According to the American Marketing Association, marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives.
The external marketing environment has a significant influence on marketing strategy and decision-making. The five key elements of the external environment are:
Market segmentation is the process of dividing the market into mutually exclusive categories of customers using geographic, demographic, or psychographic variables. In order to increase the effectiveness of marketing, most businesses focus their efforts on target markets: groups of customers with similar wants and needs.
Consumer behavior is the study of why people choose to consume products. Key influences on consumer behavior include personal, psychological, social, and cultural factors. When making buying decisions, consumers recognize a problem or need and then collect as much information as they think necessary before making a purchase. After making a purchase, their post-purchase evaluations play a critical role in future buying decisions.
Organizational markets fall into three categories: industrial market, reseller market, and the government/institutional market. Organizational buyers differ from consumer in that they are more likely to be professionals, specialists, and experts.
Across every type of market, products are an organization’s reason for being. Products must include relevant features and benefits to succeed. Consumer products are designed for direct sale to individual consumers and can be classified as convenience goods, shopping goods, or specialty goods. Industrial goods are designed for sale to other firms and can be classified as expense items or capital items.
Branding and packaging help to create a product’s identity, with the goal of generating brand loyalty – consumer preference for a product with a particular brand name. There are national brands, licensed brands, and private brands.
Opening Case: XBox Spots the Market
Marketing is the process of planning and implementing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives.
Limited financial resources force most of us to be selective in our goods and services purchases.
Consumer goods are products that consumers purchase for final consumption; firms that sell these goods are engaged in consumer marketing. Industrial goods are products that are purchased by companies to be used in further production of goods; firms that sell products to other businesses are engaged in industrial marketing.
Relationship marketing focuses on long-lasting relationships between customers and suppliers.
Marketing decisions are affected by various influences in the external environment.
The marketing mix consists of the “four Ps” of marketing: product, pricing, place, and promotion.
Target markets are groups of people with similar wants and needs and/or similar buying behaviors. Market segmentation divides a market into categories of consumer types, based on geographic, demographic, and psychographic variables.
Members of a market segment must share common traits that will affect their purchasing decisions.
Consumer behavior focuses on “why people buy.”
Influences on consumer behavior can include psychological, personal, social, and/or cultural elements. When consumers exhibit brand loyalty, they regularly purchase products because they are satisfied with the products’ performance or benefits.
Various models have been constructed to help marketers understand how consumers come to purchase products; marketers eventually use this information to develop marketing plans. A typical model includes: (a) problem/need recognition, when the consumer recognizes a problem or need; (b) information seeking, in which consumer seek information from personal sources, marketing sources, public sources, and experience; (c) evaluation of alternatives; (d) purchase decision, based on rational motives which involve the logical evaluation of product attributes, and/or emotional motives, which involve non-objective factors and lead to irrational decisions; and (e) post-purchase evaluations, in which consumers are satisfied, dissatisfied, or dissonant.
The collection, storage, and retrieval of large groups of data pertaining to individuals is data warehousing. Data mining involves the processing and use of consumer data.
Organizational markets and buying behaviors are quite different from consumer markets and consumer behaviors.
Organizational markets fall into three categories: industrial, reseller, and government/institutional markets.
Demand for industrial products is stimulated by differences in buyers and buyer-seller relationships.
In order to develop the marketing mix and plan their strategies effectively, marketers must consider what consumers buy when they purchase products; marketers must begin by understanding product features and benefits.
Product features are the tangible and intangible qualities that are built into products; product benefits include what products can do emotionally or physically for consumers.
Goods and services may be classified according to their prospective buyers; buyers may be classified as buyers of consumer products or buyers of industrial products.
The product mix is the total assortment of all goods and/or services that a marketer makes available for sale. The product mix consists of a number of product lines, which are groups of similar products intended for specific purpose for a similar group of buyers.
To expand or diversify to survive, marketers must develop and successfully introduce streams of new products. Competition and shifting consumer preferences cause marketers to continually monitor and frequently change their offerings.
Product development is a long, complex process. New products usually involve carefully planned and sometimes risky commitments of time and resources.
Estimates indicate that it takes 50 new product ideas to generate
one product that reaches the marketplace; only a few of the
survivors become successful.
