Chapter 18 - Managing Marketing in the Global Economy

Summary

When deciding to enter international markets, a firm must examine its goals and objectives, determine the risks, decide how many global markets to enter and how they are going enter them. They must take into account the foreign cultures and laws and how their products will perform and be useful to foreign customers, and how the country-of-origin effects can affect consumers and businesses.  Effective internal marketing must be matched by a strong sense of ethics, values and social responsibility.  Cause marketing cause marketing can be a way for companies to link social responsibility to consumer marketing programs. The marketing department must monitor and audit its success and weaknesses and make changes as necessary to improve. Organizations must be willing to adapt and acquire new skill sets and competencies to emerge as leaders in an ever changing environment where customers are savvier and have greater means to make the company transparent.

A.      Competing on a Global Basis

1.       In a global industry, competitors’ strategic positions in major geographic or national markets are affected by their overall global positions. A global firm operates in more than one country and captures research and development, production, logistical, marketing, and financial advantages not available to purely domestic competitors. The global market can include services as well as products.

2.       Some examples of global companies are Shell, BP, Bayer, Toshiba, and Nike.

3.       Global firms plan, operate and coordinate their activities on a worldwide basis.  Services are the fastest growing sector and account for two-thirds of global output, one-third of global employment, and 20 percent of global trade.  Companies go abroad for various reasons – they may need a larger customer base, want to achieve economies of scale or reduce dependence on one market.  There are risks involved also if a firm doesn’t thoroughly research a country’s culture, laws or consumer preferences. When seeking to enter the global market, a company must define its marketing objectives and policies and which countries to enter and how to enter them.  Some possible strategies may be: 1) indirect or direct export, 2) licensing, 3) joint ventures, and 4) direct investment. Companies must also decide how much to adapt their marketing strategies to local conditions.  One method is to use a standardized marketing program worldwide; however, there are advantages and disadvantages to this method.  Advantages are economies of scale in production and distribution, lower marketing costs, power and scope, consistency in brand image, ability to leverage good ideas quickly and efficiently, and uniformity of marketing practices.  Disadvantages are that it ignores differences in consumer needs, wants and usage pattern of products, ignores differences in consumer response to marketing programs and activities, ignores differences in brand and product development and the competitive environment, ignores differences in the legal environment, ignores differences in marketing institutions, and ignores differences in administrative procedures. Warren Keegan, has distinguished five product and communications adaptation strategies for entering a global market: 1) product – introduce the product without any change, 2) communications – changing market communications for each local market, 3) price – escalation of price due to the need to cover the added cost of transportation, tariffs, etc., and 4) distribution – how to get products to other nations and how it moves within the foreign country.  Another consideration is the country-of-origin effect and how to use positive perceptions of the brand or the products when communicating with foreign consumers.

B.      Internal Marketing

1.       Internal marketing requires that everyone in the organization accept marketing concepts and goals and engage in choosing, providing, and communicating customer value.

2.       Examples of other departments that can interact with customers are technical assistance, customer service, accounting, sales people, store clerks and even cart pushers.

3.       Every functional area of an organization can interact with customers.  It is important that all employees of an organization present a united front to customers and clients.  The marketing department no longer has sole ownership of being the face or the voice of the company.  Marketing departments can be organized in different ways: 1) functional organization – has a central leader who coordinates activities; 2) geographic organization – having regional or local marketing managers (area specialists); 3) product or brand management organization – another layer of management that supervises product managers; 4) market management organization – organizes marketing activity to meet the needs of distinct customer groups; and 5) matrix management organization – for companies that produce many products for many markets and employing both product and market managers. Marketing departments must have strong relationships with other departments to coordinate functions and operate in the best way for the company.  The organization must strive to be creative and to seek what is best for the customer.

C.      Socially Responsible Marketing

1.       Effective internal marketing must be matched by a strong sense of ethics, values, and social responsibility. 

2.       One example of a method companies are trying to become more socially responsible is by using more organic products or products with ingredients that are grown organically, such as organic cotton growers, Chipotle Mexican Grill restaurants that use natural and organic ingredients or PETCO that produces organic and natural pet foods.

3.       Many forces are driving companies to become more socially responsible – customer expectations, employee goals and ambitions, government legislation and pressure, investor interest in social criteria, media scrutiny and changing business procurement practices.  Many believe that satisfying customers, employees and other stakeholders and business success is tied to practicing social responsible marketing.  Organizations should strive for legal and ethical behavior and must ensure every employee knows and observes relevant laws.  Companies should have a written code of ethics, build a tradition of ethical behavior and hold their people fully responsible for observing ethical and legal guidelines.  More often customers are checking a company’s record on social and environmental issues and responsibility when deciding whether or not to buy from that company.  Some companies try to improve their social image by donating large amounts to charities.  Sustainability now tops many organizations list – the ability to meet humanity’s needs without harming future generations. Some organizations have been guilty of greenwashing – giving the appearance of being environmental friendly, but actually not.  This has made many consumers skeptical when an organization tries to be socially responsible.

D.      Marketing Implementation and Control

1.       Marketing implementation is the process that turns marketing plans into action assignments and ensures they accomplish the plan’s stated objectives. 

