and positioning carefully, then its marketing mix strategy, including price, "ill !e fairly straightfor"ard. =ricing strategy is largely determined !y decisions on market positioning.3 1eneral pricing o!>ectives include survival, current profit maximisation, market share leadership, or customer retention and relationship !uilding.- =rice decisions must !e coordinated "ith product design, distri!ution, and promotion decisions to form a consistent and effective marketing programme. Decisions made of other marketing mix varia!les may affect pricing decisions. %ompanies often position their products on price and then tailor other marketing mix decisions to the prices they "ant to charge.. $arget costing reverses the usual process of first designing a ne" product, determining its cost, and then setting a price. It starts "ith an ideal selling price !ased on customer considerations, and then targets costs that "ill ensure that the price is met.; 2ther companies de-emphasise price and use other marketing mix tools to create nonprice positions. 2ften, the !est strategy is not to charge the lo"est price, !ut rather to differentiate the marketing offer to make it "orth a higher price. If the product is positioned on nonprice factors, then decisions a!out 'uality, promotion, and distri!ution "ill strongly affect price.; 0ithin the organisation, management must decide "ho sets the price. In small companies, this may !e set !y top management. In industrial markets, salespeople may play a role. 4till other industries utilise pricing departments. C $he seller#s pricing freedom also varies "ith different types of markets and the relationship !et"een price and demand.1 (nder pure competition, the market consists of many !uyers and sellers tradingin a uniform commodity. )o single !uyer or seller has much effect on the goingmarket price.2 (nder monopolistic competition, the market consists of many !uyers and sellers "ho trade over a range of prices rather than a single market price. 8 range of prices occurs !ecause sellers can differentiate their offers to !uyers.3 (nder oligopolistic competition, the market consists of a fe" sellers "ho are highly sensitive to each other#s pricing and marketing strategies. $here are fe" sellers !ecause it is difficult for ne" sellers to enter the market.- In a pure monopoly, the market consists of one seller. In a regulated monopoly, the government permits the company to set rates that "ill yield a 5fair return.6 )onregulated monopolies are free to price at "hat the market "ill !ear. /o"ever, they do not al"ays charge the full price for a num!er of reasons* a desire not to attract competition, a desire to penetrate the market faster "ith a lo" price, or a fear of government regulation.NDER COPY CENTER Sayfa 31F In the end, the consumer "ill decide "hether a product#s price is right. =ricing decisions, like other marketing mix decisions, must !e !uyer oriented.1 Each price the company might charge "ill lead to a different level of demand.2 $he relationship !et"een the price charged and the resulting demand level is sho"n in the demand curve in Aigure 1-.;. $he demand curve sho"s the num!er of units the market "ill !uy in a given time period at different prices that might !e charged.3 In the normal case, demand and price are inversely related, that is, the higher the price, the lo"er the demand. In the case of prestige goods, the demand curve sometimes slopes up"ard. 4till, if the company charges too high a price, the level of demand "ill !e lo"er.- arketers also need to kno" price elasticity3ho" responsive demand "ill !e to a change in price.1 0hat determines the price elasticity of demand: 2 &uyers are less price sensitive "hen the product they are !uying is uni'ue or "hen it is high in 'uality, prestige, or exclusiveness. 3 $hey are less price sensitive "hen su!stitute products are hard to find or "hen they cannot easily compare the 'uality of su!stitutes. - Ainally, !uyers are less price sensitive "hen the total expenditure for aproduct is lo" relative to their income or "hen the cost is shared !y another party.G In setting its prices, the company must also consider competitors# costs and prices and possi!le competitor reactions to the company#s o"n pricing moves. In assessing competitors# pricing strategies, the company should ask several 'uestions*1 /o" does the company#s market offering compare "ith competitors# offerings in terms of customer value:2 /o" strong are current competitors and "hat are their current pricing strategies:3 /o" does the competitive landscape influence customer price sensitivity:1H 0hen setting prices, the company also must consider a num!er of other factors in itsexternal environment.1 Economic conditions can have a strong impact on the firm#s pricing strategies.2 $he company must also consider "hat impact its prices "ill have on other parties in its environment, such as resellers.3 $he government is an important external influence on pricing decisions.