Solution Manual for Marketing Strategy, 8th Edition O. C. Ferrell, Michael Hartline, Bryan W. Hochst

Solution Manual for Marketing Strategy, 8th Edition O. C. Ferrell, Michael Hartline, Bryan W. Hochstein

Solution Manual for Marketing Strategy, 8th Edition O. C. Ferrell, Michael Hartline, Bryan W. Hochstein

INSTRUCTOR MANUAL FOR Marketing Strategy, 8th Edition O. C. Ferrell (Author), Michael Hartline (Author), Bryan W. Hochstein (Author) Chapter 1-10 Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 1: Marketing in Today’s Economy

Contents Purpose and Perspective of the Chapter................................................................................................................... 2 Cengage Supplements .................................................................................................................................................... 2 Chapter Objectives ........................................................................................................................................................... 2 Key Terms ........................................................................................................................................................................... 2 What's New in This Chapter ......................................................................................................................................... 4 Chapter Outline ................................................................................................................................................................ 4 Discussion Questions....................................................................................................................................................... 9

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Purpose and Perspective of the Chapter

In this first chapter, we review some of the major challenges and opportunities that exist in planning marketing strategy in today’s economy. We also review the nature and scope of major marketing activities and decisions that occur throughout the planning process. Finally, we look at some of the major challenges involved in developing a marketing strategy.

Cengage Supplements

The following product-level supplements provide additional information that may help you in preparing your course. They are available in the Instructor Resource Center.

• • • •

Test Bank (contains assessment questions and problems) PowerPoint (provides text-based lectures and presentations) Case Notes (provides a case summary and teaching questions) Marketing Plan Worksheets (assists in writing a formal marketing plan)

Chapter Objectives • • • • •

Describe the challenges and opportunities of marketing in today’s economy Define marketing Explain basic marketing concepts Discuss major marketing activities and decisions Describe some of the challenges involved in developing a marketing strategy

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Key Terms

Competitive advantage: A firm’s capabilities that allow it to serve customers’ needs better than the competition Competitive intelligence: Analysis of the competitive environment that involves analyzing the capabilities, vulnerabilities, and intentions of competing businesses Environmental scanning: Analysis of the external environment that involves the analysis of economic, political, legal, technological, and cultural events and trends that may affect the future of the organization and its marketing efforts Exchange: The process of obtaining something of value from someone by offering something in return Integrated marketing communication (IMC): The coordination of all promotional activities (e.g., media advertising, social media, direct mail, personal selling, sales promotion, public relations, packaging, store displays, website design, personnel) to produce a unified, customerfocused message

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Internal analysis: The objective review of internal information pertaining to the firm’s current strategy and performance, as well as the current and future availability of resources Market: A collection of buyers and sellers that have similar needs that can be met by a particular product Market segmentation: Dividing the total market into smaller, relatively homogeneous groups or segments that share similar needs, wants, or characteristics Marketing: The activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large Marketing ethics: Principles and standards that define acceptable marketing conduct as determined by the public, government regulators, private-interest groups, competitors, and the firm itself Marketing implementation: The process of executing the marketing strategy Marketing plan: A written document that provides the blueprint or outline of the organization’s marketing activities, including the implementation, evaluation, and control of those activities Marketplace: The location where buyers and sellers meet to conduct transactions Marketspace: Electronic marketplaces unbound by time or space Product: Something that can be acquired via exchange to satisfy a need or a want Product positioning: Establishing a mental image, or position, of the product offering relative to competing offerings in the minds of target buyers Situation analysis: The overall process of collecting and interpreting internal, competitive, and environmental information Social responsibility: An organization’s obligation to maximize its positive impact on society, while minimizing its negative impact Strategy: Outlines the organization’s game plan for success Supply chain: The connection and integration of all members of the marketing channel Tactical planning: Addresses specific markets or market segments and the development of marketing programs that will fulfill the needs of customers in those markets Target markets: One or more segments of individuals, businesses, or institutions toward which the firm’s marketing efforts will be directed Utility: The ability of a product to satisfy a customer’s desires [return to top]

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What's New in This Chapter

The following elements are improvements in this chapter from the previous edition: • • • • • • • • • • • • • • •

Updated introduction to address current challenges of marketing in today’s economy New boxed feature discussing the future of marketing and recent disruptive technologies New Exhibit 1.1 Fundamental Changes to Marketing New content on the power shift to customers New content on products that have been eliminated Expanded content on audience and media fragmentation New Exhibit 1.2 Time Spent With Media New content on shifting demand patterns Eliminated content on metamarkets and metamediaries New boxed feature discussing Amazon’s marketing strategy New content on situation analysis related to data analytics New content on supply chains New Exhibit 1.4 Fortune’s 10 Best Companies to Work For New boxed feature exploring the marketing strategy at Zappos Updated Exhibit 1.6 American Satisfaction Index

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Chapter Outline

In the outline below, each element includes references (in parentheses) to related content. "CH.##” refers to the chapter objective; “PPT Slide #” refers to the slide number in the PowerPoint deck for this chapter (provided in the PowerPoints section of the Instructor Resource Center); and, as applicable for each discipline, accreditation or certification standards (“BL 1.3.3”). Introduce the chapter and use the Ice Breaker in the PPT if desired, and if one is provided for this chapter. Review learning objectives for Chapter 4. (PPT Slides 1-3).

I.

Introduction (PPT Slide 4) a. Changes in marketing are dynamic and fast-paced i. Require companies to think outside the box to anticipate disruptions and new technology-enabled competition b. Organizations require effective planning and sound marketing strategy c. Technology disruptions include: i. Blockchain ii. Omnichannel technologies iii. Consumer-centric technology iv. Streaming entertainment II. The Challenges and Opportunities of Marketing in Today’s Economy (PPT Slide 11) a. Power shift to customers i. Comparison shopping and broader purchase options ii. Creates price match pressure on retailers iii. Companies are striving to:

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1. Regain power 2. Focus on unique customer experiences 3. Understand how macro factors (e.g., weather) affect buyers 4. Greater anticipation and forecasting of customer needs b. Changes in products and selection i. Free shipping ii. Competition has exploded iii. Vast information on products iv. Displaced product lines v. Transaction efficiency vi. Disrupted industries c. Audience and media fragmentation i. Broadcast TV and streaming have created mass channels and uncertain targeting ii. Radio has been declining iii. We’re fragmented 1. We multi-task 2. We use multiple media iv. Niche marketing and targeting is enhanced v. Mass market reach is much more difficult d. Changing value proposition i. Commoditization of certain products…leads to price vulnerability ii. Pandemic and climate change challenge ―value‖ iii. Major retail ―shake-ups‖ and lifestyle changes iv. In-home entertainment challenges e. Shifting demand patterns i. Technology has shifted customer demand for certain product categories 1. Most news is not consumed through traditional newspaper 2. Most music is now consumed digitally 3. Business model is changing in many areas (e.g., malls, banks, pharmacies, grocery stores, specialty stores, conferencing/travel) f. Privacy, security, and ethical concerns i. Customer data collection is more scrutinized 1. What is the purpose of collecting the data?