2.       Johnson & Johnson is a company in which marketing controllers perform financial analysis of marketing expenditures and results, among other analysis, to measure the success or weaknesses of the marketing organization.

3.       Strategy addresses the “what” and “why” of marketing but implementation addresses the” who, where, when and how”.  Companies are striving to make their marketing operations more efficient and their return on marketing investment more measurable. Marketing control is the process by which firms assess the effects of their marketing activities and programs and make necessary changes and adjustments. There are four types of needed marketing control: 1) annual plan control; 2) profitability control; 3) efficiency control; and 4) strategic control. The average company in the Unites States loses half its customers in five years, half its employees in four years, and half its investors in less than one year. This indicates some marketing weaknesses and the company should undertake a marketing audit – a comprehensive, systematic, independent, and periodic examination of a company’s or business unit’s marketing environment, objectives, strategies, and activities. Even companies in good health can benefit from a regular marketing audit.

E.       The Future of Marketing

1.       Marketing now entails more accountability than in the past and companies must be more holistic and less departmental.  Marketers must strive for customer insight by treating customers differently but appropriately.

2.       There are many opportunities for growth and expansion in marketing.  India and China are both enormous new sources of demand for products and services.

3.       Companies have and are adapting to changes in the marketing environment.  To continue to be successful, they must make use of electronic means, building strong information and communications departments.  They must develop new sets of skills and competencies in customer relationship management.  The must recognize that all employees of the company have the potential to interact with customers and be the voice of the company.  Customers now have many ways to interact with a company and with each other concerning a company so organizations should use social media more and traditional media less.  The Web allows unprecedented depth and breadth in communications and distribution, and its transparency requires companies to be honest and authentic. Marketers should behave in socially responsible ways and strive for strong legal and ethical behaviors.

Chapter 17 - Managing Personal Communications

Summary

Direct marketing is an interactive marketing system that uses one or more media to affect a measurable response or transaction. Major direct marketing channels involve face-to-face selling, direct mail, catalog marketing, telemarketing, interactive TV, kiosks, web sites, and mobile devices such as a cell phone or smart phone. Word of mouth marketing finds ways to engage customers so they talk with other people about products, services and brands. Social media is driving word of mouth by use of online communities and forums, blogs, and social networks.  A strong sales force is very important toa company. Designing a strong sales force requires choosing objectives, strategy, structure, size, and compensation.

A.      Direct Marketing

1.       Direct marketing is the use of consumer-direct (CD) channels to reach and deliver goods and services to customers without using marketing middlemen. 

2.       One example of direct marketing is when you suddenly become besieged with offers for life insurance after you’ve inquired online for quotes.  Or, getting mailed flyers and advertisements for dish network or satellite TV because you live in a rural area and can’t get cable.

3.       Direct marketing helps consumers who are short on time by promoting products directly to them.  Direct marketers can by mailing lists for almost any group, customize and personalize messages to build customer relationships, reach interested consumers at the right time, and test alternative media and messages, and measure responses.  Direct mail means sending an offer, announcement, reminder, or other item to an individual consumer.  Successful direct mail marketing means: 1) choosing objectives -  for order response, generating leads, strengthening customer relationships, reinforcing purchasing decisions; 2) target market and prospects – recency, frequency, and monetary amount formula; 3) offer elements; 4) testing elements; and 5) measuring success: lifetime value. Marketers may also use catalog marketing – sending full line merchandise catalogs, specialty catalogs, and business catalogs or telemarketing – using the telephone and call centers to attract prospects.  Direct marketers use all the major media such as newspapers, magazines, radio, infomercials, and television shopping channels. There are some drawbacks to using direct marketing, however.  Many people don’t like hard sell, direct marketing solicitations and many marketers take advantage of vulnerable consumers, like the elderly.  The Federal Trade Commission receives many complaints each year about marketers who have crossed the ethical line.

B.      Interactive Marketing

1.       Interactive marketing is using an online component such as the Internet to communicate and sell directly to consumers and provides opportunities for much greater interaction and individualization.

2.       An example of interactive marketing is when you pull up Yahoo to login to your email account.  Recently, they have started placing advertisements for movies or TV shows on the webpage background that is full-page size.  You can’t help but read them when they are taking up so much space.

3.       With interactive marketing, marketers can reach people who’ve actually started the buying process and they can build or tap into online communities, inviting customer participation.  A disadvantage is that consumers can easily screen out most online messages.  Online messages are also vulnerable to hackers and vandals.  Some main categories of interactive marketing are: 1) websites; 2) search ads; 3) display ads; 4) e-mail; and 5) mobile marketing. Websites should be attractive, easy to use and navigate and encourage repeat visits.  Search ads are either paid search or pay-per-click ads – marketers bid on search terms that serve as a proxy for the consumer’s product or consumption interest. The highest bidder gets the best placement in search engines Google, Yahoo! or Bing. Display ads or banner ads are text and image boxes that advertisers pay to place on relevant webpages. E-mail allows marketers to communicate directly with consumers without the expense of direct mail.  Mobile marketing is sending text messages and ads to cell phones and smart phones.

C.      Word of Mouth

1.       Word of mouth advertising is when consumers talk about many brands and products every day.  It may be generated organically with little advertising, but can be managed and facilitated.

