MARKETING MANAGEMENT REVIEWER PERSONS.

Some people have done a masterful job of

CHAPTER 1: marketing themselves—David Beckham, Oprah Winfrey,
Defining Marketing for the 21st Century and the Rolling Stones.

PLACES. Cities ,states, regions, and whole nations

compete to attract tourists, residents, factories, and
company headquarters. Place marketers include
economic development specialists, real estate agents,
commercial banks, local business associations, and
advertising and public relations agencies.
Marketing creates demand for a product, which in turn
PROPERTIES. Properties are intangible rights of
drives revenue. Greater demand creates the need for
ownership to either real property (real estate) or
companies to hire new workers, while revenue (top
financial property (stocks and bonds). They are bought
line) contributes to a company’s bottom line (profits),
and sold, and these exchanges require marketing.
which allow the company to be more fully engaged in
socially responsible activities.
ORGANIZATIONS. Organizations work to build a
MARKETING is the activity, set of institutions, and strong, favorable, and unique image in the minds of their
processes for creating, communicating, delivering, and target publics. Universities, museums, performing arts
exchanging offers that have value for customers, organizations, corporations, and nonprofits all use
clients, partners, and society at large. marketing to boost their public images and compete for
audiences and funds.
MARKETING MANAGEMENT is the art and
science of choosing target market and getting, keeping, INFORMATION. Information is essentially what
and growing customers through creating, delivering, books, schools, and universities produce, market, and
and communicating superior customer value. distribute at a price to parents, students, and
communities

WHAT IS MARKETED? IDEAS. Every market offering includes a basic idea.

Marketers market 10 main types of entities: goods, Social marketers are busy promoting such ideas as
services, events, experiences, persons, places, “Friends Don’t Let Friends Drive Drunk” and “A Mind Is a
properties, organizations, information, and ideas Terrible Thing to Waste.”

GOODS. Physical goods constitute the bulk of most WHO MARKETS?

countries’ production and marketing efforts.

SERVICES. Services include the work of airlines, hotels,

car rental firms, barbers and beauticians, maintenance
and repair people, and accountants, bankers, lawyers,
engineers, doctors, software programmers, and
management consultants.
MARKETERS AND PROSPECTS
EVENTS. Marketers promote time-based events, such
as major trade shows, artistic performances, and A marketer is someone who seeks a response—
company anniversaries. attention, a purchase, a vote, a donation—from another
party, called the prospect. If two parties are seeking to
EXPERIENCES. By orchestrating several services and sell something to each other, we call them both
goods, a firm can create, stage, and market experiences. marketers.
There is also a market for customized experiences, such
as a week at a baseball camp with retired baseball greats, TYPES OF DEMAND
a four-day rock and roll fantasy camp, or a climb up 1. Negative demand—Consumers dislike the
Mount Everest. product and may even pay to avoid it.
 2. Nonexistent demand—Consumers may be SIMPLE MARKETING SYSTEM
unaware of or uninterested in the product.
3. Latent demand—Consumers may share a strong
need that cannot be satisfied by an existing
product.
4. Declining demand—Consumers begin to buy the
product less frequently or not at all.
5. Irregular demand—Consumer purchases vary
on a seasonal, monthly, weekly, daily, or even The diagram above shows the relationship between the
hourly basis. industry and the market. Sellers and buyers are
6. Full demand—Consumers are adequately connected by four flows. Sellers send goods and services
buying all products put into the marketplace. and communications such as ads and direct mail to the
7. Overfull demand—More consumers would like market; in return they receive money and information
to buy the product than can be satisfied. such as customer attitudes and sales data. The inner loop
8. Unwholesome demand—Consumers may be shows an exchange of money for goods and services; the
attracted to products that have undesirable outer loop shows an exchange of information.
social consequences.
KEY CUSTOMER MARKETS
Consumer Markets Companies selling mass consumer
goods and services such as juices, cosmetics, athletic
shoes, and air travel spend a great deal of time
establishing a strong brand image by developing a
superior product and packaging, ensuring its availability,
and backing it with engaging communications and
reliable service.