2. Who are you sharing the data with? ii. Social media sites and internet connected devices create anxiety over privacy 1. Mobile devices and vehicles can track us g. Unclear legal jurisdiction i. Legal systems differ from country to country 1. This difference is especially important for firms doing business in the United States and China ii. Collection of sales tax for online transactions is a major issue III. Basic Marketing Concepts (PPT Slide 20)

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a. Marketing i. Marketing places the customer at the core of all decisions 1. Changing wants/needs 2. Drive satisfaction ii. Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society-at-large 1. Greater focus on long-term relationships b. What is a market? i. A market is a collection of buyers and sellers ii. A marketplace is a physical location where buyers and sellers meet to conduct transactions (e.g., grocery stores, malls, flea markets) iii. A marketspace describes electronic marketplaces unbound by time or space (i.e., online markets or e-commerce) c. What is exchange? i. Exchange is the process of obtaining something of value from someone by offering something in return 1. Usually entails obtaining products for money ii. Five conditions must be met: 1. There must be at least two parties to the exchange 2. Each party has something of value to the other party 3. Each party must be capable of communication and delivery 4. Each party must be free to accept or reject the exchange 5. Each party believes it is desirable to exchange with the other party d. What is a product? i. A product is something that can be acquired via exchange to satisfy a need or a want 1. Goods 2. Services 3. Ideas 4. Information 5. Digital product 6. People 7. Places 8. Experiences and events 9. Real/financial property 10. Organizations ii. Economists use the term utility to describe the ability of a product to satisfy a customer’s desires 1. Form utility: distinctive features and quality 2. Time utility: available when the customer wants (24-hour access) 3. Place utility: available where the customer wants (Uber Eats) 4. Possession utility: credit cards and financing

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5. Psychological utility: positive experiential activities that bring satisfaction (live events) IV. Major Marketing Activities and Decisions (PPT Slide 29) a. Strategic planning i. Strategy is blueprint for building marketing plan 1. Top-level concerns: Corporate mission, SBU coordination, resource acquisition 2. Mid-level concerns: Focus on a particular product or market 3. Lower-level concerns: Tactical and operational in nature a. Tactical planning addresses specific markets or market segments and the development of marketing programs that will fulfill the needs of customers in those markets ii. The marketing plan provides the outline for how the organization will combine product, pricing, distribution, and promotion decisions to create an offering that customers will find attractive b. Research and analysis i. Internal analysis 1. Objective review of resources, strategy, and performance ii. Competitive intelligence 1. Assessment of competitors’ capabilities, vulnerabilities, and planning iii. Environmental scanning 1. Macro considerations: economic, political, legal, tech, and cultural iv. Situation analysis 1. Collecting and interpreting internal, competitive, and environmental information c. Developing competitive advantage i. Competitive advantage is an excellence that exceeds competitors 1. Product quality 2. Strategic pricing-travel and tourism 3. Customer service 4. Market positioning 5. Distribution networks 6. Innovation and access to new technologies d. Marketing strategy decisions i. An organization’s marketing strategy describes how the firm will fulfill the needs and wants of its customers 1. Can include activities associated with maintaining relationships with other stakeholders (e.g., employees, shareholders, supply chain partners) 2. Composed of one or more marketing programs ii. Marketing programs consist of two elements 1. A target market or markets 2. A marketing mix (product, price, place, promotion)

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e. Market segmentation and target marketing i. Market segmentation 1. Dividing a marketplace into smaller, homogeneous segments 2. Similar needs, wants, and characteristics ii. Target marketing 1. Distinct segments that a company will market their product to 2. May have many markets: primary, secondary, etc. f. Marketing program decisions i. Products fulfill the basic needs and wants of the customer 1. Product decisions are most important ii. Price leads to revenue and profit 1. Has direct connection with customer demand 2. Easiest element to change 3. Major quality cue for customers iii. Distribution is critical 1. Supply chain decisions involve many activities (e.g., sourcing of raw materials, production of finished products, ultimate delivery to final customers) iv. Promotion is also called integrated marketing communication (IMC) 1. The coordination of all promotional activities to produce a unified, customer-focused message g. Branding and positioning i. Product positioning involves establishing a mental image, or position, of the product offering relative to competing offerings in the minds of target buyers ii. Goal is to differentiate the firm’s product offering from those of competitors by making the offering stand out h. Social responsibility and ethics i. Social responsibility 1. Refers to an organization’s obligations to maximize its positive and minimize its negative impact on society ii. Marketing ethics 1. Principles or standards that define acceptable behavior in marketing activities i. Implementation and control i. Marketing implementation is the process of executing the marketing strategy ii. The ―how‖ of marketing planning iii. The organization must always consider how the strategy will be executed iv. ―People‖ sometimes referred to as ―fifth P‖ of the marketing mix 1. Employees who execute the marketing strategy j. Developing and maintaining customer relationships i. Move from transactional to relationship marketing

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ii. Develop and maintain longer term, mutually satisfying relationships through value creation iii. Promotes customer trust and confidence iv. Important in B2B employees and supply chain partners V. Taking on the Challenges of Marketing Strategy (PPT Slide 47) a. Biggest challenge: change i. Customers, technology, the marketing organization itself b. Marketing strategy is inherently people-driven i. People inside organization fulfilling needs and wants of other people 1. Customers, shareholders, business partners, society at large c. Customer expectations are high, less brand loyal, more price sensitive d. Marketers must adapt to shifts in markets and competition [return to top]

Discussion Questions

You can assign these questions several ways: in a discussion forum in your LMS; as whole-class discussions in person; or as a partner or group activity in class.

1. Think about all of the exchanges that you participate in on a weekly or monthly basis.

How many of these exchanges have their basis in long-term relationships? How many are simple transaction-based exchanges? Which do you find most satisfying? Why? a. Answer: Answers to this question will vary greatly. Many students will not consider their exchanges to be relational until you ask them how long they have been using the same company/provider. Many exchanges are relational by default (we use the same dry cleaner or gas station continuously without thinking about it). Whether students find transactional or relational exchanges more satisfying will depend on their likes and dislikes.

2. What do you think is the most important P of the marketing mix? a. Answer: Since the product and its attributes fulfill the basic needs and wants of the customer, it is no surprise that the product and the decisions that surround it are among the most important parts of the marketing program. This importance hinges on the connection between the product and the customers’ needs.

3. Why is developing a competitive advantage important? Think of a successful company and identify its competitive advantage. a. Answer: To be successful, a firm must possess one or more competitive advantages that it can leverage in the market in order to meet its objectives. A competitive advantage is something that the firm does better than its competitors that gives it an edge in serving customers’ needs and/or maintaining mutually satisfying relationships with important stakeholders. Competitive advantages are critical because they set the tone, or strategic focus, of the entire marketing program. When these advantages are tied to market opportunities, the firm can offer customers a compelling reason to buy their products. Without a competitive advantage, the firm and its products are likely to be just one more offering among a sea of commoditized products.

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b. Examples of successful companies could include: i. Product quality (Apple) ii. Customer service (Microsoft) iii. Market positioning (Salesforce) iv. Distribution networks (Amazon) v. Innovation and access to new technologies (Tesla) [return to top]

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 2: Strategic Marketing Planning

Instructor Manual Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 2: Strategic Marketing Planning

Contents Purpose and Perspective of the Chapter.................................................................................................................12 Cengage Supplements ..................................................................................................................................................12 Chapter Objectives ......................................................................................................................................................... 12 Key Terms .........................................................................................................................................................................12 What's New in This Chapter .......................................................................................................................................13 Chapter Outline .............................................................................................................................................................. 14 Discussion Questions.....................................................................................................................................................19

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 2: Strategic Marketing Planning

Purpose and Perspective of the Chapter

In this chapter, we examine the planning process at different points. We begin by discussing the overall process and considering the hierarchy of decisions that must be made in strategic marketing planning. Next, we introduce the marketing plan and look at the marketing plan framework used throughout the text. We also discuss the role and importance of the marketing plan in marketing strategy. Finally, we explore other advances in strategic planning such as strategy mapping and the ESG (environmental, social, governance) framework.

Cengage Supplements

The following product-level supplements provide additional information that may help you in preparing your course. They are available in the Instructor Resource Center.