2.       Examples of word of mouth advertising through social networks can be Facebook, LinkedIn and Twitter through posts to blogs, etc.  On a smaller local scale, many restaurants and stores benefit from so much word of mouth advertising that they rarely need to advertise by any other method.

3.       Word of mouth is an important advertising method.  Paid media results from press coverage of company-generated advertising or other promotional efforts. Earned media (free media) is all the PR benefits a firm receives without having directly paid for anything from things such as news stories, blogs, and social conversations that deal with the brand.  Social media promotes the flow of word of mouth.  Social media are a means for consumers to share text, images, audio, and video information with each other, with companies and vice versa.  Social media are useful but they can’t become the sole source of marketing communications.  The three main platforms for social media are online communities and forums, blogs, and social networks. Two other forms of word of mouth are buzz and viral marketing.  Buzz marketing generates excitement, creates publicity, and conveys new, relevant, brand-related information through unexpected of outrageous means.  Viral marketing encourages consumers to pass along company-developed products and services or audio, video, or written information to others online.  Opinion leaders are those who influence cliques – small groups whose members interact frequently.  Marketers concentrate on online effects by tracking them through advertising, PR, or digital agencies.  Through demographic information or proxies and cookies, firms can monitor when customers blog, comment, post, share, link, upload, friend, stream, write on a wall, or update a profile (REALLY?!?!)

D.      Personal Selling and the Sales Force

1.       Personal selling and sales force are representatives and agents that companies hire to locate prospects, develop them into customers, and grow the business.

2.       Some examples of companies that use a sales force are copier and print management companies that represent manufacturers such as Canon, Kyocera, Lanier; personal and home decorating companies such as Premier Jewelry, Mary Kay, or Home Interior.

3.       Many companies, primarily industrial and consumer companies hire a sales force to use as a direct-selling force.  There are six different types of sales representatives: 1) deliver – major task is to deliver the product; 2) order taker – either behind-the-counter or outside calling on store managers; 3) missionary – salesperson expected to build goodwill or educate the user; 4) technician – has a high level of technical knowledge about the product; 5) demand creator – relies on creative methods for selling tangible and intangible products; 6) solution vendor – salesperson whose expertise is solving a customer’s problem.  Professional sales people must be trained in methods of analysis and customer management.  Many times the company wants to build a long-term customer-supplier relationship with their customers. This enables them to be ready to respond to their customers’ needs and wants.  It’s not effective in all situations but when it is the right strategy the organization will focus on managing its customers as well as its products. When designing its sales force, the company should focus on developing sales force objectives, strategy, structure, size and compensation.  A direct sales force consists of paid employees who work exclusively for the company.  A contractual sales force consists of manufacturers’ reps, sales agents, and brokers who earn a commission based on sales. Sales forces can vary in structure and size and many companies offer attractive compensation packages to get and retain top sales representatives.

E.       Managing the Sales Force

1.       Managing the sales force involves various policies and procedures to guide the firm in recruiting, selecting, training, supervising, motivating, and evaluating representatives.

2.       Gillette is a company that uses testing to hire sales reps that are suited to sales.  They say tests have reduced turnover and scores correlated well with the progress of new reps.

3.       Hiring the right people to be sales representatives is crucial.  Surveys reveal that the top 25 percent of the sales force brought in more than half the sales and that there is a 20 percent turnover rate of sales forces reps industry wide.  Many companies are now using prolonged testing and interviewing to try to ensure hiring the best people. The sales force will need to be well-trained and have deep product knowledge, be able to add ideas to improve operations, and be efficient and reliable.  Firms need to specify how much time sales reps need to spend prospecting for new accounts and which companies to focus on.  They should make use of computer and telecommunications innovations, as this can help cut costs.  Using smart phones or laptops, salespeople can access valuable product and customer information. Many sales reps require encouragement, motivation and special incentives to put forth greater effort. Studies found that pay is a much better incentive for sales people than complements and security.  Sales reps need to be evaluated regularly on their performance.  Information about the reps can come from sales reports and self-reports, personal observation, customer comments, customer surveys, and conversations with other reps.

Chapter 16 - Managing Mass Communications

Summary

Advertising is any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor. Advertising is a five-step process of setting advertising objectives, establishing a budget, choosing the advertising message and creative strategy, deciding on the media and evaluating communication and sales effects.  Marketers may use advertising, sales promotions, events and experiences and public relations to create brand awareness and loyalty for their products.

A.      Developing and Managing an Advertising Program

1.       Advertising is any paid form of nonpersonal presentation and promotion of a product by an identified sponsor.

2.       Proctor & Gamble used advertising to revamp a brand that’s been around for decades, Old Spice.  By advertising in a realm where people actually want to watch the commercials, the Super Bowl, they were able to gain the attention of many consumers who might not have paid much attention in an ordinary time slot.