- 4ocial concerns may have to !e taken into account.21 )e"-product pricing strategiesNDER COPY CENTER Sayfa 32%ompanies !ringing out a ne" product face the challenge of setting prices for the first time. $hey can choose !et"een t"o !road strategies.1 arket-skimming pricing1 any companies that invent ne" products set high initial prices to 5skim6 revenues layer-!y-layer from the market. $his is called market-skimming pricing.2 arket skimming makes sense only under certain conditions.1 Airst, the product#s 'uality and image must support its higher price, and enough !uyers must "ant the product at that price.2 4econd, the costs of producing a smaller volume cannot !e so high that they cancel the advantage of charging more.3 Ainally, competitors should not !e a!le to enter the market easily and undercut the high price.2 arket-penetration pricing1 Eather than setting a high price to skim off small !ut profita!le market segments, some companies use market-penetration pricing. $hey set a lo" initial price in order to penetrate the market 'uickly and deeply3to attract a large num!er of !uyers 'uickly and "in a large market share.2 4everal conditions must !e met for this lo"-price strategy to "ork.1 $he market must !e highly price sensitive so that a lo" price producesmore market gro"th.2 =roduction and distri!ution costs must fall as sales volume increases.3 $he lo" price must help keep out the competition, and the penetrationpricer must maintain its lo"-price position3other"ise, the price advantage may !e only temporary.22 =roduct-mix pricing strategies1 $he strategy for setting a product#s price often has to !e changed "hen the product is part of a product mix. In this case, the firm looks for a set of prices that maximises theprofits on the total product mix. $he five product mix pricing situations are*2 =roduct line pricing1 In product line pricing, management must decide on the price steps to set !et"een the various products in a line.2 $he price steps should take into account cost differences !et"een the products in the line, customer evaluations of their different features, and competitors# prices. In many industries, sellers use "ell-esta!lished price points for the products in their line.NDER COPY CENTER Sayfa 333 $he seller#s task is to esta!lish perceived 'uality differences that support the price differences.3 2ptional-product pricing1 any companies use optional-product pricing3offering to sell optional or accessory products along "ith their main product.2 =ricing these options is a sticky pro!lem. $he company has to decide "hich items to include in the !ase price and "hich to offer as options.- %aptive-product pricing1 %ompanies that make products that must !e used along "ith a main product areusing captive-product pricing. =roducers of the main products often price them lo" and set high markups on the supplies.2 In the case of services, this strategy is called t"o-part pricing. $he price of the service is !roken into a fixed fee plus a varia!le usage rate. $he service firm must decide ho" much to charge for the !asic service and ho" much for the varia!le usage. $he fixed amount should !e lo" enough to induce usage of the service, profit can !e made on the varia!le fees.. &y-product pricing1 (sing !y-product pricing, a manufacturer "ill seek a market for !y-products and should accept any price that covers more than the cost of storing and delivering them.2 &y-products can even turn out to !e profita!le.; =roduct-!undle pricing1 (sing product !undle pricing, sellers often com!ine several of their products and offer the !undle at a reduced price.2 =rice !undling can promote the sales of products consumers might not other"ise !uy, !ut the com!ined price must !e lo" enough to get them to !uy the !undle.23=rice-ad>ustment strategies1 %ompanies usually ad>ust their !asic prices to account for various customer differences and changing situations. $he six price ad>ustment strategies are*2 Discount and allo"ance pricing1 $he many forms of discounts include a cash discount3a price reduction to !uyers "ho pay their !ills promptly. 