Traditionally, a “market” was a physical place where Business Markets Companies selling business goods and
buyers and sellers gathered to buy and sell goods. services often face well-informed professional buyers
Economists describe a market as a collection of buyers skilled at evaluating competitive offerings. Business
and sellers who transact over a particular product or buyers buy goods to make or resell a product to others
product class (such as the housing market or the grain at a profit. Business marketers must demonstrate how
market). their products will help achieve higher revenue or lower
costs. Advertising can play a role, but the sales force, the
price, and the company’s reputation may play a greater
There are five basic markets – Manufacturer Markets,
one.
Resource Markets (raw material markets, labor markets,
money markets), Intermediary Markets (wholesalers,
resellers, etc.), Consumer Markets, and Government Global Markets Companies in the global marketplace
Markets. must decide which countries to enter; how to enter each
(as an exporter, licenser, joint venture partner, contract
Manufacturers go to resource markets (raw material manufacturer, or solo manufacturer); how to adapt
markets, labor markets, money markets), buy resources product and service features to each country; how to
and turn them into goods and services, and sell finished price products in different countries; and how to design
products to intermediaries, who sell them to consumers. communications for different cultures. They face
Consumers sell their labor and receive money with which different requirements for buying and disposing of
they pay for goods and services. The government collects property; cultural, language, legal and political
tax revenues to buy goods from resource, manufacturer, differences; and currency fluctuations. Yet, the payoff
and intermediary markets and uses these goods and can be huge.
services to provide public services. Each nation’s
economy, and the global economy, consists of Nonprofit and Governmental Markets Companies
interacting sets of markets linked through exchange selling to nonprofit organizations with limited purchasing
processes. power such as churches, universities, charitable
organizations, and government agencies need to price
carefully. Lower selling prices affect the features and
quality the seller can build into the offering. Much A brand is an offering from a known source. A brand
government purchasing calls for bids, and buyers often name such as McDonald’s carries many associations in
focus on practical solutions and favor the lowest bid in people’s minds that make up its image: hamburgers,
the absence of extenuating factors. cleanliness, convenience, courteous service, and golden
arches. All companies strive to build a brand image with
MARKETPLACE - physical locations (such as retail as many strong, favorable, and unique brand
store) associations as possible.
MARKETSPACE - digital location (online retailer)
METAMARKETS - The cluster of complementary VALUE AND SATISFACTION
products and services related in consumers mind but - pertains to the benefits that the market expects
spread across diverse set of industries. to get/experience
• (Ex. A car buyer will engage many parts of this metamarket, The buyer chooses the offerings he or she perceives to
creating an opportunity for metamediaries to assist him or deliver the most value, the sum of the tangible and
her in moving seamlessly through them. Edmund’s lets a car intangible benefits and costs to her. Value, a central
buyer find the stated features and prices of different
automobiles and easily click to other sites to search for the marketing concept, is primarily a combination of quality,
lowest-price dealer for financing, accessories, and used service, and price (qsp), called the customer value triad.
cars. Metamediaries also serve other metamarkets, such as Value perceptions increase with quality and service but
home ownership, parenting and baby care, and weddings.) decrease with price.
We can think of marketing as the identification,
CORE MARKETING CONCEPTS creation, communication, delivery, and monitoring of
Needs, Wants, and Demands customer value. Satisfaction reflects a person’s judgment
Needs are the basic human requirements such as for air, of a product’s perceived performance in relationship to
food, water, clothing, and shelter. Humans also have expectations. If the performance falls short of
strong needs for recreation, education, and expectations, the customer is disappointed. If it matches
entertainment. These needs become wants when they expectations, the customer is satisfied. If it exceeds
are directed to specific objects that might satisfy the them, the customer is delighted.
need.
Wants – specific of a needs (food is a need: burger is a MARKETING CHANNELS
food but is a want) To reach a target market, the marketer uses three
kinds of marketing channels. Communication channels
Demands are wants for specific products backed by an deliver and receive messages from target buyers and
ability to pay. include newspapers, magazines, radio, television, mail,
telephone, billboards, posters, fliers, CDs, audiotapes,
TARGET MARKETS, POSITIONING, and and the Internet. The marketer also uses distribution
SEGMENTATION channels to display, sell, or deliver the physical product
or service(s) to the buyer or user. To carry out
Target Markets – possible market or client who will transactions with potential buyers, the marketer also
purchase your product/services uses service channels that include warehouses,
Positioning – inculcate or implanting something in the transportation companies, banks, and insurance
minds of the customer of certain product companies. Marketers clearly face a design challenge in
• Ex. Colgate – strong white teeth; Close-Up: fresh choosing the best mix of communication, distribution,
breath and service channels for their offerings.
Segmentation – simply dividing the market that will SUPPLY CHAIN
serve as your market - how the product is created from raw materials to
• (ex. Market a, b, c. because market A prefer components to finished products carried to final
different than the other markets) buyers.
COMPETITION
OFFERINGS AND BRANDS - Competition includes all the actual and potential
Companies address customer needs by putting forth rival offerings and substitutes a buyer might
a value proposition, a set of benefits that satisfy those consider.
needs. The intangible value proposition is made physical MARKETING ENVIRONMENT
by an offering, which can be a combination of products, The marketing environment consists of the task
services, information, and experiences. environment and the broad environment.
 • The task environment includes the actors Disintermediation. traditional companies engaged in
engaged in producing, distributing, and reintermediation and became “brick-and-click” retailers,
promoting the offering. (company, suppliers, adding online services to their offerings. Some became
distributors, dealers, and target customers) stronger contenders than pure-click firms, because they
• The broad environment consists of six had a larger pool of resources to work with and
components: demographic environment, established brand names.
economic environment, social-cultural
environment, natural environment, Consumer buying power. In part, due to
technological environment, and political-legal disintermediation via the Internet, consumers have
environment. Marketers must pay close substantially increased their buying power. From the
attention to the trends and developments in home, office, or mobile phone, they can compare
these and adjust their marketing strategies as product prices and features and order goods online from
needed. New opportunities are constantly anywhere in the world 24 hours a day, 7 days a week,
emerging that await the right marketing savvy bypassing limited local offerings and realizing significant
and ingenuity. price savings. Even business buyers can run a reverse
auction in which sellers compete to capture their
THE NEW MARKETING REALITIES business. They can readily join others to aggregate their
MAJOR SOCIETAL FORCES purchases and achieve deeper volume discounts.
Today, major, and sometimes interlinking, societal
forces have created new marketing behaviors, Consumer information. Consumers can collect
opportunities, and challenges. information in as much breadth and depth as they want
Network information technology. The digital revolution about practically anything. They can access online
has created an Information Age that promises to lead to encyclopedias, dictionaries, medical information, movie
more accurate levels of production, more targeted ratings, consumer reports, newspapers, and other
communications, and more relevant pricing. information sources in many languages from anywhere
in the world.
Globalization. Technological advances in transportation,
shipping, and communication have made it easier for Consumer participation. Consumers have found an
companies to market in, and consumers to buy from, amplified voice to influence peer and public opinion. In
almost any country in the world. recognition, companies are inviting them to participate
in designing and even marketing offerings to heighten
Deregulation. Many countries have deregulated their sense of connection and ownership.
industries to create greater competition and growth
opportunities. Consumer resistance. Many customers today feel there
are fewer real product differences, so they show less
Privatization. Many countries have converted public brand loyalty and become more price- and quality-
companies to private ownership and management to sensitive in their search for value, and less tolerant about
increase their efficiency undesired marketing.