The more quickly a product enters the marketplace, the more likely it is to survive. Introducing new products ahead of competitors allows companies to become market leaders.
Every product passes through a series of stages during its limited profit-producing life.
Branding and packaging are two tools that allow consumers to identify products in the marketplace.
Brand names are symbols for characterizing products and distinguishing them from one another; branding is the process of using symbols to communicate the features and qualities of products.
A product’s package serves several purposes; the package can serve as an in-store advertisement, a display for the brand name, an identifier of product features and benefits, and can reduce the risk of damage and increase the difficulty of stealing.
Foreign consumers differ from domestic buyers in language, customs, business practices, and consumer behavior. Marketing products internationally means mounting a strategy to support global business operations.
Some products can be marketed internationally without modifications, whereas, some products need to be modified to fit the needs of a local market.
Many factors that affect domestic pricing also affect international pricing; additional factors affecting global market pricing are the costs of transportation and selling abroad.
Distribution networks in other countries may be costly. Many domestic marketers hire foreign agents to assist with selling, advertising, and providing information about local markets.
Many American promotional tactics do not succeed in other countries. Marketers must consider differences in language and culture when promoting products abroad.
Far more small businesses fail than succeed. The successful small businesses have learned skillful application of the marketing mix and careful consideration of each element in the marketing mix.
Understanding the target market and the targeted group’s wants is critical.
Profits are often determined by accurately assessing costs from the start.
The most critical aspect of distribution for small businesses is facility location.
Understanding promotional costs, as well as benefits of chosen promotional tools, may be the most critical steps involved.
Answers to Questions and Exercises
Questions for Review
Both deal with the way people purchase and consume products. However, organizational buyers are professional, specialized, and expert, relying less on product image. Buyer-seller relationships tend to be longer lasting.
Market segmentation is a method of breaking consumers into mutually exclusive groups based on similar characteristics that are likely to affect consumption. By identifying and targeting segments that are most likely to purchase its products, an organization can tailor its marketing efforts in terms of product features and benefits, pricing, packaging, promotion, and distribution.
These processes involve the collection and storage of vast amounts of consumer information, including demographic, psychographic, and geographic information. That information can, in turn, be used to determine where future needs and wants of consumers may fall. In addition, storage of such data may allow a researcher to monitor trends in behavioral changes among a specific market niche.
Convenience goods and services – candy, ATM services
Shopping goods and services – clothing, car repair
Specialty goods and services – houses, interior design
Expense items – inventory, repair bills
Capital items – computer servers, long-term maintenance contracts
Questions for Analysis
Answers will vary, but students should focus on product and package characteristics, price levels, promotional tools, and distribution options. They should also discuss demographics and psychographics of the target market and the way they influence marketing mix decisions.
Answers will vary but should include need recognition, search for information, evaluation of information, purchase decision, and post-purchase evaluation.
Answers will vary.
Convenience goods, such as candy bars, should have very prominent branding and packaging elements in order to spur impulse purchases. Shopping goods, such as computers and clothing, should be branded and packaged to clearly communicate their unique features and benefits since shoppers engage in comparisons. Specialty goods, such as high-end cosmetics in top department stores, should be branded and packaged in a way that reinforces their mystique.
Answers will vary, but students should address how the person’s job relates to product, price, promotion, and place, and how the person monitors decisions in each area to determine when change is necessary.
Answers will vary based on the nature of the product and the business.
Answers to Exercising Your Ethics
The key ethical issues are integrity and communication. Matthew has invested enormous effort in information collecting and evaluating alternatives, expecting that once he had made the purchase decision the dealer would come through on its end of the bargain. One possibility is that the sales representative and the sales manager simply had not communicated, but this becomes an ethical issue when the sales representative has the responsibility to establish contracts without the authority to deliver results.
Since the contract has been signed, the minimal obligation of the car company is to offer the 2002 model at the 2001 price.
Answers will vary.
Answers to Building Your Business Skills
Answers will vary, but students should have specific information for each of the market segmentation factors.
Answers will vary.
Answers will vary.
These ads are likely targeted to middle-to-higher income owners of older homes who need to replace heating or air conditioning systems or are willing to pay for upgraded equipment for greater comfort. They may also target affluent buyers who are building a home.
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