8 typical example is 52D1H, net 3H,6 "hich NDER COPY CENTER Sayfa 34means that although payment is due "ithin 3H days, the !uyer can deduct 2 percent if the !ill is paid "ithin 1H days.2 8 'uantity discount is a price reduction to !uyers "ho !uy large volumes. 4uchdiscounts provide an incentive to the customer to !uy more from one given seller, rather than from many different sources.3 8 functional discount 9also called a trade discount+ is offered !y the seller to trade-channel mem!ers "ho perform certain functions, such as selling, storing, and record keeping.- 8 seasonal discount is a price reduction to !uyers "ho !uy merchandise or services out of season.. 8llo"ances are another type of reduction from list price. 1 $rade-in allo"ances are price reductions given for turning in an old item "hen !uying a ne" one.2 =romotional allo"ances are payments or price reductions to re"ard dealers for participating in advertising and sales support programmes.3 4egmented pricing1 %ompanies "ill often ad>ust their !asic prices to allo" for differences in customers, products, and locations.2 In segmented pricing, the company sells a product or service at t"o or more prices, even though the difference in prices is not !ased on differences in costs.1 (nder customer-segment pricing, different customers pay different prices for the same product or service.2 (nder product form pricing, different versions of the product are priced differently !ut not according to differences in their costs.3 (nder location pricing, a company charges different prices for different locations, even though the cost of offering each location is the same.- (sing time pricing, a firm varies its prices !y the season, the month, the day, and even the hour.- =sychological pricing1 %onsumers use price to >udge 'uality. In using psychological pricing, sellers consider the psychology of prices and not simply the economics.2 8nother aspect of psychological pricing is reference prices3prices that !uyers carry in their minds and refer to "hen looking at a given product.3 Aor most purchases, consumers don#t have all the skill or information they needto figure out "hether they are paying a good price. $hey may rely on certain cues that signal "hether a price is high or lo".. =romotional pricingNDER COPY CENTER Sayfa 351 0ith promotional pricing, companies "ill temporarily price their products !elo" list price and sometimes even !elo" cost to create !uying excitement and urgency.1 4upermarkets and department stores "ill price a fe" products as loss leaders to attract customers to the store in the hope that they "ill !uy other items at normal markups.2 4ellers "ill also use special-event pricing in certain seasons to dra" more customers.3 anufacturers sometimes offer cash re!ates to consumers "ho !uy the product from dealers "ithin a specified time, the manufacturer sends the re!ate directly to the customer.- 4ome manufacturers offer lo"-interest financing, longer "arranties, or free maintenance to reduce the consumer#s 5price.6. $he seller may simply offer discounts from normal prices to increase sales and reduce inventories.2 =romotional pricing can have adverse effects.1 (sed too fre'uently and copied !y competitors, price promotions can create 5deal-prone6 customers "ho "ait until !rands go on sale !efore!uying them.2 %onstantly reduced prices can erode a !rand#s value in the eyes of customers.3 arketers sometimes use price promotions as a 'uick fix instead of s"eating through the difficult process of developing effective longer-term strategies for !uilding their !rands.; 1eographical pricing1 8 company also must decide ho" to price its products for customers located in different parts of the country or "orld.2 A2&-origin pricing is a practice that means the goods are placed free on !oard 9hence, A2&+ a carrier. 8t that point the title and responsi!ility pass to the customer, "ho pays the freight from the factory to the destination.3 (niform-delivered pricing is the opposite of A2& pricing. /ere, the company charges the same price plus freight to all customers, regardless of their location.$he freight charge is set at the average freight cost.- Jone pricing falls !et"een A2&-origin pricing and uniform-delivered pricing. 