Heightened competition. Intense competition among NEW COMPANY CAPABILITIES

domestic and foreign brands raises marketing costs and • Marketers can use the Internet as a powerful
shrinks profit margins. information and sales channel.
• Marketers can collect fuller and richer
Industry convergence. Industry boundaries are blurring information about markets, customers,
as companies recognize new opportunities at the prospects, and competitors.
intersection of two or more industries. • Marketers can tap into social media to amplify
their brand message.
Retail transformation. entrepreneurial retailers are • Marketers can facilitate and speed external
building entertainment into their stores with coffee bars, communication among customers.
demonstrations, and performances, marketing an • Marketers can send ads, coupons, samples, and
“experience” rather than a product assortment information to customers who have re- quested
them or given the company permission to send
them.
 • Marketers can reach consumers on the move concept does not mean that all companies are changing.
with mobile marketing. Many companies continue to operate under the
• Companies can make and sell individually production concept.
differentiated goods.
• Companies can improve purchasing, recruiting, The production concept is one of the oldest concepts in
training, and internal and external business. It holds that consumers prefer products that
communications. are widely available and inexpensive. Managers of
• Companies can facilitate and speed up internal production-oriented businesses concentrate on
communication among their employees by using achieving high production efficiency, low costs, and mass
the Internet as a private intranet. distribution.
• Companies can improve their cost efficiency by
skillful use of the Internet. The product concept proposes that consumers favor
products offering the most quality, performance, or
WHO IS RESPONSIBLE FOR MARKETING? innovative features.
• Entire Organization
• Marketing Department The selling concept argues that members of a market will
• Chief Marketing Officer not purchase enough product on their own so companies
use the “hard-sell” to increase demand. Typically used
CMOs must have strong quantitative skills but also well- with unsought goods such as insurance or cemetery
honed qualitative skills; they must have an independent, plots, or when companies face overcapacity.
entrepreneurial attitude but also work in close harmony
with other departments such as sales; and they must The marketing concept emerged in the mid-1950s41 as
capture the “voice” and point of view of consumers yet a customer-centered, sense-and-respond philosophy.
have a keen bottom- line understanding of how The job is to find not the right customers for your
marketing creates value within their organization. products, but the right products for your customers .

MARKETING IN THE ORGANIZATION The holistic marketing concept is based on the

Although an effective CMO is crucial, increasingly development, design, and implementation of marketing
marketing is not done only by the marketing department. programs, processes, and activities that recognize their
Because marketing must affect every aspect of the breadth and interdependencies. Holistic marketing
customer experience, marketers must properly manage acknowledges that everything matters in marketing—
all possible touch points—store layouts, package and that a broad, integrated perspective is often
designs, product functions, employee training, and necessary.
shipping and logistics methods. Marketing must also be
influential in key general management activities, such as
product innovation and new-business development.
As the late David Packard of Hewlett-Packard
observed, “Marketing is far too important to leave to
the marketing department.” Companies now know that
every employee has an impact on the customer and must
see the customer as the source of the company’s
prosperity. So they’re beginning to emphasize
interdepartmental teamwork to manage key processes.
They’re emphasizing the smooth management of core
business processes, such as new-product realization, RELATIONSHIP MARKETING. Aims to build
customer acquisition and retention, and order mutually satisfying long-term relationships with key
fulfillment. constituents in order to earn and retain their
business.
MARKETING CONCEPT Four key constituents for relationship marketing are
The five distinct marketing concepts are: Production, customers, employees, marketing partners (channels,
Product, Selling, Marketing, and Holistic. These suppliers, distributors, dealers, agencies), and members of
philosophies have evolved over time and began with the the financial community (shareholders, investors, analysts).
production concept. The evolution of a new marketing Marketers must create prosperity among all these
constituents and balance the returns to all key stakeholders. McCarthy classified various marketing activities into
To develop strong relationships with them requires marketing-mix tools of four broad kinds, which he called
understanding their capabilities and resources, needs, the four Ps of marketing: product, price, place, and
goals, and desires. The ultimate outcome of relationship
marketing is a unique company asset called a marketing
promotion
network, consisting of the company and its supporting
stakeholders—customers, employees, sup- pliers, If we update them to reflect the holistic marketing
distributors, retailers, and others—with whom it has built concept, we arrive at a more representative set that
mutually profitable business relationships. encompasses modern marketing realities: people,
processes, programs, and performance
INTEGRATED MARKETING occurs when the
marketer devises marketing activities and
assembles marketing programs to create,
communicate, and deliver value for consumers such
that “the whole is greater than the sum of its parts.”
Two key themes are that (1) many different
marketing activities can create, communicate, and PEOPLE reflects, in part, internal marketing and
deliver value and (2) marketers should design and the fact that employees are critical to marketing
implement any one marketing activity with all other success. Marketing will only be as good as the
activities in mind. people inside the organization.
PROCESSES reflects all the creativity,
INTERNAL MARKETING, an element of holistic discipline, and structure brought to marketing
marketing, is the task of hiring, training, and management.
motivating able employees who want to serve PROGRAMS reflects all the firm’s consumer-
customers well. It ensures that everyone in the directed activities. It encompasses the old four Ps as
organization embraces appropriate marketing well as a range of other marketing activities that
principles, especially senior management. might not fit as neatly into the old view of
marketing.
PERFORMANCE MARKETING requires We define PERFORMANCE as in holistic
understanding the financial and nonfinancial marketing, to capture the range of possible
returns to business and society from marketing outcome measures that have financial and
activities and programs. Top marketers are nonfinancial implications (profitability as well as
increasingly going beyond sales revenue to examine brand and customer equity), and implications
the marketing scorecard and interpret what is beyond the company itself (social responsibility,
happening to market share, customer loss rate, legal, ethical, and community related).
customer satisfaction, product quality, and other
measures. They are also considering the legal, MARKETING MANAGEMENT TASKS
ethical, social, and environmental effects of • Developing market strategies and plans
marketing activities and programs. • Capturing marketing insights
• Connecting with customers
THE FOUR P COMPONENTS OF THE MARKETING MIX • Building strong brands
• Shaping market offerings
• Delivering value
• Communicating value
• Creating long-term growth
CHAPTER 2 CORE BUSINESS PROCESSES
The firm’s success depends not only on how well each
DEVELOPING MARKETING STRATEGIES department performs its work, but also on how well the
AND PLANS company coordinates departmental activities to conduct
core business processes. These processes include:
Successful marketers must focus on delivering value to
customers. This is accomplished by: • The market-sensing process. All the activities in
1. First, choosing the value represents the gathering and acting upon information about the
“homework” marketing must do before any market
product exists. Marketers must segment the • The new-offering realization process. All the
market, select the appropriate target, and activities in researching, developing, and
develop the offering’s value positioning. launching new high-quality offerings quickly and
• The formula “segmentation, targeting, within budget
positioning (STP)” is the essence of • The customer acquisition process. All the
strategic marketing. (Segmentation- dividing activities in defining target markets and
the market based on the demographic profile of prospecting for new customers
the market(ex. Male or female) so that we can • The customer relationship management
choose who are our markets and easier to create
a product for a particular market, Propositioning-
process. All the activities in building deeper
the values/benefit that the market will get from understanding, relationships, and offerings to
our product) individual customers
2. The second phase is providing the value. • The fulfillment management process. All the
Marketing must determine specific product activities in receiving and approving orders,
features, prices, and distribution. shipping the goods on time, and collecting
3. The task in the third phase is communicating the payment
value by utilizing the sales force, Internet,
advertising, and any other communication tools CORE COMPETENCIES
to announce and promote the product.