3.       Advertising can be a cost-effective way to reach consumers and make them aware of your products.  Before launching an ad campaign, marketing managers should start by identifying the target audience and the buyer motives.  Marketers can make the five major decisions, known as the five Ms: 1) Mission – what are the advertising objectives? 2) Money – how much can we spend and how best to allocate it? 3) Message – what message do we want to send? 4) Media – what media should we use? 5) Measurement – how do we evaluate the results? Advertising objectives can be classified into informative advertising (creates brand awareness), persuasive advertising (creates liking, preference and conviction), reminder advertising – stimulates repeat purchases, and reinforcement advertising – aims to convince current purchasers that they made the right choice. When setting the advertising budget, there are five factors to consider, 1) stage in the product life cycle, 2) market share and consumer base, 3) competition and clutter, 4) advertising frequency, and 5) product substitutability. When designing an ad campaign marketers will need to consider the message generation and evaluation, the creative development and execution and legal and social issues.

B.      Deciding on Media and Measuring Effectiveness

1.       Media selection is finding the most cost-effective media to deliver the desired number and type of exposures to the target audience.

2.       An example of the effectiveness of a well-planned media advertising campaign is Southwest Airlines, who launched a campaign advertising that bags fly free.  Even though many competitors were cutting back on media spending during the recession, Southwest was able to add a full point of market share.

3.       Once the message has been chosen, the marketers must decide how to deliver it.  This involves deciding on the desired reach, frequency and impact; choosing among major media types; selecting specific media vehicles; deciding on media timing; and deciding on geographical media allocation. The effect of exposures on audience awareness depends on reach – how many different persons or households are exposed, frequency – the number of times within a specified time period a person or household is exposed, and impact – the qualitative value of an exposure through a given medium. A media planner must know the benefits and limitations of each method. Because of reduced effectiveness of traditional mass media, advertisers are now seeking ways to reach their target audience outside their homes and instead reach them where they work, play and shop.  These ads can appear as billboards, product placements in television and movies, point of purchase, signs on buses, shopping carts and vehicles. The media planner must decide on the most cost-effective vehicles within each chosen media type.  Also in choosing media, the advertiser must decide on a macroscheduling (seasons and business cycle) and a microscheduling (allocating advertising expenditures within a short period to obtain maximum impact) decision. Advertisers should measure the effectiveness of their advertising efforts and how well the target audience is responding to it. One way to measure this is through communication-effect research.

C.      Sales Promotion

1.       Sales promotion is a key ingredient in marketing campaigns and consists of a collection of incentive tools, mostly short-term, designed to stimulate quicker or greater purchase of particular products or services by consumers of the trade.

2.       Some of the major types of promotion tools are samples, coupons, cash refund offers (rebates), price packs (cents-off deals), premiums, frequency programs, prizes, patronage awards, free trials, product warranties, tie-in promotions, cross promotions, and point-of-purchase displays and demonstrations.

3.       The objectives of sales promotions are too attract new customers, reward loyal customers and to increase repurchase rates of occasional customers.  Many customers will switch brands during a promotion and become brand users.  Others will only switch during the promotion or will take advantage of the promotion to stockpile on their favorite items, reducing later sales.  As promotions became more popular with management, advertising efficiency declined.  Sales promotions, however, don’t build the brand loyalty that advertising does and many smaller companies cannot afford to launch a sales promotion on a large scale. When using sales promotions, a company must establish its objectives, select the tools, develop the program, pretest the program, implement and control it, and evaluate the results.

D.      Events and Experiences

1.       Becoming part of a personally relevant moment in consumers’ lives though events and experiences can broaden and deepen a company or brand’s relationship with the target market.

2.       Some examples of corporate sponsorship are Visa sponsoring the Olympics, Old Spice sponsoring college sports and motor sports, Toyota sponsoring fishing tournaments, and Hyundai and Sony sponsoring the World Cup soccer events.  

3.       Marketers try to become part of consumers lives by sponsoring or being associated with major events for a number of reasons: 1) to identify with a particular target market or lifestyle; 2) to increase salience of company or product name; 3) to create or reinforce perceptions of key brand image associations; 4) to enhance corporate image; 5) to create experiences and evoke feelings; 6) to express commitment to the community or on social issues; 7) to entertain key clients or reward key employees; and 8) to permit merchandising or promotional opportunities. Making sponsorship successful can be determined by a few major decisions: 1) choosing event opportunities that fit the brand’s marketing objectives and communication strategy; 2) designing sponsorship programs that accompanies an event sponsorship is what ultimately determines its success. 3) measuring sponsorship activities to determine their success.

E.       Public Relations

1.       Public relations (PR) include a variety of programs to promote or protect a company’s image or individual products. A public is any group that has an actual or potential interest in or impact on a company’s ability to achieve its objectives.

2.       Examples of strong publicity or MPR are the “I Love New York” campaign from the 1970’s, the extreme amount of “feel good” publicity launched by Tylenol, Toyota and BP when these companies had major public image crisis to overcome.

3.       Most companies have PR departments to monitor the attitudes of the organization’s publics and distribute information and communications to build goodwill. They perform the following five functions: 1) press relations, 2) product publicity, 3) corporate communications, 4) lobbying,  5) counseling management about public issues. Market public relations (MPR) support corporate or product promotion and image making.  The old name for MPR was “publicity” but MPR goes much further than simple publicity and plays an important role in the following tasks: 1) launching new products, 2) repositioning a mature product, 3) building interest in a product category, 4) influencing specific target groups, 5) defending products that have encountered public problems, and 6) building the corporate image in a way that reflects favorably on its products. There are major decisions in marketing PR in regards to establishing the market objectives, choosing the PR messages and vehicles, implementing the plan and evaluating the results.  The main tools of MPR are: 1) publications; 2) events; 3) sponsorships; 4) news; 5) speeches; 6) public service activities; and 7) identity media. The easiest measure of MPR effectiveness is the number of exposures carried by the media but a better measure is the change in product awareness, comprehension or attitude resulting from an MPR campaign.