8ll customers "ithin a given @one pay a single total price, the more distance the @one, the higher the price.. (sing !asing-point pricing, the seller selects a given city as a 5!asing point6 and charges all customers the freight cost from that city to the customer location, regardless of the city from "hich the goods are actually shipped. ; (sing freight-a!sorption pricing, the seller a!sor!s all or part of the actual freight charges in order to get the desired !usiness.C Dynamic pricing offers many advantages for marketers. Internet sellers can mine their data!ases to gauge a specific shopper#s desires, measure his or her NDER COPY CENTER Sayfa 36means, instantaneously tailor products to fit that shopper#s !ehaviour, and priceproducts accordingly. any &2& marketers monitor inventories, costs, and demand at any given moment and ad>ust prices instantly. &uyers also !enefit from the 0e! and dynamic pricing.C International pricing1 %ompanies that market their products internationally must decide "hat prices to charge in the different countries in "hich they operate.2 In some cases, a company can set a uniform "orld"ide price. /o"ever, most companies ad>ust their prices to reflect local market conditions and cost considerations.3 $he price that a company should charge in a specific country depends on many factors, including economic conditions, competitive situations, la"s and regulations, and development of the "holesaling and retailing system. %onsumer perceptions and preferences also may vary from country to country, calling for different prices. 2r the company may have different marketing o!>ectives in various "orld markets that re'uire changes in pricing strategy.- %osts play an important role in setting international prices. $ravelers a!road areoften surprised to find that goods that are relatively inexpensive at home may carry outrageously higher price tags in other countries.1 In some cases, such price escalation may result from differences in selling strategies or market conditions.2 In most instances, ho"ever, it is simply a result of the higher costs of selling in another country3the additional costs of product modifications, shipping and insurance, import tariffs and taxes, exchange rate fluctuations, and physical distri!ution.2- =rice changes1 Initiating price changes1 4everal situations may lead a firm to consider cutting its price. 1 2ne such circumstance is excess capacity. In this case, the firm needs more !usiness and cannot get it through increased sales effort, productimprovement, or other measures.2 8nother situation leading to price changes is falling market share in the face of strong price competition.3 8 company may also cut prices in a drive to dominate the market through lo"er costs. Either the company starts "ith lo"er costs than its competitors, or it cuts prices in the hope of gaining market share that "ill further cut costs through larger volume.2 8 successful price increase can greatly increase profits.NDER COPY CENTER Sayfa 371 8 ma>or factor in price increases is cost inflation. Eising costs s'uee@eprofit margins and lead companies to pass cost increases along to customers.2 8nother factor leading to price increases is over demand. 0hen a company cannot supply all that its customers need, it can raise prices, ration products to customers, or !oth.3 %ompanies can increase their prices in a num!er of "ays to keep up "ith rising costs.- =rices can !e raised almost invisi!ly !y dropping discounts and adding higher-priced units to the line.. =rices can !e pushed up openly.3 %ustomers do not al"ays interpret prices in a straightfor"ard "ay. $hey may vie" a price cut in several "ays.1 $hey might think the company is a!andoning their market.2 $hey might !elieve the 'uality has !een reduced, or that the price "illcome do"n even further and that it "ill pay to "ait and see.3 8 price increase, "hich "ould normally lo"er sales, may have some positive meanings for !uyers.- $hey might think that the item is very 5hot6 and may !e uno!taina!le unless they !uy it soon, or that the item is an unusually good product, or the company is !eing greedy and >ust charging "hat the market "ill!ear.- 8 firm considering a price change has to "orry a!out the reactions of its competitors as "ell as those of its customers. %ompetitors are most likely to react "hen the num!er of firms involved is small, "hen the product is uniform,and "hen the !uyers are "ell informed.2 Eesponding to price changes1 Aigure 1-.C sho"s the "ays a company might assess and respond to a competitor#s price cut.2 If a company decides that effective action can and should !e taken, it might make any of four responses.1 It could reduce its price to match the competitor#s price.2 It may decide that the market is price sensitive and that it "ould lose too much market share to the lo"er-priced competitor.3 It might "orry that recapturing lost market share later "ould !e too hard.