THE VALUE CHAIN

Firms must focus on what they do well; things that are

the essence of the business. A core competency must
hold the above characteristics.
Harvard’s Michael Porter has proposed the value chain - Contributes to perceived customer benefits-
as a tool for identifying ways to create more customer anything that you promise to the market, should
value. According to this model, every firm is a synthesis be delivered.
of activities performed to design, produce, market, - Useful in a wide variety of markets- your
deliver, and support its product. product can be used or utilized by not just a
specific or one market.
The primary activities are (1) inbound logistics, or - Difficult to imitate- it means your product is
bringing materials into the business; (2) operations, or unique and hard to copy by other companies
converting materials into final products; (3) outbound
logistics, or shipping out final products; (4) marketing,
which includes sales; and (5) service. Specialized A Holistic Marketing Orientation and Customer Value
departments handle the support activities—(1)
procurement(in charge of buying materials needed for
the operation), (2) technology development, (3) human
resource management, and (4) firm infrastructure.
(Infrastructure covers the costs of general management,
planning, finance, accounting, legal, and government
affairs.)
One view of holistic marketing sees it as “integrating the The tactical marketing plan specifies the marketing
value exploration, value creation, and value delivery tactics, including product features, promotion,
activities with the purpose of building long-term, merchandising, pricing, sales channels, and service.
mutually satisfying relationships and coprosperity among - Tactical marketing plans focus on specific
key stakeholders.” Holistic marketers address three key tactics such as product features, promotion,
management questions: merchandising, pricing, sales channels, and
1. Value exploration—How a company identifies service.
new value opportunities - specific plan for identified strategies
2. Value creation—How a company efficiently
creates more promising new value offerings
CORPORATE STRATEGIC PLANNING
3. Value delivery—How a company uses its Some corporations give their business units freedom
capabilities and infrastructure to deliver the new to set their own sales and profit goals and strategies. All
value offerings more efficiently corporate headquarters undertake four planning
activities:
STRATEGIC PLANNING
1. Defining the corporate mission.
2. Establishing strategic business units
3. Assigning resources to each strategic business
unit
4. Assessing growth opportunities

Organizations develop mission statements to share

Marketers must give priority to strategic planning in
with managers, employees, and (in many cases)
three key areas: (1) managing a company’s
customers. A clear, thoughtful mission statement
businesses as an investment portfolio, (2) assessing
each business’s strength by considering the market’s provides a shared sense of purpose, direction, and
growth rate and the company’s position and fit in that opportunity.
market, and (3) establishing a strategy. The In defining the corporate mission, organizations
company must develop a game plan for achieving each should start by answering Peter Drucker’s classic
business’s long-run objectives. question, from these answers the organization can
develop a good mission statement.
Strategic Planning, Implementation, and Control - What is our business?
Processes - Who is the customer?
- What is of value to the customer?
- What will our business be?
- What should our business be?