• • • •

Test Bank (contains assessment questions and problems) PowerPoint (provides text-based lectures and presentations) Case Notes (provides a case summary and teaching questions) Marketing Plan Worksheets (assists in writing a formal marketing plan)

Chapter Objectives • • • • • •

Define strategic marketing planning Understand mission statements and vision statements Describe a corporate or business-unit strategy Describe the components of the marketing plan Explain crisis management Understand the importance of customer-focused strategic planning and balanced strategic planning

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Key Terms

Competitive advantage: A firm's capabilities that allow it to serve customers’ needs better than the competition Continuity planning: The strategies, systems, and procedures that help ensure that a firm’s policies are in place and operating (with all necessary redundancies, backup checks and balances, safeguards, monitoring, etc.)

Crisis management: The process of handling a high-impact event characterized by ambiguity and the need for swift action to access and respond to potential damage Executive summary: A synopsis of the overall marketing plan, with an outline that conveys the main thrust of the marketing strategy and its execution Goals: Broad, simple statements of what will be accomplished through the marketing strategy

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 2: Strategic Marketing Planning

Key performance indicators (KPIs): Measures of performance to evaluate success Marketing control: Establishing performance standards, assessing actual performance by comparing it with these standards, and taking corrective action if necessary to reduce discrepancies between desired and actual performance Marketing objectives: Specific marketing goals stated in quantitative terms to permit reasonably precise measurement Marketing plan: A written document that provides the blueprint or outline of the organization’s marketing activities, including the implementation, evaluation, and control of those activities Mission (mission statement): A clear and concise statement that explains the organization’s reason for existence Situation analysis: The overall process of collecting and interpreting internal, competitive, and environmental information SWOT analysis: Focuses on the internal factors (strengths and weaknesses) and external factors (opportunities and threats) that give the firm certain advantages and disadvantages in satisfying the needs of its target market(s) Synthetic customer vision: How marketers see their products from the virtual eyes of the customer by analyzing multiple data sources to create a holistic view of customer perceptions and use of products Vision (vision statement): A future-oriented statement that seeks to answer the question ―What do we want to become?‖ [return to top]

What's New in This Chapter

The following elements are improvements in this chapter from the previous edition: • • • • • • • • • • • •

New boxed feature discusses the importance of competitive advantage, commoditization, and ―the commodity trap‖ Updated Exhibit 2.2 Mission Statement Examples New examples of mission width New boxed feature explores the Johnson & Johnson Credo New key term key performance indicators (KPIs) New in-text example to illustrate SWOT analysis New content on the RACI (Responsible, Accountable, Consulted, Informed) Chart as a system used to ensure that implementation of a marketing plan occurs New Exhibit 2.4 Percent of Revenue Spent on Marketing by Industry New content on the forward-looking nature of the marketing plan New content on crisis management and continuity planning New Exhibit 2.5 Major Barriers Marketers Face Around Innovation New content on synthetic customer vision

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 2: Strategic Marketing Planning

• • •

New boxed feature explores how Spotify is expanding its customer base New content the ESG (environmental, social, governance) framework New Exhibit 2.7 ESG Framework Example

[return to top]

Chapter Outline

In the outline below, each element includes references (in parentheses) to related content. "CH.##” refers to the chapter objective; “PPT Slide #” refers to the slide number in the PowerPoint deck for this chapter (provided in the PowerPoints section of the Instructor Resource Center); and, as applicable for each discipline, accreditation or certification standards (“BL 1.3.3”). Introduce the chapter and use the Ice Breaker in the PPT if desired, and if one is provided for this chapter. Review learning objectives for Chapter 4. (PPT Slides 1-3).

VI. Introduction (PPT Slide 4) a. Without a competitive advantage, a firm may find itself in the ―commodity trap‖ i. Product is just one more in a sea of similar products b. Competitive advantage can be developed with product differentiation, promotion, price, or distribution c. Mature industries face this problem d. Firms in this trap must spend a great deal on promotion e. Some firms avoid this trap through brand building VII. The Strategic Planning Process (PPT Slide 6) a. Situation analysis refers to an in-depth analysis of the organization’s internal and external environments b. A marketing plan is a written document that provides the blueprint or outline of the organization’s marketing activities i. Including implementation, evaluation, and control ii. Determines specific marketing goals, objectives, responsibilities, budgets, and timelines iii. Requires contingency plans for unknown disruptors iv. Decisions must be made within the organization’s overall mission, goals, and objectives c. Organizational mission versus organizational vision i. A mission, or mission statement, seeks to answer the question ―What business are we in?‖ ii. A vision or vision statement seeks to answer the question ―What do we want to become?‖ iii. Elements of the mission statement 1. Who are we?

2. Who are our customers?

3. What is our operating philosophy (basic beliefs, values, ethics, etc.)?

4. What are our core competencies or competitive advantages?

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 2: Strategic Marketing Planning

5. What are our responsibilities with respect to being a good steward of our human, financial, and environmental resources? iv. Mission width and stability 1. If the mission is too broad, it will be meaningless a. Can lead companies to establish plans and strategies in areas where their strengths are limited 2. Narrow mission statements can be costly as well a. Can cause company to miss major opportunity b. Consider railroad industry overtaken by other modes of transportation and travel 3. Mission stability refers to the frequency of modifications in an organization’s mission statement a. Mission should not change frequently v. Customer-focused mission statement 1. Mission statements have become much more customer oriented 2. People’s lives and businesses should be enriched because they have dealt with the organization d. Corporate or business-unit strategy i. Strategic business units (SBUs) include subsidiaries, divisions, product lines, and other profit centers 1. Competitive advantages, allocation of resources and coordination across functional units (marketing, production, finance, HR, etc.) ii. Must consider firm’s capabilities e. Functional goals and objectives i. Represent functional areas of the organization 1. Marketing, production, financial, or human resources ii. Should be expressed in clear/simple terms iii. Should be measurable (accurately) 1. Sales ($ or units) 2. Profitability 3. Gain in market share 4. Sales/square foot 5. Average check (sale) 6. Share of customer (function of cross-selling) f. Functional strategy i. Select one or more target markets ii. Develop a distinctive marketing program that addresses/understands the wants/needs of the market(s) g. Implementation i. Execution of the functional strategy ii. Two focal point audiences 1. Internal (employees, managers, and executives) 2. External (customers, suppliers, investors, society at large)

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 2: Strategic Marketing Planning

iii. How can emerging technologies be used to support implementation? iv. To better ensure that implementation of the marketing program occurs, firms use systems to assign responsibility for planned action 1. One simple system used to make sure that responsibility is assigned is the RACI (Responsible, Accountable, Consulted, Informed) Chart a. Some person or department is responsible to conduct the work needed to accomplish the task b. Typically, a higher level is held accountable to make sure the task is completed c. Additional internal employees and departments may also need to be consulted to gain cooperation with the task or informed about updates on the changes that are taking place h. Evaluation and control i. Establish and monitor key performance indicators (KPIs) ii. Provides feedback for the next round of strategic planning VIII.The Marketing Plan (PPT Slide 22) a. Marketing plan should be comprehensive, flexible, consistent, logical b. Marketing plan structure i. Executive summary 1. Outlines the key points of the plan/execution a. Concise overview of the plan 2. Not a ―drill deep‖ detailed analysis a. Major aspects of plan, objectives, sales goals/projections, costs, and measurement/assessment b. Breadth of the plan (what areas are you covering) c. If an executive or employee reads the plan, can they quickly determine what is expected to happen and how it will happen d. Share with key constituents to help them understand their roles e. First part of the marketing plan…you’re selling your plan ii. Situation analysis 1. Internal environment a. Workforce availability, competitive demand, age/capacity of technology, financial resources, and internal political strife b. Firms current marketing objectives and performance 2. Customer environment a. Needs of target market(s), changing needs, how current/new products meet those needs 3. External environment