- %utting the price "ill reduce the company#s profits in the short run.. 4ome companies might also reduce their product 'uality, services, andmarketing communications to retain profit margins, !ut this "ill ultimately hurt long-run market share. ; 8lternatively, the company might maintain its price !ut raise the perceived value of its offer. It could improve its communications, NDER COPY CENTER Sayfa 38stressing the relative 'uality of its product over that of the lo"er-pricecompetitor.C 2r the company might improve 'uality and increase price, moving its !rand into a higher-price position. $he higher 'uality >ustifies the higher price that in turn preserves the company#s higher margins.F Ainally, the company might launch a lo"-price 5fighting !rand63adding a lo"er-price item to the line or creating a separate lo"er-price!rand. $his is necessary if the particular market segment !eing lost is price sensitive and "ill not respond to arguments of higher 'uality."dvertisingLearning Objectives1G Define the roles of advertising in the promotion mix.2H Descri!e the main decisions involved in developing an advertising programme.Chapter Outline2. Introduction1 8dvertising involves communicating the company#s or !rand#s value proposition !y using paid media to inform, persuade, and remind consumers.2 =u!lic relations involves !uilding good relations "ith various company pu!lics ? fromconsumers and the general pu!lic to the media, investor, donor, and government pu!lics. 2; 8dvertising1 8dvertising can !e traced !ack to the very !eginnings of recorded history. 2 8dvertising is defined as any paid form of non-personal presentation and promotion of ideas, goods, or services through mass media such as ne"spapers, magasines, television, or radio !y an identified sponsor. 2C Important decisions in advertising1 arketing management must make four important decisions "hen developing an advertising programme*2 4etting advertising o!>ectivesNDER COPY CENTER Sayfa 391 $he first step is to set advertising o!>ectives. $hese o!>ectives should !e !ased on decisions a!out the target market, positioning and marketing mix, "hich define the >o! that advertising must do in the total marketing programme. 2 8n advertising o!>ective is a specific communication task to !e accomplished "ith a specific target audience during a specific period of time. 3 8dvertising o!>ectives can !e classified !y primary purpose3"hether the aim is to inform, persuade, or remind.- Informative advertising is used heavily "hen introducing a ne" product category. In this case, the o!>ective is to !uild primary demand.. 4ome persuasive advertising has !ecome comparative advertising, in "hich a company directly or indirectly compares its !rand "ith one or more other !rands.; Eeminder advertising is important for mature products3it keeps consumers thinking a!out the product.3 4etting the advertising !udget1 8fter determining its advertising o!>ectives, the company next sets its advertising !udget for each product.2 $here are several factors that should !e considered "hen setting the advertising!udget.1 4tage of product life cycle2 arket share3 %ompetition and clutter- 8dvertising fre'uency. =roduct differentiation- Developing advertising strategy1 8dvertising strategy consists of t"o ma>or elements* creating advertising messages and selecting advertising media. 2 %reating the advertising message includes addressing the changing message environment, deciding upon the general message strategy, and deciding on the message execution.1 $he first step in creating effective advertising messages is to plan a message strategy3to decide "hat general message "ill !e communicated to consumers.2 essage strategy statements tend to !e plain, straightfor"ard outlines of !enefits and positioning points that the advertiser "ants to stress. $he advertiser must next develop a compelling creative concept3or 5!ig idea63that "ill !ring the message strategy to life in a distinctiveand memora!le "ay.3 $he creative concept "ill guide the choice of specific appeals to !e used in an advertising campaign. - 8dvertising appeals should have three characteristics.NDER COPY CENTER Sayfa 401 Airst, they should !e meaningful, pointing out !enefits thatmake the product more desira!le or interesting to consumers.2 4econd, appeals must !e !elieva!le3consumers must !elieve that the product or service "ill deliver the promised !enefits.3 8ppeals should also !e distinctive3they should tell ho" the product is !etter than the competing !rands.. $he advertiser no" has to turn the !ig idea into an actual ad executionthat "ill capture the target market#s attention and interest. 