Good mission statements have five major

characteristics:
- Focus on a limited number of goals
- Stress major policies and values
MARKETING PLAN - Define major competitive spheres
The marketing plan is the central instrument for - Take a long-term view
directing and coordinating the marketing effort. It - Short, memorable, meaningful
operates at two levels: strategic and tactical.
Strategic Business Units (SBU)
The strategic marketing plan lays out the target markets
An SBU has three characteristics:
and the firm’s value proposition, based on an analysis of
1. It is a single business, or a collection of
the best market opportunities.
- Strategic marketing plans begin with an analysis related businesses, that can be planned
of market opportunities and based on what’s separately from the rest of the company.
learned leads to an identification of target 2. It has its own set of competitors.
markets and the firm’s value propositions.
- BROADER
 3. It has a manager responsible for strategic ASSESSING GROWTH OPPORTUNITIES
planning and profit performance, who Assessing growth
controls most of the factors affecting profit. opportunities includes
planning new businesses,
The purpose of identifying the company’s strategic downsizing, and terminating
business units is to develop separate strategies and older businesses. If there is a
assign appropriate funding. gap between future desired
sales and projected sales,
Defining Strategic Business Units corporate management will
A business can define itself in terms of three need to develop or acquire
dimensions: customer groups, customer needs, and new businesses to fill it.
technology.
Its customer group is television studios; the customer
need is lightIng; the technology is incandescent lighting.
The company might want to expand to make lighting for
The Strategic-Planning Gap
homes, factories, and offices, or it could supply other
services television studios need, such as heating,
ventilation, or air conditioning. It could design other
lighting technologies for television studios, such as
infrared or ultraviolet lighting or perhaps
environmentally friendly “green” fluorescent bulbs.

The illustration illustrates this strategic-planning gap for

a major manufacturer of blank compact disks called
Musicale (name disguised). The lowest curve projects the
expected sales over the next five years from the current
business portfolio. The highest describes desired sales
over the same period. Evidently, the company wants to
The table shows how companies define themselves grow much faster than its current businesses will permit.
based on whether they use a product or market
definition. Market definitions allow for additional
INTENSIVE MARKET GROWTH
growth opportunities.
Intensive growth looks for
ASSIGNING RESOURCES opportunities within current
Portfolio-planning models such as the GE/McKinsey businesses. The product-
Matrix and the BCG Matrix were used in the past to assist market expansion grid looks at
managers in making resource allocation decisions. But growth possibilities from the
they have been replaced with newer models that perspective of current and
consider shareholder value analysis. The newer models new products and markets.
consider growth from global expansion, repositioning,
retargeting, and strategic outsourcing.
Market Penetration – gaining market share with current
products and current customers. The company can
achieve growth by having current customers purchase
more, attract competitors’ customers, or bring non-
buyers into the market.
Market Development – Finding new markets for existing
products. The firm can find new buyer groups (business
customers rather than consumers), new distribution
channels (online), or expand distribution to other regions
or countries.
Product Development – Develop new products to the CORPORATE CULTURE
current market. As the firm already has a relationship Corporate culture is defined as “the shared experiences,
with current customers, they can develop new products stories, beliefs, and norms that characterize an
to meet other, related needs of its customers. organization.”
Diversification – Developing new products for new
markets. MARKETING INNOVATION
Innovation in marketing is critical. Imaginative ideas on
INTEGRATIVE GROWTH strategy exist in many places within a company. Senior
management should identify and encourage fresh ideas
from three underrepresented groups: employees with
youthful or diverse perspectives, employees far
removed from company headquarters, and employees
new to the industry. Each group can challenge company
orthodoxy and stimulate new ideas.

Scenario analysis looks at future possibilities by asking

“What if…” questions about customers, competitors,
A business can increase sales and profits through markets.
backward, forward, or horizontal integration within its
industry. Business Unit Strategic Planning

BACKWARD- a backward integrative growth strategy

would involve buying one of your suppliers as a way to
better control your supply chain. Doing so could help you
to develop new products faster and potentially more
cheap. It could help reduce your cost.

HORIZONTAL- this growth strategy would involve buying

a competing business or businesses. A variation of this
Acquisition, where one company acquires the other and Each business unit needs to define its specific mission
merges where two equals agree to go together. within the broader company mission. Thus, a television-
studio-lighting-equipment company might define its
FORWARD- is a strategy of acquiring the companies that mission as, “To target major television studios and
were once the suppliers for the business seeking more become their vendor of choice for lighting technologies
integration. that represent the most advanced and reliable studio
lighting arrangements.” Notice this mission does not
DIVERSIFICATION attempt to win business from smaller television studios,
offer the lowest price, or venture into non-lighting
products.

Opportunity and Threat Matrices

Firms can often discover opportunities outside its

present business. However, the new industry should be
highly attractive (grow potential) and the company
should have (or acquire) the right capabilities to succeed.
To evaluate opportunities, companies can use market profit by increasing revenue and reducing
opportunity analysis (MOA) to ask questions like: expenses. They can grow revenue, in turn, by
increasing market share and prices.
1. Can we articulate the benefits convincingly to a 2. Objectives should be quantitative whenever
possible. The objective “to increase the return on
defined target market(s)?
investment (ROI)” is better stated as the goal “to
2. Can we locate the target market(s) and reach increase ROI to 15 percent within two years.”
them with cost-effective media and trade 3. Goals should be realistic. Goals should arise from
channels? an analysis of the business unit’s opportunities and
3. Does our company possess or have access to the strengths, not from wishful thinking.
critical capabilities and resources we need to 4. Objectives must be consistent. It’s not possible to
deliver the customer benefits? maximize sales and profits simultaneously.
4. Can we deliver the benefits better than any
actual or potential competitors? STRATEGY FORMULATION
5. Will the financial rate of return meet or exceed Michael Porter has pro- posed
our required threshold for investment? three generic strategies that
provide a good starting point
In the opportunity matrix , the best marketing opportunities for strategic thinking: overall
facing the TV-lighting-equipment company appear in the cost leadership,
upper-left cell (#1). The opportunities in the lower-right
cell (#4) are too minor to consider. The opportunities in the
differentiation, and focus.
upper-right cell (#2) and the lower-left cell (#3) are worth
monitoring in the event that any improve in attractiveness
Cost Leadership, where they are seeking to achieve the
and potential. lowest production and distribution costs to underprice
competitors and gain market share.
Differentiation strategy, where they focus on achieving
SWOT ANALYSIS
The overall evaluation of a company’s strengths, better performance on an important customer benefit
weaknesses, opportunities, and threats is called SWOT (such as quality or speed)
analysis. It’s a way of monitoring the external and Focus approach where they concentrate on a narrow
internal marketing environment. market segment, gaining as much insight about the
Business units must monitor key macro-environment segment as possible, and then pursue either a cost
forces as well as micro-environment factors. Monitoring leadership or differentiation strategy.
the external environment can allow firms to identify
growth opportunities and potential threats to its existing Oftentimes, companies cannot achieve objectives
businesses. without the use of partners. Strategic Alliances can
To take advantage of opportunities the firm must be be used to compliment or leverage current capabilities
aware of its own internal strengths and weaknesses. and resources to the benefit of both parties. Alliances
fall into four categories:
GOAL FORMULATION 1. Product or service alliance. One company
licenses another to produce its product, or
two companies jointly market their
complementary products or a new product.
2. Promotional alliances. One company agrees to
carry a promotion for another company’s product
or service.
Once the company has performed a SWOT analysis, it can 3. Logistic alliances. One company offers logistical
proceed to goal formulation, developing specific goals services for another company’s product.
for the planning period. Goals are objectives that are 4. Pricing collaborations. One or more
specific with respect to magnitude and time. Managing companies join in a special pricing
these objectives effectively requires these four criteria to
collaboration
be met.