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 2: Strategic Marketing Planning

iii.

iv.

v.

vi.

vii.

a. Competitive, economic, social, political/legal, and technological 4. Challenges a. Too much data, push toward integrated data analytics SWOT analysis 1. SWOT analysis focuses on the internal factors (strengths and weaknesses) and external factors (opportunities and threats)— derived from the situation analysis in the preceding section—that give the firm certain advantages and disadvantages in satisfying the needs of its target market(s) 2. Strengths and weaknesses are internal issues unique to the firm conducting the analysis 3. Opportunities and threats are external issues that exist independently of the firm conducting the analysis Marketing goals and objectives 1. Goals are broad, simple statements of what will be accomplished a. Guide the creation of objectives and resource allocations 2. Marketing objectives are quantitative expectations to permit measurement and evaluation 3. Performance targets to determine ―success‖ 4. Defines measurement targets for the evaluation and control phases 5. Must be consistent with the firm’s mission Marketing strategy 1. Selection/identification of target market(s) 2. Creating and maintaining the marketing program a. Price, product, promotion, and distribution 3. Enhance competitive advantage(s) and make it sustainable a. Managing relationships with customers through maintaining a competitive advantage(s) Marketing implementation 1. What are the specific marketing activities that will be undertaken?

2. How will the activities be performed?

3. When will these activities be performed?

4. Who is responsible for these activities?

5. How will the completion of planned activities be monitored?

6. How much will these activities cost?

Evaluation and control 1. Marketing control involves establishing performance standards a. Assessing actual performance against performance standards i. Tied to plan objectives b. Taking corrective action as needed

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 2: Strategic Marketing Planning

i. To reduce discrepancies between desired/actual data 2. Financial assessment of the plan a. Costs, sales, and revenue b. Affects alternative courses of action going forward 3. Marketing audit can help determine why marketing plan is not living up to expectations 4. Marketing plans are forward looking and set goals/objectives c. Using the marketing plan structure i. Plan ahead ii. Revise, then revise again iii. Be creative iv. Use common sense and judgment v. Think ahead to implementation vi. Update regularly vii. Communicate to others viii. Crisis management is the process of handling a high-impact event characterized by uncertainty and ambiguity 1. Requires quick response to mitigate damage 2. Impossible to be perfect because of all the chaos involved 3. Learning events because of successes and failures a. Assist in the development of future crisis management plans 4. Likely to disrupt marketing plans/implementation 5. Require the development of a recovery plan ix. Continuity planning refers to strategies, systems, and procedures that help ensure that a firm’s policies are in place and operating (in any environment) 1. Anticipation, prevention, mitigation, and survival mechanisms 2. Goes beyond normal planning to: a. Address disasters b. Provide continuity through decision making d. Purpose and significance of the marketing plan i. Explains both the present and future 1. Situation analysis and SWOT ii. Specifies expected outcomes (goals and objectives) iii. Describes specific actions/responsibilities iv. Identifies resources needed for implementation v. Permits monitoring of actions/results so that controls can be implemented 1. Informs next year’s planning cycle e. Organizational aspects of the marketing plan i. Marketing manager, brand manager, and/or product manager write the plan

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 2: Strategic Marketing Planning

1. Others use consultants or committees ii. Responsibility for performance lies with V.P. Marketing or Marketing Director iii. Final approval comes from the President or CEO 1. Will the proposed plan achieve the desired objectives?

2. Are there alternative uses of resources that would better meet corporate or business unit objectives, other than this plan?

IX. Maintaining Customer Focus and Balance in Strategic Planning (PPT Slide 42) a. Customer-focused planning i. Focus on customer satisfaction and firm success ii. Putting customers’ needs first iii. Long term, value added relationships with key stakeholders iv. Generate sustainable competitive advantage v. Home Depot under Carol Tome (CFO) vi. Marketers can see their products from the virtual eyes of the customer by analyzing multiple data sources to create a holistic view of customer perceptions and use of products (synthetic customer vision) b. Balanced strategic planning i. System to monitor environmental, social, and governance (ESG) ii. Environmental 1. Land, air, water protection iii. Social (how you treat key stakeholders) 1. Product liability, shareholder activists, etc. iv. Governance 1. Legal, regulatory, business ethics [return to top]

Discussion Questions

You can assign these questions several ways: in a discussion forum in your LMS; as whole-class discussions in person; or as a partner or group activity in class.

4. Discussion: Organizational Aspects (PPT Slide 38) Duration: 30 minutes. a. In some organizations, marketing does not have a place of importance in the organizational hierarchy. Why do you think this happens? What are the consequences for a firm that gives little importance to marketing relative to other business functions? i. Answer: Student answers to this question will vary based on their professional experiences. One key issue deals with the background and training of the senior management team. Those that rise through the ranks from marketing have a stronger appreciation for marketing activities. Others tend to see the marketing function as an expense rather than an investment. Another reason is that some firms place more emphasis on shareholders than on customers. In these cases, financial

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 3: Collecting and Analyzing Marketing Information

issues, rather than marketing, rise to the top. The consequences of shirking marketing activities should be obvious. Firms without customers tend to have limited life spans.

5. Discussion: Marketing Implementation (PPT Slide 31) Duration: 15 minutes. a. Defend or contradict this statement: Developing marketing strategy is more important than implementing marketing strategy because, if the strategy is flawed, its implementation doesn’t matter. i. Answer: Students should recall from Chapter 1 that there are few universal rules in marketing. Hence, it is difficult to determine if a strategy is flawed prior to its execution. Likewise, even perfect strategies can be poorly implemented. In the end, it is impossible to separate strategy from implementation—both are vitally important to business success. This debate will highlight the importance of both strategy development and strategy implementation.

6. Discussion: Balanced Strategic Planning (PPT Slide 46) Duration: 30 minutes. a. What are some of the potential difficulties in approaching strategic planning from a balanced perspective? Isn’t financial performance still the most important perspective to take in planning? Explain. i. Answer: Some students will argue for the importance of the financial perspective, arguing that firms are in business to make money for shareholders. These students will favor stock price and market capitalization as the key indicators of success. However, in firms dominated by intangible assets, the financial perspective becomes less able to measure performance accurately. The use of less tangible, even somewhat subjective, measures of performance is the key difficulty in using the balanced approach. Many of today’s business leaders have a difficult time with the balanced approach because they are not trained in using it and their compensation packages are not tied to balanced measures. Hence, the dominance of financial measures is somewhat selffulfilling. [return to top]

Instructor Manual Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 3: Collecting and Analyzing Marketing Information

Contents Purpose and Perspective of the Chapter.................................................................................................................22 Cengage Supplements ..................................................................................................................................................22 Chapter Objectives ......................................................................................................................................................... 22 Key Terms .........................................................................................................................................................................22

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 3: Collecting and Analyzing Marketing Information

What's New in This Chapter .......................................................................................................................................24 Chapter Outline .............................................................................................................................................................. 25 Discussion Questions.....................................................................................................................................................30

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 3: Collecting and Analyzing Marketing Information

Purpose and Perspective of the Chapter

In this chapter, we examine several issues related to conducting a situation analysis, the components of a situation analysis, and the collection of marketing data and information to facilitate strategic marketing planning. Although situation analysis has traditionally been one of the most difficult aspects of market planning, recent advances in technology have made the collection of market data and information much easier and more efficient. This chapter examines the different types of marketing data and information needed for planning, as well as many sources where such data may be obtained.

Cengage Supplements

The following product-level supplements provide additional information that may help you in preparing your course. They are available in the Instructor Resource Center.