Chapter 15 - Designing and Managing Integrated Marketing Communications

Summary

Modern marketing calls for more than developing a good product, pricing it attractively, and making it accessible. Marketers must establish a marketing communications mix through various effective means that places knowledge and awareness of a product in the minds of consumers.  Communication objectives can be to create category need, brand awareness, brand attitude, or brand purchase intention.  Communication strategies can be personal or nonpersonal.  Companies should decide which communications budgeting plan is best for their strategy.  Companies must also devise a method to measure the effectiveness of their marketing communications and adjust as needed. Integrated marketing communications recognize the added value of a comprehensive plan to evaluate the strategic roles of a variety of communication disciplines.

A.      The Role of Marketing Communications

1.       Marketing communications are the means by which firms attempt to inform, persuade, and remind consumers, either directly or indirectly, about the products and brands they sell.

2.       Marketing communication can take many forms – advertisements mailed to your home (junk mail) or seen and heard on television or radio, coupons in newspapers, pop up ads on webpages, or product placement in TV shows are movies.

3.       Technology and other factors have changed the way that consumers process communications, and have even given them a choice not to process it at all.  There are now digital video recorders (DVRs) that allow consumers to skip over the commercials and have eroded the effectiveness of mass media.  Some customers feel that marketing communications have become invasive; therefore, marketers must find creative ways to use technology without intruding in consumers’ lives. The marketing communications mix consists of eight major modes of communication: 1) advertising; 2) sales promotion; 3) events and experiences; 4) public relations and publicity; 5) direct marketing; 6) interactive marketing; 7) word-of-mouth marketing; and 8) personal selling.  Two communication process models are useful in helping marketers understand the fundamental elements of effective communications – the macromodel and the micromodel.  The macromodel has nine factors in effective communications that involve – sender/receiver, message and media, encoding, decoding, response, feedback and noise.  Micromodels concentrate on consumers’ specific responses to communications and assume a buyer passes through cognitive, affective, and behavioral stages.

B.      Developing Effective Communications

1.       Developing effective communications requires eight steps: 1) identify the target; 2) determine the objectives; 3) design communications; 4) select channels; 5) establish budget 6) decide on the media mix; 7) measure the results; and 8) manage integrated marketing communications.

2.       Companies who want to sell toys or other “kid” products may advertise during time periods when kids are most likely to be watching.  Household products seem to be advertised more during the day and vehicles are heavily advertised during the evening to reach the audience that will be most likely to purchase these items.

3.       The process of developing effective communications must start with a clear target audience. The target audience is potential buyers and current users and those who have some influence on these consumers, individuals, groups, particular publics or the general public. Four possible communication objectives are: 1) category need; 2) brand awareness; 3) brand attitude; and 4) brand purchase intention.   Communications that achieve the desired response requires solving three problems dealing with message strategy (what to say), creative strategy (how to say it), and message source (who should say it). In message strategy, companies search for appeals, themes, or ideas that will tie in to the brand positioning.  In creative strategy, messages can be classified as either informational (tells what the product can do for you) or transformational appeals (elaborates on a nonproduct-related benefit or image). For the message source, messages delivered by attractive or popular sources can achieve higher attention and recall, hence using celebrities as spokespersons. Communication channels that carry the message may be personal or nonpersonal.  Personal communications let two or more persons communicate face-to-face or person-to-audience. Word-of-mouth and personal influence carries a lot of weight.  Nonpersonal communication channels are directed to more than one person and include advertising, sales promotions, events and experiences, and public relations. How much that’s spent on marketing communications varies from industry to industry but there are four common methods for deciding on a budget: 1) the affordable method – what can the company afford? 2) percentage of sales method; 3) competitive-parity method – setting the budget to achieve share-of-voice parity with competitors; 4) objective-and-task method – setting the budget by determining objectives and setting the tasks to achieve those objectives.

C.      Deciding on the Marketing Communications Mix

1.       Companies must allocate the communications budget over the eight major modes of communications. Companies search for ways to gain efficiency by substituting one communications tool for another and this is why marketing functions need to be coordinated.

2.       A company such as Coca-Cola may advertise to build up a long-term image and a retailer might advertise to let consumers know about a sale or specials that are available in a certain area.

3.       Each communication tool has its own characteristics and costs.  Advertising can reach geographically dispersed buyers, generate quick sales, and allow advertisers to focus on specific aspects of the brand and product.  Sales promotions use tools such as coupons, contests, premiums to draw a stronger and faster buyer response.  Public relations and publicity can be effective when coordinated with other communications-mix elements. Events and experiences are seen as highly relevant and more actively engaging for consumers.  Direct and interactive marketing are customized for the addressed individual, are able to be prepared very quickly and can be changed depending on the response. Word-of-mouth marketing can be influential, personal and timely. Personal selling is most effective in the later stages of the buying process, particularly in building up buyer preference, conviction and action. There are several factors in developing a communications mix: 1) type of product market, 2) consumer readiness to make a purchase, and 3) stage in the product life cycle. Once a communications plan is in place, the company should measure its impact so they will know how many consumers are aware of their brand, buy it and like it.  This helps them to adjust their plan to sell more products and better serve their customers.