1. They must be arranged hierarchically, from

most to least important. The business unit’s key
objective for the period may be to increase the rate
of return on investment. Managers can increase
Program Formulation and Implementation INTERNAL RECORDS
Great strategies can lead to failure unless they are To spot important opportunities and potential problems,
implemented properly. Proper formulation ensures that marketing managers rely on internal reports of orders,
all the pieces fit together. But firms must also examine sales, prices, costs, inventory levels, receivables, and
the cost of the marketing programs to ensure that the payables.
expense is justified. The Order-to-Payment Cycle
The heart of the internal records system is the order-to-
Feedback and Control payment cycle. Sales representatives, dealers, and
Changes in the market are inevitable. Companies must customers send orders to the firm. The sales department
be aware of pending changes and have the will to change prepares invoices, transmits copies to various
course. departments, and back-orders out-of-stock items.
Shipped items generate shipping and billing documents
that go to various departments. Because customers favor
Product Planning: The Nature and Content of a firms that can promise timely delivery, companies need
Marketing Plan to perform these steps quickly and accurately. Many use
At the product level, planning centers around the the Internet and extranets to improve the speed,
marketing plan, which can be based on each product, accuracy, and efficiency of the order-to-payment cycle.
channel, or customer group. The five major sections of a
marketing plan are presented here. Sales Information System
Sales information systems provide managers with up-to-
date information on the current sales of individual
products.