• • • •

Test Bank (contains assessment questions and problems) PowerPoint (provides text-based lectures and presentations) Case Notes (provides a case summary and teaching questions) Marketing Plan Worksheets (assists in writing a formal marketing plan)

Chapter Objectives • • • • •

Define big data Describe how marketing information is collected and analyzed through a situation analysis Differentiate the internal environment, the customer environment, and the external environment Understand how marketing data and information is collected Identify problems that can occur during data collection

[return to top]

Key Terms

5W Model: A method than managers can use to collect information in assessing the firm’s target markets and attempting to understand all relevant buyer behavior and product usage characteristics by asking who, what, where, when, and why Analytics: The discovery of trends and patterns within the data via analysis techniques Backstage technology: Technological advances that are not necessarily apparent to customers Big data: Extremely large data sets from structured and unstructured sources Brand competitors: Companies that market products with similar features and benefits to the same customers at similar prices

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 3: Collecting and Analyzing Marketing Information

Cultural values: The commonly agreed on guiding principles of everyday life in a society or community Dashboard: A visual representation of real-time results for each metric across multiple levels and markets Data: The facts and details of customers, product use, and/or user inputs Derived demand: When the demand for one product depends on (is derived from) the demand of another product Direct observation: Where the researcher records the overt behaviors of customers, competitors, or suppliers in natural settings Experiments: Where the researcher selects matched subjects and exposes them to different treatments while controlling for extraneous variables to arrive at casual insights Focus groups: Where the researcher moderates a panel discussion among a gathering of 6 to 10 people who openly discuss a specific subject Frontstage technology: Technological advances that are most noticeable to customers Generic competitors: Companies that market very different products that solve the same problem or satisfy the same basic customer need Insights: The value of data and analytics, as these outcomes identify useable information that helps to improve operations and performance of marketing activity Internal environment: Refers to an organization's objectives, strategy, and performance, the availability of resources, and organizational culture and structure Metrics: Measurable indicators of company objectives, such as sales performance, market share, and/or growth rate Predictive analytics: The use of historical data inputs to predict future outcomes Product competitors: Companies that compete in the same product class, but with products that are different in features, benefits, and price Situation analysis: The overall process of collecting and interpreting internal, competitive, and environmental information Surveys: Where the researcher asks respondents to answer a series of questions on a particular topic Total budget competitors: Companies that compete for the limited financial resources of the same customers [return to top]

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 3: Collecting and Analyzing Marketing Information

What's New in This Chapter

The following elements are improvements in this chapter from the previous edition: • • • • • • • • • • • • • • • • •

New content on big data New boxed feature explores big data and its impact on marketing analytics New section on the human element of data analytics New content on data, analytics, and insights New content and examples related to the importance of situation analysis New key terms metrics and dashboard New content on predictive analytics New content on a customer success orientation New content highlighting new technologies that answer the question, ―What do customers do with our products?‖ New content on the importance of supply chain Updated boxed feature discusses the growing problem of e-waste Updated Exhibit 3.6 Examples of Major Types of Competition Updated Exhibit 3.7 Trends in the U.S. Sociocultural Environment New Exhibit 3.8 The U.S. Labor Force by Age Group Updated sociocultural trends New boxed feature discusses the many ways Instagram uses big data The section explore the use of social media as an external data source

[return to top]

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 3: Collecting and Analyzing Marketing Information

Chapter Outline

In the outline below, each element includes references (in parentheses) to related content. "CH.##” refers to the chapter objective; “PPT Slide #” refers to the slide number in the PowerPoint deck for this chapter (provided in the PowerPoints section of the Instructor Resource Center); and, as applicable for each discipline, accreditation or certification standards (“BL 1.3.3”). Introduce the chapter and use the Ice Breaker in the PPT if desired, and if one is provided for this chapter. Review learning objectives for Chapter 4. (PPT Slides 1-3).

X. Introduction (PPT Slide 4) a. Big data refers to large data sets from massive structured and unstructured sources i. Can be analyzed and used to support strategic decisions b. Situation analysis describes current and future issues and key trends as they affect three key environments: the internal environment, the customer environment, and the external environment i. Can give the organization a big picture of the issues and trends that affect its ability to deliver value to stakeholders ii. Recognizes that data and information are not the same 1. Data is not useful until converted into information iii. Forces managers to ask continually, ―How much data and information do I need?‖ iv. Is valuable only to the extent that it improves the quality of the resulting decisions 1. Marketing managers must avoid ―paralysis by analysis‖ v. Should provide as complete a picture as possible about the organization’s current and future situation with respect to the internal, customer, and external environments XI. Conducting a Situation Analysis (PPT Slide 9) a. The Human Element i. The human element is critical ii. Situation analysis does not replace intuition/insights iii. Data does not talk or think-interpret/manage the data/process b. Data, Analytics, and Insights Are Not the Same i. Data—the facts and details of customers, product use, and/or user inputs ii. Analytics—the discovery of trends and patterns within the data via analysis techniques iii. Insights—the value of data and analytics, as these outcomes identify useable information that helps to improve operations and performance of marketing activity c. Situation Analysis Should Be Used Strategically i. Any effort at situation analysis should be well-organized, systematic, and supported by sufficient resources ii. Most important aspect of the analysis is that it should be an ongoing effort

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 3: Collecting and Analyzing Marketing Information

iii. It’s valuable only to the extent that it improves the quality of the resulting marketing plan iv. It is a challenge to track all three environments (internal, customer, external) simultaneously XII. The Internal Environment (PPT Slide 16) a. Review of Current Objectives, Strategy, and Performance i. Typically includes review the situation quarterly and monitor it on a daily or weekly basis via metrics and dashboards ii. Metrics for evaluation 1. Sales performance, market share, and/or growth rate iii. Dashboard visually represents the results of measured metrics 1. Real-time monitoring iv. Causes for concern 1. Wrong marketing goals/objectives 2. Flawed marketing strategy 3. Poor implementation 4. Macro changes 5. Tech changes 6. Changes in consumer sentiment b. Availability of Resources i. Predictive analytics to use historical data inputs to predict the future ii. Informs coping mechanisms to make up for shortfalls iii. Trying to improve productivity c. Organizational Culture and Structure i. Marketing manager should review current and anticipated cultural and structural issues that could affect marketing activities ii. Consider internal culture of firm: Is marketing respected and central to a customer focus?

1. Culture and structure are relatively stable at most firms 2. Changing structure is time consuming iii. Many now shifting toward customer success orientation XIII. The Customer Environment (PPT Slide 21) a. Examines the firm’s current customers in its target markets, as well as potential customers that currently do not purchase the firm’s product offering b. Can be conducted by using the expanded 5W model: i. Who are our current and potential customers?

1. Who is the purchaser?

2. Demographic, geographic, and psychographic 3. Are purchasers different from users?

4. Who has influence on purchase decision?

5. Who is financially responsible for purchase? ii. What do customers do with our products?

1. Quantities/combinations purchased 2. Heavy user versus light user differences

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 3: Collecting and Analyzing Marketing Information

XIV.

3. Do buyers use complementary products? a. Derived demand is when the demand for one product depends on (is derived from) the demand of another product 4. What is done with the product after use?

5. Any recycling of products or packaging? iii. Where do customers purchase our products?

1. What types of vendors? a. Online or in-store? b. Direct from the seller? c. E-commerce, direct marketing, catalogs 2. Are purchases from non-stores increasing? iv. When do customers purchase our products?

1. Is there a seasonality to buying? a. Weather impacts 2. Do promotional events affect buying?

3. Are there other variables that impact when a purchase occurs? a. Physical/social surroundings b. Time pressures c. Purchase task v. Why (and how) do customers select our products?

1. How do our products compare to competitors?

2. How do our products meet consumer needs? a. Are customer needs changing?

3. How are the products paid for?

4. Consumers loyalty or transactional 5. How can we enhance customer relationships? vi. Why do potential customers not purchase our products?