D.      Managing the Integrated Marketing Communications Process

1.       Integrated marketing communications (IMC) process is a planning process designed to assure that all brand contacts received by a customer or prospect for a product, service, or organization are relevant to that person and consistent over time.

2.       An example of IMC is when marketers use web sites and social media sites, such as Facebook to advertise their products and services.

3.       Skillfully combining the strategic roles of communications disciplines can provide clarity, consistency, and maximum impact through seamless integration of messages.  Companies will need to coordinate the media across and within media types and should combine personal and nonpersonal channels through multiple-vehicle and multiple-stage campaigns. Promotions can be combined with advertising and online and offline communications can be combined by printing web addresses on printed media so customers can explore a product more fully on a company’s website (and possibly see other products). Integrated marketing communications can produce stronger message consistency and help build brand equity and create greater sales impact.

Chapter 14 - Managing Retailing, Wholesaling, and Logistics

Summary

Retailing includes all the activities that it takes in selling goods or services to the consumer for personal, nonbusiness use.  Retailing can involve brick and mortar stores, e-commerce, m-commerce or a combination of each. Wholesaling is all it takes to get the goods from the producers into the hands of the business customers who use it or resale it. Wholesalers must decide on the best marketing-logistics strategy that will allow them to meet the demand, then implementing and controlling the flow of materials and final goods from point of origin to point of use, to meet customer requirements at a profit.

A.      Retailing

1.       Retailing includes all the activities in selling goods or services directly to final consumers for personal, nonbusiness use.

2.       Wal-Mart is probably the most famous retailer, then Target, K-mart, Sears, etc.

3.       There are store retailers, nonstore retailers, and retail organizations.  There are 10 major types of store retailers: Specialty store, department store, supermarket, convenience store, drug store discount store, extreme value or hard-discount store, off-price retailer, superstore and catalog showroom. Retailers can position themselves as offering one of four levels of service: 1) self-service – customers locate and select items on their own; 2) self-selections – customers find their own goods but can ask for assistance; 3) limited service – offer credit and merchandise return privileges and customers need more information and assistance; 4) full service – sales people are ready to assist in every phase.  Nonstore retailing has been growing faster than store retailing.  There are four major categories of nonstore retailing: 1) direct selling – door-to-door and home sales parties; 2) direct marketing – including telemarketing and internet; 3) automatic vending – soft drinks and snacks; and 4) buying service – storeless vendor serving specific clientele.  The new environment in retailing is emerging to better satisfy a customer’s need for convenience.  There are many decisions a retail marketer must make.  It needs to define and profile its target market.  It must decide which channels to employ to reach their customers.  It must decide which product assortment will best match its competitors. It must establish merchandise sources, policies, and practices for procurement. It must set prices in relation to the target market, product-and-service assortment mix, and competition.  It must decide on a service mix to offer customers. It must decide on the atmosphere of their stores and what kind of in-store experience they will offer to customers. It must decide on the type of communication to convey messages about products to customers.  Finally, a marketer must on location and where to place their stores.

B.      Private Labels

1.       A private label brand is a brand that retailers and wholesalers develop.

2.       Some popular private label brands are Equate, Great Value and Sav-a-Lot.

3.       According to the Private Label Manufacturers’ Association, store brands now account for one of every four items sold in stores.   Intermediaries sponsor their own brands because the can be more profitable.  Costs are lower so private labels generate higher profit margins. Generics are unbranded and plainly packaged and less expensive versions of common products.  They are sometimes made with lower quality ingredients and offer standard or low quality at a price that can be much lower than nationally advertised brands.  The growing power of store brands has benefited from the weakening of the national brands. Consumers have become more price conscious and are more likely to buy on price. 

C.      Wholesaling

1.       Wholesaling includes all the activities in selling goods or services to those who buy for resale or business use. Wholesalers are also called distributors.

2.       Big V Feed in McAlester is a wholesaler of cattle feed and other livestock feed and care products. A wholesaler for human food is U.S. Foods.  They are distributers of food and restaurant supplies.

3.       Wholesalers differ from retailers in several ways: 1) they deal with business customers instead of retail customers; 2) wholesale transactions are usually larger than retail transactions and cover a larger trade area; 3) wholesalers deal with differ legal regulations and taxes than retailers. Wholesalers are usually more efficient in the areas of selling and promoting, buying and assortment building, bulk breaking, warehousing, transportation, financing, risk bearing, market information, and management services and counseling.  Wholesalers face complaints from manufacturers that they don’t do enough to promote their products and they face new sources of competition, demanding customers and new technologies.  Savvy wholesalers can add value and increase asset productivity by managing inventories and receivables better, cutting costs by using current information systems and materials handling technology.  Wholesaling still remains vulnerable to customer resistance to price increases and by the winnowing out of suppliers based on cost and quality.

D.      Market Logistics

1.       Market logistics is planning the infrastructure to meet the demand, then implementing and controlling the physical flows of materials and final goods from points of origin to points of use, to meet customer requirements at a profit.