Databases/ Data Mining

Databases store and organize information that can be
retrieved based on several criteria such as purchase
history, product preferences, and can even contain
demographic and psychographic information on
customers.
CHAPTER 3
MARKETING INTELLIGENCE SYSTEM
COLLECTING INFORMATION AND A marketing intelligence system is a set of procedures
FORECASTING DEMAND and sources that managers use to obtain everyday
information about developments in the marketing
COLLECTING INFORMATION environment. The internal records system supplies
Marketers are in position to collect information from results data, but the marketing intelligence system
customers, competitors, and other external supplies happenings data. Marketing managers collect
factors/group that can help to identify market changes. marketing intelligence in a variety of different ways, such
Companies with superior information can choose as by reading books, newspapers, and trade publications;
their markets better, develop better offerings, and talking to customers, suppliers, and distributors;
execute better marketing planning. monitoring social media on the Internet; and meeting
with other company managers.
MARKETING INFORMATION SYSTEM
A marketing information system (MIS) consists of Improving Marketing Intelligence
people, equipment, and procedures to gather, sort, A company can take eight possible actions to improve the
analyze, evaluate, and distribute needed, timely, and quantity and quality of its marketing intelligence.
accurate information to marketing decision makers.
Sales Force. Train and motivate the sales force to spot
The company’s marketing information system should and report new developments. The company must “sell”
be a mixture of what managers think they need, what its sales force on their importance as intelligence
they really need, and what is economically feasible. An gatherers.
internal MIS committee can interview a cross-section of
marketing managers to discover their information needs.
Motivate distributors, retailers, and other reviews, ratings, and recommendations on virtually
intermediaries to pass along important intelligence. any topic—and their numbers continue to grow.
Marketing intermediaries are often closer to the
customer and competition and can of- fer helpful USING MARKETING INTELLIGENCE
insights. Marketing intelligence should be gathered and
shared with decision makers quickly to effectively
Hire external experts to collect intelligence. Many use the information.
companies hire specialists to gather marketing
intelligence. ANALYZING THE MACROENVIRONMENT
Where the microenvironment refers to those
Network internally and externally. The firm can elements closest to the company, customers,
purchase competitors’ products, attend open houses and competitors, suppliers, etc., the macroenvironment
trade shows, read competitors’ published reports, attend
refers to those elements that can impact a company
stockholders’ meetings, talk to employees, collect
but cannot be controlled. These include things such
competitors’ ads, consult with suppliers, and look up
as the economy, culture, demographics, politics,
news stories about competitors.
technology, and the natural environment.
Set up a customer advisory panel. Members of advisory
NEED AND TRENDS
panels might include the company’s largest, most
Enterprising individuals and companies manage to create
outspoken, most sophisticated, or most representative
new solutions to unmet needs. Dockers was created to
customers.
meet the needs of baby boomers who could no longer fit
into their jeans and wanted a physically and
Take advantage of government-related data resources.
psychologically comfortable pair of pants. Let’s
distinguish among fads, trends, and megatrends.
Purchase information from outside research firms and
vendors. A fad is “unpredictable, short-lived, and without social,
economic, and political significance.” Fads are measured
MARKETING INTELLIGENCE AND THE in months, rather than years.
INTERNET - Wham-0 sold 25 million Hula Hoops in its first 4
months. Pet rocks were launched in the mid-
• Independent customer goods and service review 1970’s and sold 1 million units in a matter of
forums. Independent forums include Web sites months. Five months later sales were almost
such as [Link], [Link], non-existent.
[Link], and [Link].
[Link] collects millions of consumer reviews
of stores and products each year from two sources: A trend is more predictable and durable than a fad;
its 1.3 million volunteer members, and feedback trends reveal the shape of the future and can provide
from stores that allow [Link] to collect it strategic direction.
directly from their customers as they make - The fitness/diet trend is an example, although
purchases. there have been many fads within this trend, the
• Distributor or sales agent feedback sites. overall movement toward healthier living has
Feedback sites offer positive and negative remained.
product or service reviews, but the stores or
distributors have built the sites themselves. A megatrend is a “large social, economic, political, and
• Combo sites offering customer reviews and technological change [that] is slow to form, and once in
expert opinions. Combination sites are place, influences us for some time—between seven and
concentrated in financial services and high-tech ten years, or longer.” Megatrends influence all factors of
products that require professional knowledge. life that impact business, culture, economics, society,
• Customer complaint sites. Customer complaint and personal lives.
forums are designed mainly for dissatisfied
customers.
• Public blogs. Tens of millions of blogs and social
networks exist online, offering personal opinions,
MAJOR ENVIRONMENTAL FORCES A subculture is a group that shares a distinct culture
different from the larger culture that they belong.
DEMOGRAPHICS Examples of subcultures include Gothic, Metalhead,
Demographic developments often move at a fairly punk, Trekkies, biker, etc.
predictable pace. The main one marketers monitor is
population, including the size and growth rate of NATURAL ENVIRONMENT
population in cities, regions, and nations; age Companies must be cognizant of the effects of their
distribution and ethnic mix; educational levels; business on the environment and how regulations can
household patterns; and regional characteristics and influence its competitive position. Changes in regulations
movements. can also provide opportunities for companies, but these
opportunities may only be recognized if the company
DEMOGRAPHIC ENVIRONMENT includes this aspect into their strategic planning.
Worldwide population growth Opportunities await those who can reconcile prosperity
- 6.8 billion in 2010; will grow to 9 billion in 2040 with environmental protection.
Population age mix
Corporate environmentalism recognizes the need to
- Mexico young population: Italy old by 2011 in
integrate environmental issues into the firm’s strategic
the US, those 65 and older will grow faster than
plans. Trends in the natural environment for marketers to
the entire US population.
be aware of include the shortage of raw materials,
Ethnic and other markets especially water; the increased cost of energy; increased
- 25 million people in the US were born in pollution levels; and the changing role of governments.
another country Hispanic’s accounted for 11
percent of the US population in the 2000 TECHNOLOGICAL ENVIRONMENT
census. By 2020 Hispanics are expected to It is the essence of market capitalism to be dynamic and
account for 18.9 percent of the population. tolerate the creative destructiveness of technology as
Educational Groups the price of progress. When old industries fight or ignore
Household patterns - 20% of households “Married with new technologies, their businesses decline.
Children”; 27% single live-alone; Single-parent families
(8%); living with nonrelatives only (5%); and other - ACCELERATING PACE OF CHANGE. More ideas
family structures (8%) than ever are in the works, and the time between
idea and implementation is shrinking. So is the
ECONOMIC ENVIRONMENT time between introduction and peak production.
The available purchasing power in an economy depends - UNLIMITED OPPORTUNITIES FOR INNOVATION.
on current income, prices, savings, debt, and credit Some of the most exciting work today is taking
availability. place in biotechnology, computers,
microelectronics, telecommunications, robotics,
The financial crisis in 2008-09 may have permanently and designer materials.
changed consumer buying habits. - VARYING R&D BUDGETS. A growing portion of
U.S. R&D expenditures goes to the development
The income distribution of a country can influences the as opposed to the research side, raising concerns
decision to enter a specific market. about whether the United States can maintain its
lead in basic science. Many companies put their
SOCIO-CULTURAL ENVIRONMENT money into copying competitors’ products and
The influence that both society and culture have on the making minor feature and style improvements.
views of individuals. - INCREASED REGULATION OF TECHNOLOGICAL
CHANGE. Government has expanded its
agencies’ powers to investigate and ban
potentially unsafe products.
POLITICAL-LEGAL ENVIRONMENT • The penetrated market is the set of consumers
The political and legal environment consists of laws, who are buying the company’s product.
government agencies, and pressure groups that influence
various organizations and individuals. Sometimes these NINETY TYPES OF DEMAND
laws create new business opportunities. MEASUREMENT
- INCREASE IN BUSINESS LEGISLATION Business
legislation is intended to protect companies
from unfair competition, protect consumers
from unfair business practices, protect society
from unbridled business behavior, and charge
businesses with the social costs of their products
or production processes. Each new law may also
have the unintended effect of sapping initiative
and slowing growth.
Companies can prepare as many as 90 different types of
- GROWTH OF SPECIAL-INTEREST GROUPS
demand estimates, for six different product levels, five
Political action committees (PACs) lobby
space levels, and three time periods. Each of these serves
government officials and pressure business
a different purpose. Short run can for ordering raw
executives to respect the rights of consumers,
materials, plan production, or borrow cash.
women, senior citizens, minorities, and gays and
lesbians.
DEMAND MEASUREMENT
The consumerist movement organized citizens and
government to strengthen the rights and powers of buyers
in relationship to sellers.