1. What needs do our products not meet?

2. What ―beats us‖ in competitive advantage?

3. Marketing mix misalignment with the market 4. What is the potential for noncustomer conversion?

The External Environment (PPT Slide 32) a. Competition i. Types of competitors 1. Brand competitors: Market products with similar features and benefits to the same customers at similar prices 2. Product competitors: Compete in the same product class, but with products that are different in features, benefits, and price 3. Generic competitors: Market different products that solve the same problem or satisfy the same basic customer need 4. Total budget competitors: Compete for the limited financial resources of the same customers ii. Stages of competitive analysis

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 3: Collecting and Analyzing Marketing Information

b.

c.

d.

e.

f.

1. Identification: Identify current and potential brand, product, generic, and total budget competitors 2. Characteristics: Assess size, growth, profitability, objectives, strategies, and target markets of each competitor 3. Assessment: Assess each key competitor’s strengths and weaknesses 4. Capabilities: Capabilities in terms of products, distribution, promotion, and pricing.

5. Response: Estimate each competitor's most likely strategies and responses under different environmental situations Economic Growth and Stability i. Change and uncertainty is inevitable ii. Overall economic conditions in our markets iii. Consumer optimism/pessimism on economy iv. Buying and spending patterns within the industry Political Trends i. Political landscape ii. Industry (de)regulation trends iii. Maintaining good relations with elected officials Legal and Regulatory Issues i. What regulatory changes can affect marketing? ii. Do recent court decisions inform strategy? iii. Do recent rulings modify our marketing activities?

1. Federal, state, and local regulations iv. Impact of changes in global trade agreements Technological Advancements i. Technology changes impact: 1. Operations and production 2. Unlock greater efficiency in marketing activities 3. Product survival/obsolescence 4. New product development ii. Frontstage technology is most noticeable to customers iii. Backstage technology advances are not as apparent iv. Radio frequency identification (RFID) is both frontstage and backstage 1. Digital data is encoded in RFID tags and is captured by reading radio waves 2. Uses in inventory, asset tracking, ID badges, controlled access, supply chain management, personnel tracking, counterfeit protection Sociocultural Trends i. How are demographics and cultural values changing? ii. What challenges/opportunities have changed our diversity (both customers and employees)? iii. What is the societal attitude toward our industry?

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 3: Collecting and Analyzing Marketing Information

iv. What social or ethical issues should we address?

XV. Collecting Marketing Data and Information (PPT Slide 44) a. Secondary Information Sources i. Internal data sources 1. Firm’s own records 2. Internal data is often not readily accessible ii. Government sources 1. Data on economy, population, business activities 2. Easily accessible, low cost iii. Book and periodical sources 1. Subscription services 2. Major trade associations 3. Academic journals 4. General business publications iv. Social media and online 1. Most companies utilize their social media presence to collect internal data on customers via chat, comments, reviews 2. Social media backed by real-time data 3. Websites such as Yelp, TripAdvisor, Google, Amazon, and thousands more collect and display consumer comments and reviews about products 4. Companies can collect data via their own websites v. Commercial sources 1. Commercial sources are almost always relevant to a specific issue 2. They deal with the actual behaviors of customers in the marketplace 3. Generally charge a fee b. Primary Data Collection i. Advantages and disadvantages 1. Expensive and time consuming 2. Gives an option to ―incomplete/dated‖ data 3. Allows pinpointing your particular needs 4. Trustworthy due to the level of control ii. Direct observation: the researcher records the overt behaviors of customers, competitors, or suppliers in natural settings 1. Main advantage of observation research is that it accurately describes behavior without influencing the target under observation.

2. Results of observation research are often overly descriptive and subject to a great deal of bias and researcher interpretation iii. Focus groups: the researcher moderates a panel discussion among a gathering of 6 to 10 people who openly discuss a specific subject 1. Good for obtaining in-depth information about a particular issue 2. Flexible

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 3: Collecting and Analyzing Marketing Information

3. Useful in designing a large-scale survey to ensure that questions have the appropriate wording 4. Main disadvantage is that focus groups require a highly skilled moderator to help limit the potential for moderator bias iv. Surveys: the researcher asks respondents to answer a series of questions on a particular topic 1. Time efficient 2. Increasingly difficult to convince people to participate v. Experiments: researcher selects matched subjects and exposes them to different treatments while controlling for extraneous variables 1. Well-suited to testing for cause-and-effect relationships 2. Can experiment with different combinations of marketing mix variables 3. Expensive 4. Difficult controlling all extraneous variables c. Overcoming Problems in Data Collection i. Incomplete or inaccurate definition of the marketing problem 1. The marketing problem must be accurately and specifically defined before the collection of any data ii. Expense 1. Key is to find alternative data collection methods or sources 2. Use Internet as a means of collecting both qualitative and quantitative data on customer opinions and behavior iii. Times 1. Online data is quite accessible iv. Organization of the vast amount of data and information 1. Convert the data and information into a form that will facilitate strategy development [return to top]

Discussion Questions

You can assign these questions several ways: in a discussion forum in your LMS; as whole-class discussions in person; or as a partner or group activity in class.

7. Discussion: Situation Analysis (PPT Slide 8) Duration: 30 minutes. a. Of the three major environments in a situation analysis (internal, customer, external), which do you think is the most important? Why? What are some situations that would make one environment more important than the others? i. Answer: Student responses will vary and there are really no right or wrong answers to this question. Obviously, all three environments are important.

Many students will argue that the external environment is the most important because it contains the most factors that can have an effect on a firm’s marketing activities. In mature markets, the customer

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 4: Developing Competitive Advantage and Strategic Focus

environment is likely to be more important. In emerging markets, the external environment will likely be in the spotlight.

8. Discussion: Consumer data (PPT Slide 7) Duration: 20 minutes. a. The Internet has made it easier for marketers to collect consumer data. Describe the positive impact that big data has had on marketing. i. Answer: To help overcome data collection costs, many researchers have turned to the Internet as a means of collecting both quantitative and qualitative data on customer opinions and behaviors. Marketers can use big data to create competitive advantages that will help them discover new insights into customer behavior. Companies of all sizes have unprecedented access to business trends, customer preferences, and buying behavior forecasts—which improves understanding of the marketing environment and marketing research capabilities. By predicting consumer behavior and investing in new innovations based on consumer preferences, companies can stay competitive in the fast-paced digital world.

9. Discussion: Noncustomers (PPT Slide 29) Duration: 30 minutes. a. Understanding the motivations of a firm’s noncustomers is often just as important as understanding its customers. Look again at the reasons why an individual would not purchase a firm’s products. How can a firm reach out to noncustomers and successfully convert them into customers? i. Answer: Professors Kim and Mauborgne discuss this issue in their book Blue Ocean Strategy. They stress eliminating noncustomers’ pain points (issues that prevent them from buying), creating value innovation (low cost and differentiation), and identifying a price that compels the mass of customers to consider the product. We address some of these issues in the next chapter; hence, this is an excellent question in preparation for that discussion. [return to top]

Instructor Manual Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 4: Developing Competitive Advantage and Strategic Focus

Contents Purpose and Perspective of the Chapter.................................................................................................................33 Cengage Supplements ..................................................................................................................................................33 Chapter Objectives ......................................................................................................................................................... 33 Key Terms .........................................................................................................................................................................33 What's New in This Chapter .......................................................................................................................................35

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 4: Developing Competitive Advantage and Strategic Focus

Chapter Outline .............................................................................................................................................................. 35 Discussion Questions.....................................................................................................................................................38

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 4: Developing Competitive Advantage and Strategic Focus

Purpose and Perspective of the Chapter

In this chapter, discuss the SWOT analysis and SWOT-driven strategic planning. A SWOT analysis encompasses both the internal and external environments of the firm. Internally, the framework addresses a firm’s strengths and weaknesses on key dimensions such as financial performance and resources, human resources, production facilities and capacity, market share, customer perceptions, product quality, product availability, and organizational communication. The assessment of the external environment organizes information on the market (customers and competition), economic conditions, social trends, technology, and government regulations. Next, we discuss how managers identify competitive advantages and establish a strategic focus.