8ny message can !e presented in different execution styles, such as the follo"ing*1 4lice of life* $his style sho"s one or more 5typical6 peopleusing the product in a normal setting.2 Bifestyle* $his style sho"s ho" a product fits in "ith a particular lifestyle.3 Aantasy* $his style creates a fantasy around the product or its use.- ood or image* $his style !uilds a mood or image around the product, such as !eauty, love, or serenity.. usical* $his style sho"s one or more people or cartoon characters singing a!out the product.; =ersonality sym!ol* $his style creates a character that represents the product. $he character might !e animated orreal.C $echnical expertise* $his style sho"s the company#s expertise in making the product.F 4cientific evidence* $his style presents survey or scientificevidence that the !rand is !etter or !etter liked than one or more other !rands.G $estimonial evidence or endorsement* $his style features ahighly !elieva!le or lika!le source endorsing the product.; $he advertiser also must choose a tone for the ad, use memora!le and attention-getting "ords in the ad, and maximise the use of format elements to make a difference in an ad#s impact as "ell as in its cost. C $o select media, the advertiser must decide on the reach and fre'uency needed to achieve advertising o!>ectives.1 Eeach is a measure of the percentage of people in the target market "ho are exposed to the ad campaign during agiven period of time.2 Are'uency is a measure of ho" many times the average person in the target market is exposed to the message.3 $he advertiser also must decide on the desired media impact3the 'ualitative value of a message exposure through a given medium.NDER COPY CENTER Sayfa 41- In general, the more reach, fre'uency, and impact the advertiser seeks, the higher the advertising !udget "ill have to !e.F $he media planner no" must chose the !est media vehicles3specific media "ithin each general media type.1 edia planners must compute the cost per thousand persons reached !y a vehicle. $he media planner must alsoconsider the costs of producing ads for different media. 2 In selecting media vehicles, the media planner must !alance media cost measures against several media impact factors.3 $he advertisers must also decide ho" to schedule the advertising over the course of a year. $he firm can vary its advertising to follo" a seasonal pattern, to oppose a seasonal pattern, or to !e the same all year. %ontinuity means scheduling ads evenly "ithin a given period. =ulsing means scheduling ads unevenly over a given time period.. Evaluating advertising effectiveness and return on advertising investment1 easuring the communication effects of an ad tells "hether the ad is communicating "ell.2F 2ther advertising considerations1 In developing advertising strategies and programmes, the company must address t"o additional 'uestions. Airst, ho" "ill the company organise its advertising function3"ho "ill perform "hich advertising tasks: 4econd, ho" "ill the company adapt its advertising strategies and programmes to the complexities of international markets:1 In small companies, advertising might !e handled !y someone in the sales department. 2 Barge companies set up advertising departments "hose >o! it is to set the advertising !udget, "ork "ith the ad agency, and handle other advertising not done !y the agency.2 International advertisers face many complexities not encountered !y domestic advertisers.1 $he most !asic issue concerns the degree to "hich glo!al advertising should !eadapted to the uni'ue characteristics of various country markets.1 4tandardisation produces many !enefits3lo"er advertising costs, greater glo!al advertising coordination, and a more consistent "orld"ide image.NDER COPY CENTER Sayfa 422 /o"ever, standardisation ignores the fact that country markets differ greatly in their cultures, demographics, and economic conditions. $hus, most international advertisers 5think glo!ally !ut act locally.6 $hey develop glo!al advertising strategies that make their "orld"ide advertising efforts more efficient and consistent. $hen they adapt theiradvertising programmes to make them more efficient and consistent.2 1lo!al advertises are also concerned "ith the degree to "hich advertising decision making and implementation should !e centralised or decentrali@ed. Aive key factors influence this choice. 1 %orporate and market o!>ectives.2 =roduct uniformity.3 =roduct appeal.- %ultural sensitivities.. Begal constraints.3 1lo!al advertisers face several special pro!lems, like variations in the cost and availa!ility of advertising media and differences in regulatory practices. NDER COPY CENTER Sayfa 43