2.       Two companies that specialize in getting products from the manufacturer into the hands of the customer are UPS and FedEx. 

3.       Marketing logistics planning has four steps: 1) deciding on the company’s value proposition to its customers; 2) selecting the best channel design and network strategy for reaching the customers; 3) developing operational excellence in sales forecasting, warehouse management, transportation management, and materials management; and 4) implementing the solution with the best information systems, equipment, policies, and procedures. Marketing logistics tasks call for integrated logistics systems (ILS) which includes materials management, material flow systems, and physical distribution, aided by information technology.  A company’s total cost of marketing logistics can be 30 to 40 percent of the product cost.  A company that can lower its market logistics costs can lower prices, yield higher profit margins, or both. Most companies have a market logistics objective that wants to improve service at the least cost.  With the objective in mind, the company must design a system that will minimize costs and still achieve its objectives. Each possible market-logistics system will lead to the following cost: M=T+FW+VW+S where M = the total market-logistics cost of the proposed system; T = total freight cost of proposed system; FW = total fixed warehouse cost of proposed system; VW = total variable warehouse costs (including inventory) of the proposed system; and S = total cost of lost sales due to average delivery delay under proposed system.  Companies must make four major decisions about: 1) how to handle order processing; 2) where they should warehouse the stock; 3) how much should we hold in inventory; and 4) what mode of transportation they should use to ship goods.  Market-logistics should be derived from business strategies and not just from cost considerations, should be information sensitive and connect all the parties, and the company should set its logistics goals to match or exceed competitors’ service standards and should involve all relevant members in the planning process.

Chapter 13 - Designing and Managing Integrated Marketing Channels

Summary

Many producers do not sell their products directly to their customers but instead use one or more marketing channels – intermediaries performing a variety of functions.  The most important functions performed by intermediaries are information, promotion, negotiation, ordering, financing, risk taking, physical possession, payment, and title. Manufacturers can sell direct or use multilevel channels, depending on customer needs, channel objectives and the type and number of intermediaries involved.  When using marketing channels there is the potential for conflict and competition and there are also legal and ethical considerations. Companies can now also choose whether to add e-commerce and m-commerce through channel integration.

A.      Marketing Channels and Value Networks

1.       Sets of interdependent organizations participating in the process of making a product or service available for use or consumption.  They are the set of pathways a product or service follows after production, culminating in purchase and consumption by the final end user.

2.       A cosmetic producer doesn’t sell directly to the customer.  Instead, they provide products to retail stores, who display the products to customers (who are attracted by the advertisements and promises of instant beauty), in the stores. 

3.       A marketing channel system is the set of marketing channels a company employs.  Marketing channels serve and make markets and the channels chosen affect all other marketing decisions.  A firm must also decide whether to use push or pull marketing strategy.  Push strategy is when the firm uses its sales force or other means to induce intermediaries to carry, promote, and sell the product to the end users.  Pull strategy is when the firm uses communications to persuade consumers to demand the product from intermediaries, inducing the intermediaries to order it.  Hybrid or multichannel marketing occurs when a firm uses two or more marketing channels to reach customer segments.  The supply chain is an important part of marketing a product. One strategy is to use demand chain planning – think of the target market first, and then design the supply chain backward from that point.  The firm might also take a broader view with the company at the center of a value network, surrounded by a system of partnerships and alliances that a firm creates to source, augment, and deliver its offerings.

B.      The Role of Marketing Channels

1.       Marketing intermediaries make goods available and accessible to target markets, usually more effectively and efficiently than the firm can achieve on its own.

2.       The producers of chewing gum, the William Wrigley, Jr. Company, would not find it practical or profitable to sell its gum without the aid of intermediaries.

3.       A marketing channel has functions and flows that perform the work of moving goods from producers to consumers. A forward flow of activity such as storage and movement, title, and communications is activity from the company to the customer. A backward flow is functions such as ordering and payments from the customers to the company. Some functions such as information, negotiation, finance and risk taking occur in both directions. Marketing channels also have levels, some consisting of only the manufacturer and the final customer, called a zero level channel or direct marketing channel.  Other channels have multiple levels of intermediaries between the producer and the customer. Service sector channels have changed tremendously with the internet.  Customers can now go online to have such services as photo printing done.  They can get advice and helpful information online and they can even keep up with their favorite entertainers.

C.      Channel-Design Decisions

1.       Marketing channels are sets of interdependent organizations participating in the process of making a product or service available for use or consumption; also called trade channel or distribution channels. To design a marketing channel system, marketers must identify major channel alternatives, based on the customer needs and wants.

2.       CDW is an example of an intermediary in a marketing channel.  CDW sells technology type merchandise such as computers, printers, routers, among a variety of other office needs.