FORECASTING AND DEMAND

MEASUREMENT

Understanding a market potential involves more

than just research and analysis. Companies must Market demand is the total volume that would be bought
also determine market size, growth, and profit by a defined customer group, in a defined geographical
potential. area, in a defined period, in a defined marketing
environment, under a defined marketing program.
MARKET TYPES Company demand (expected market share) is the
Markets can be broken down in several ways. company’s estimated share of market demand at
alternative levels of company marketing efforts in each
period.

MARKET DEMAND FUNCTIONS

• The potential market is the set of consumers

with a sufficient level of interest in a market
offer. Market demand is not fixed as it can change based on
• The available market is the set of consumers several variables. If firms in an industry increase
who have interest, income, and access to a marketing expenditures, reduce (or raise) prices, then
particular offer. demand can increase (or fall). The financial environment
• The target market is the part of the qualified (shown in figure b) also influences overall market
available market the company decides to pursue. demand.
Only one level of industry marketing expenditure will Total market potential is the maximum sales available
actually occur. The market demand corresponding to this to all firms in an industry during a given period, under a
level is called the market forecast. given level of industry marketing effort, and
environmental conditions. Area market potential is the
Market potential is the limit approached by market sales potential for a specific territory.
demand as industry marketing expenditures approach Market-buildup Method looks to identify all potential
infinity for a given marketing environment. buyers in a market and estimating their potential
purchases.
Product-penetration percentage, the percentage of Market-factor Index Method – seeks to determine
ownership or use of a product or service in a population market potential based on proxy information. For
example, if Virginia represents 2.55% of the US
Company demand is the company’s estimated share of population, then the state may produce 2.55% of all US
market demand at alternative levels of company sales.
marketing effort in a given time period. Industry Sales; Market Sales

The company sales forecast is the expected level of Total market potential is the maximum sales available to all
company sales based on a chosen marketing plan and an firms in an industry during a given period, under a given
assumed marketing environment. level of industry marketing effort and environmental
conditions. A common way to estimate total market
potential is to multiply the potential number of buyers by
A sales quota is the sales goal set for a product line,
the average quantity each purchases, times the price.
company division, or sales representative. It is primarily
a managerial device for defining and stimulating sales
AREA MARKET POTENTIAL Because companies must
effort, often set slightly higher than estimated sales to
allocate their marketing budget optimally among their
stretch the sales force’s effort.
best territories, they need to estimate the market
potential of different cities, states, and nations. Two
A sales budget is a conservative estimate of the expected
major methods are the market-buildup method, used
volume of sales, primarily for making current purchasing,
primarily by business marketers, and the multiple-factor
production, and cash flow decisions. It’s based on the
index method, used primarily by consumer marketers.
need to avoid excessive risk and is generally set slightly
lower than the sales forecast.
The market-buildup method calls for identifying all the
potential buyers in each market and estimating their
Company sales potential is the sales limit approached by potential purchases. It produces accurate results if we have
company demand as company marketing effort a list of all potential buyers and a good estimate of what
increases relative to that of competitors. The absolute each will buy. Unfortunately, this information is not always
limit of company demand is, of course, the market easy to gather.
potential.
ESTIMATING FUTURE DEMAND
ESTIMATING CURRENT DEMAND The few products or services that lend themselves to
easy forecasting generally enjoy an absolute level or a
fairly constant trend, and competition that is either
nonexistent (public utilities) or stable (pure oligopolies).
In most markets, in contrast, good forecasting is a key
factor in success. All forecasts are built on one of three
information bases: what people say, what people do, or
what people have done. Using what people say requires
surveying buyers’ intentions, composites of sales force
opinions, and expert opinion. Building a forecast on what
people do means putting the product into a test market
to measure buyer response. To use the final basis—what
people have done—firms analyze records of past buying
behavior or use time-series analysis or statistical demand
analysis.
Forecasting is the art of anticipating what buyers are
likely to do under a given set of conditions.

COMPOSITE OF SALES FORCE OPINIONS When buyer

interviewing is impractical, the company may ask its sales
representatives to estimate their future sales. Few
companies use these estimates without making some
adjustments, however.

EXPERT OPINION Companies can also obtain forecasts

from experts, including dealers, distributors, suppliers,
marketing consultants, and trade associations. Dealer
estimates are subject to the same strengths and
weaknesses as sales force estimates. Many companies
buy economic and industry forecasts from well-known
economic-forecasting firms that have more data
available and more forecasting expertise.

- Occasionally, companies will invite a group of

experts to prepare a forecast. The experts
exchange views and produce an estimate as a
group (group-discussion method) or individually,
in which case another analyst might combine
them into a single estimate (pooling of individual
estimates). Further rounds of estimating and
refining follow (the Delphi method)

PAST-SALES ANALYSIS Firms can develop sales forecasts

on the basis of past sales. Time- series analysis breaks
past time series into four components (trend, cycle,
seasonal, and erratic) and projects them into the future.
Exponential smoothing projects the next period’s sales
by combining an average of past sales and the most
recent sales, giving more weight to the latter. Statistical
demand analysis measures the impact of a set of causal
factors (such as income, marketing expenditures, and
price) on the sales level. Finally, econometric analysis
builds sets of equations that describe a system and
statistically derives the different parameters that make
up the equations statistically.

MARKET-TEST METHOD When buyers don’t plan their

purchases carefully, or experts are unavailable or
unreliable, a direct-market test can help forecast new-
product sales or established product sales in a new
distribution channel or territory.