3.       Consumers choose the marketing channel they prefer based on what their needs are.  It could be based on price, product, assortment, convenience and their own shopping goals. Channels produce five service outputs: 1) lot size – the number of units the channel permits a consumer to purchase, 2) waiting and delivery time – the average time customers wait on receipt of goods, 3) spatial convenience – how easy is it for the consumer to purchase the product, 4) product variety – assortment provided by the marketing channel, and 5) service backup – add-on services provided by the channel. Marketers should state their channel objectives, which vary with product characteristics.  How does it need to be shipped or does it need to be installed?  Are there legal restrictions or regulations that affect channel design?  Marketers also need to identify major channel alternatives. These could be sales forces, agents, distributors, dealers, direct mail, telemarketing and the internet. Channel alternatives differ in three ways: 1) types of intermediaries – merchants, agents and facilitators, 2) number of intermediaries – determined by whether a firm uses exclusive distribution, selective distribution or intensive distribution, 3) terms and responsibilities of channel members – price policies, conditions of sale, territorial rights and specific services to be performed by each party. Each channel alternative needs to be evaluated against economic, control, and adaptive criteria.

D.      Channel Management Decisions

1.       After a firm has chosen a channel system, it must select, train, motivate, and evaluate individual intermediaries for each channel.

2.       A Mercedes-Benz dealership would not represent the firm well if it appeared dirty or disorganized.  The Toyota dealership I use is always spotless and very clean and their staff is very efficient and friendly.

3.       When selecting channel members a firm should remember that to the customer the channels are the company.  Producers should determine what characteristics distinguish the better intermediaries and would represent the firm best to the customer. Firms should implement training and market research, and other capability-building programs to motivate and improve intermediaries’ performance.  Marketers have channel power – the ability to alter channel members’ behavior so they take actions they wouldn’t have otherwise. Producers must also evaluate their intermediaries’ performance and modify channel design and arrangements as needed. International/global channels can bring opportunities and challenges as marketers must tailor their image to meet local needs.

E.       Channel Integration and Systems

1.       Channel integration is connecting all the independent distribution channels within your channel system and how they work together.

2.       A franchise, such as a fast food restaurant, is an example of a channel integration.

3.       A marketing channel normally consists of an independent producer, wholesaler(s) and retailer, each is separate and none have complete or substantial control over the other.  However, there are three other systems, vertical, horizontal and multichannel.  In the vertical marketing system (VMS) the producer, wholesaler(s) and retailer(s) act as a unified system. The channel captain owns or franchises the others or has so much power that the other cooperate.  Three types of VMS are corporate, administered, and contractual. Horizontal marketing system is one in which two or more unrelated companies put together resources or programs to exploit emerging marketing opportunity.  These companies might work together on a temporary or permanent basis.  An integrated marketing system is one in which the strategies and tactics of selling through one channel reflect the strategies and tactics of selling through one or more other channels. Adding more channels can help increase market coverage, help lower channel costs and have more customized selling.

F.       Conflict, Cooperation, and Competition

1.       The interests of independent business entities don’t always coincide and conflict exists when one member’s actions prevent another member from achieving its goal. Channel coordination occurs when channel members are brought together to advance the channel’s goals as opposed to their own incompatible goals.

2.       Wal-Mart is the principal buyer for many manufacturers and because of its size it can command lower prices than other buyers.

3.       One type of channel conflict is horizontal conflict, which occurs between members on the same level.  Vertical channel conflict occurs between different levels of the channel. Multichannel conflict exists when the manufacturer has two or more channels that sell to the same market. Channel conflict can be caused when channel members have goal incompatibility, unclear roles and rights, differences in perception or because of intermediaries’ dependence on the manufacturer.  Some channel conflict can be good and lead to positive changes, but too much conflict is dysfunctional.  Firms can manage conflict well through strategic justification, dual compensation, superordinate goals, employee exchange, joint memberships, co-optation, diplomacy, mediation, or arbitration, and legal recourse. Marketers, particularly high-end and luxury brands, must work hard not to dilute their brands through inappropriate channels.  The law seeks to prevent companies from using exclusionary tactics that might keep competitors from using a channel.  With exclusive distribution, only certain dealers are allowed to carry a seller’s products (exclusive dealing).  Exclusive arrangements are legal as long as they are voluntary.  U.S. law encourages fair and open competition.

G.     E-Commerce and M-Commerce Marketing Practices

1.       Many companies sell their goods and services online, some exclusively online.  This saves the cost retail floor space, staff, and inventory and is particularly useful for producers who sell to niche markets.

2.       J.C. Penny & Company is an example of a company that has been in existence for many decades and has added online shopping and features through their website.  Amazon.com is an exclusively online company.

3.       Online retailers may be pure-click companies – those who have launched a website without any previous existence as a firm, and brick-and-click companies – existing company that adds an online site for information or e-commerce. Several kinds of pure-click companies are search engines, Internet service providers, commerce sites, transaction sites, content sites, and enabler sites.  Inhibitors of online shopping are the absence of pleasurable experiences, social interaction, and personal consultation with a company representative so online retailers are using blogs, social networking sites and mobile marketing to stay in touch with customers. B2B sites give customers access to: 1) supplier websites, 2) infomediaries, 3) market makers, and 4) customer communities.  Many brick and mortar companies have added an e-commerce channel through online shopping and face the challenges of managing online and offline channels. M-commerce marketing is mobile marketing.  Mobile channels and media can keep consumers connected and interacting with a brand throughout their day.  Customers like the convenience of making purchases using their smartphones and in the United States mobile marketing is becoming more prevalent and taking all forms. Privacy issues are raised because companies can potentially pinpoint their customer’s location with GPS technology.