Cengage Supplements

The following product-level supplements provide additional information that may help you in preparing your course. They are available in the Instructor Resource Center.

• • • •

Test Bank (contains assessment questions and problems) PowerPoint (provides text-based lectures and presentations) Case Notes (provides a case summary and teaching questions) Marketing Plan Worksheets (assists in writing a formal marketing plan)

Chapter Objectives • • • • • •

Explain the relevance of SWOT analysis Learn how to productively use SWOT analysis Understand SWOT-driven strategic planning Describe how managers develop and leverage competitive advantages Understand how firms establish a strategic focus Explain how marketing goals and objectives are developed

[return to top]

Key Terms

Capability: When strengths serve to satisfy a customer need Competitive advantages: Something that the firm does better than its competitors that gives it an edge in serving customers’ needs and/or maintaining mutually satisfying relationships with important stakeholders Customer intimacy: A strategy that focuses on working to know your customers and understand their needs better than the competition to develop capabilities and competitive advantages Disruption: Reinventing business processes, collaborating and integrating within the firm, investing in new technology, and creating entirely new markets to meet untapped customers’ needs

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 4: Developing Competitive Advantage and Strategic Focus

Goals: Broad, simple statements of what will be accomplished through the marketing strategy Objectives: Specific and quantitative benchmarks that can be used to gauge progress toward the achievement of the marketing goals Operational excellence: A strategy that focuses on efficiency of operations and processes to develop capabilities and competitive advantages Opportunities: Favorable conditions in the external environment that could produce rewards for the organization if acted upon Outside-in thinking: Looking at competitor strengths and weaknesses with a goal of identifying areas where competitive advantage can be gained by flipping the strengths and weaknesses of others Product leadership: A strategy that focuses on technology and product development to develop capabilities and competitive advantages Right-side-up thinking: The current state of business based on known facts and information; in essence the basis of SWOT analysis Strategic focus: The overall concept or model that guides the firm as it weaves various marketing elements together into a coherent strategy Strategy canvas: A tool for visualizing a firm’s strategy relative to other firms in a given industry; the horizontal axis identifies the key factors that the industry competes on with the products that are offered to customers; the vertical axis indicates the offering level that firms offer to buyers across these factors; the central portion of the strategy canvas is the value curve, or the graphic representation of the firm’s relative performance across its industry’s factors Strengths: What the firm can do well due to resources possessed by the firm or the nature of the relationships between the firm and its customers, its employees, or outside organizations (e.g., supply chain partners, suppliers, lending institutions, government agencies, etc.)

SWOT analysis: Focuses on the internal factors (strengths and weaknesses) and external factors (opportunities and threats) that give the firm certain advantages and disadvantages in satisfying the needs of its target market(s) SWOT matrix: A four-cell array that can be used to visually evaluate each element of a SWOT analysis (strengths, weaknesses, opportunities, threats) Threats: Barriers in the external environment that could prevent the company from reaching its objectives Upside-down thinking: An assessment of what could change in the environment that might transform current strengths into weaknesses and current weaknesses into strengths Weaknesses: Deficiencies of a firm due to a lack of resources by the firm or the nature of the relationships between the firm and its customers, its employees, or outside organizations (e.g., supply chain partners, suppliers, lending institutions, government agencies, etc.)

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 4: Developing Competitive Advantage and Strategic Focus

[return to top]

What's New in This Chapter

The following elements are improvements in this chapter from the previous edition: • • • • • • • • • • • • •

New key term disruption New section Modern Relevance of SWOT Analysis Updated Exhibit 4.2 Directives for a Productive SWOT Analysis New content on supply chain considerations in the SWOT analysis Insight resources added as a type of resource New section Adopt a Disruptive Mindset introduces new key terms right-side-up thinking, upside-down thinking, and outside-in thinking Updated Exhibit 4.5 Potential Issues to Consider in a SWOT Analysis New Exhibit 4.6 U.S. Airline Domestic Cost per Available Seat Mile Added new issues to be considered for successful SWOT analysis New Exhibit 4.7 The SWOT Matrix Updated Exhibit 4.9 Common Sources of Competitive Advantage New boxed feature discusses Kroger’s strategy for digital growth New content on advances in measuring outcomes that allow for real-time assessment

[return to top]

Chapter Outline

In the outline below, each element includes references (in parentheses) to related content. "CH.##” refers to the chapter objective; “PPT Slide #” refers to the slide number in the PowerPoint deck for this chapter (provided in the PowerPoints section of the Instructor Resource Center); and, as applicable for each discipline, accreditation or certification standards (“BL 1.3.3”). Introduce the chapter and use the Ice Breaker in the PPT if desired, and if one is provided for this chapter. Review learning objectives for Chapter 4. (PPT Slides 1-3).

XVI.

Introduction (PPT Slide 4) a. SWOT analysis: i. Is considered to be one of the most effective tools in analyzing marketing data and information ii. Links a company’s ongoing situation analysis to the development of the marketing plan iii. Structures the information from the situation analysis into four categories: strengths, weaknesses, opportunities, and threats iv. Uses the structured information to uncover competitive advantages and guide the selection of the strategic focus for the firm’s marketing strategy b. Today, innovation is more about disruption i. Reinventing business processes, collaborating and integrating within the firm, investing in new technology, and creating entirely new markets to meet untapped customers’ needs.

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 4: Developing Competitive Advantage and Strategic Focus

XVII. a. b.

XVIII. a.

b. c.

d.

XIX. a.

b.

Modern Relevance of SWOT Analysis (PPT Slide 7) SWOT is more relevant than ever for businesses If done correctly and diligently, SWOT analysis is a viable and relevant mechanism for the development of the marketing plan Making SWOT Analysis Productive (PPT Slide 9) To make SWOT analysis as productive as possible, the marketing manager should: i. Stay focused by using a series of SWOT analyses, each focusing on a specific product/market combination ii. Search extensively for competitors, whether they are a present competitor or potential future competitor iii. Collaborate with other functional areas by sharing information and perspectives iv. Examine issues from the customers’ perspective by asking questions such as ―What do customers (and noncustomers) believe about us as a company?‖ and ―Which of our weaknesses translate into a decreased ability to serve customers (and a decreased ability to convert noncustomers)?‖ 1. This includes examining the issues from the perspective of the firm’s internal customers, its employees v. Look for causes, not characteristics, by considering the firm’s resources that are the true causes for the firm’s strengths, weaknesses, opportunities, and threats vi. Separate internal issues from external issues using this key test to differentiate: ―Would this issue exist if the firm did not exist?‖ If the answer is yes, the issue should be classified as external to the firm vii. Adopt a disruptive mindset Right-side-up thinking is the current state of business based on known facts and information, in essence the basis of SWOT Upside-down thinking is an assessment of what could change in the environment that might transform current strengths into weaknesses and current weaknesses into strengths Outside-in thinking utilizes the idea of upside-down thinking and applies it to a firm’s competitors SWOT-Driven Strategic Planning (PPT Slide 20) Strengths and weaknesses: i. Exist because of resources possessed (or not possessed) by the firm, or they exist due to the nature of key relationships between the firm and its customers, its employees, or outside organizations ii. Must be leveraged into capabilities (in the case of strengths) or overcome (in the case of weaknesses) iii. Are meaningful only when they assist or hinder the firm in satisfying customer needs Opportunities and threats:

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 4: Developing Competitive Advantage and Strategic Focus

i. Are not potential marketing actions; rather, they involve issues or situations that occur in the firm’s external environments ii. Should not be ignored as the firm gets caught up in developing strengths and capabilities for fear of creating an efficient, but ineffective, organization iii. May stem from changes in the competitive, customer, economic, political/legal, technological, and/or sociocultural environments c. The SWOT matrix: i. Allows the marketing manager to visualize the analysis ii. Should serve as a catalyst to facilitate and guide the creation of marketing strategies that will produce desired results iii. Allows the manager to see how strengths and opportunities might be connected to create capabilities that are key to meeting customer needs iv. Involves assessing the magnitude and importance of each strength, weakness, opportunity, and threat XX. Developing and Leveraging Competitive Advantages (PPT Slide 35) a. Competitive advantage stems from the firm’s capabilities in relation to those held by the competition i. Can be based on both internal and external factors ii. Is based on both reality and customer perceptions iii. Is often based on the basic strategies of operational excellence, product leadership, and/or customer intimacy XXI. Establishing a Strategic Focus (PPT Slide 44) a. Establishing a strategic focus is based on developing an overall concept or model that guides the firm as it weaves various marketing elements together into a coherent strategy i. Is typically tied to the firm’s competitive advantages ii. Involves using the results of the SWOT analysis as the firm considers four major directions for its strategic efforts: aggressiveness, diversification, turnaround, or defensiveness iii. Can help ensure that the firm does not step beyond its core strengths to consider opportunities that are outside its capabilities b. Strategic focus can be visualized through the use of a strategy canvas where the goal is to develop a value curve that is distinct from the competition c. Establishing a strategic focus is an important stage of the planning process because it lays the groundwork for the development of marketing goals and objectives and connects the outcomes of the SWOT analysis to the remainder of the marketing plan XXII. Developing Marketing Objectives and Goals (PPT Slide 52) a. Marketing goals are broad, desired accomplishments that are stated in general terms i. Indicate the direction the firm attempts to move in, as well as the set of priorities it will use in evaluating alternatives and making decisions

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 4: Developing Competitive Advantage and Strategic Focus

ii. Should be attainable, realistic, internally consistent, and comprehensive and help to clarify the roles of all parties in the organization iii. Should involve some degree of intangibility b. Marketing objectives provide specific and quantitative benchmarks that can be used to gauge progress toward the achievement of the marketing goals i. Can be assessed in real time because of advances in measuring outcomes ii. Should be attainable with a reasonable degree of effort iii. May be either continuous or discontinuous, depending on the degree to which they depart from present objectives iv. Should specify the time frame for their completion v. Should be assigned to specific areas, departments, or individuals who have the responsibility to accomplish them [return to top]

Discussion Questions

You can assign these questions several ways: in a discussion forum in your LMS; as whole-class discussions in person; or as a partner or group activity in class.

10. Discussion: Strengths, Weaknesses, Opportunities, Threats (PPT Slide 21) Duration: 45 minutes. a. Strengths, weaknesses, opportunities, and threats: Which is the most important?

Why? How might your response change if you were the CEO of a corporation?

What if you were a customer of the firm? i. Answer: Although answers will vary, most students are likely to argue that strengths are the most important. If a firm has no strengths, it has little chance for success regardless of the opportunities available in the market.

Customers will certainly care more about strengths because they translate into benefits. A CEO likely considers the external issues to be most important.

11. Discussion: Competitive advantage (PPT Slide 38) Duration: 20 minutes. a. Support or contradict this statement: ―Given the realities of today’s economy and the rapid changes occurring in business technology, all competitive advantages are short lived. There is no such thing as a sustainable competitive advantage that lasts over the long term.‖ Defend your position. i. Answer: Given the rapid pace of change in today’s economy, this statement is certainly truer than at any time in the past. Students are likely to point to firms that have been successful for a long time, such as Amazon, Microsoft, Walmart, and 3M. Encourage them to identify the competitive advantages that make these firms stand out from others.

12. Discussion: Strategy canvas (PPT Slide 51) Duration: 15 minutes. a. The central portion of the strategy canvas is the value curve, or the graphic representation of the firm’s relative performance across its industry’s factors. Is it possible for an organization to be successful despite having a value curve that is

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 5: Customers, Segmentation, and Target Marketing

not distinct from the competition? In other words, can an organization be successful by selling a me-too product (a product that offers no compelling differences when compared to the competition)? Explain. i. Answer: The answer has to be ―yes‖ because there are many examples of this phenomenon. For example, it is widespread in pharmaceuticals where many products provide the same basic benefits and the sales potential is so high. Throwing another ―me-too‖ drug into the mix can lead to high sales and profit margins even if the product offers no compelling difference relative to the competition. In this case, even a small share of the market can lead to high sales/profits. This assumes that sales/profits are the most important measure of success. [return to top]

Instructor Manual Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 5: Customers, Segmentation, and Target Marketing

Contents Purpose and Perspective of the Chapter.................................................................................................................40 Cengage Supplements ..................................................................................................................................................40 Chapter Objectives ......................................................................................................................................................... 40 Key Terms .........................................................................................................................................................................40 What's New in This Chapter .......................................................................................................................................42 Chapter Outline .............................................................................................................................................................. 43 Discussion Questions.....................................................................................................................................................50

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 5: Customers, Segmentation, and Target Marketing

Purpose and Perspective of the Chapter

In this chapter, we begin our discussion of marketing strategy by examining customers, segments, and target markets. We focus our attention on the buyers who collectively make up the major portion of most markets. From this perspective, we concern ourselves with markets as individuals, institutions, or groups of individuals or institutions that have similar needs that can be met by a particular product offering. In this chapter, we examine issues associated with buyer behavior in both consumer and business markets. We also discuss traditional and individualized approaches to market segmentation, the criteria for successful market segmentation, and specific target marketing strategies. The potential combinations of target markets and marketing programs are essentially limitless. Choosing the right target market from among many possible alternatives is one of the key tests in developing a good marketing strategy.

Cengage Supplements

The following product-level supplements provide additional information that may help you in preparing your course. They are available in the Instructor Resource Center.

• • • •

Test Bank (contains assessment questions and problems) PowerPoint (provides text-based lectures and presentations) Case Notes (provides a case summary and teaching questions) Marketing Plan Worksheets (assists in writing a formal marketing plan)

Chapter Objectives • • • • •

Understand buyer behavior in consumer markets Understand buyer behavior in business markets Explain market segmentation approaches Describe how to identify market segments Describe target marketing strategies

[return to top]

Key Terms

Behavioral segmentation: The use of actual consumer behavior or product usage to make distinctions among market segments Buying center: The group of people responsible for making purchase decisions Demographic segmentation: Dividing markets into segments using demographic factors such as gender, age, income, and education Evoked set: A list of potential product choices that has been narrowed by the customer to only a few products or brands that can meet their needs

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 5: Customers, Segmentation, and Target Marketing

Geodemographic segmentation: Dividing markets into segments by neighborhood profiles based on demographic, geographic, and lifestyle segmentation variables; also known as geoclustering Hard costs: Include monetary price and associated purchase costs such as shipping and installation Market concentration: A focus on a single market segment Market segmentation: The process of dividing the total market for a particular product or product category into relatively homogeneous segments or groups Market specialization: Offering customized marketing programs that not only deliver needed products but also provide needed solutions to customers’ problems Mass customization: Providing unique products and solutions to individual customers on a mass scale Mass market targeting: The development of multiple marketing programs to serve all customer segments simultaneously Mass marketing: An undifferentiated approach that assumes that all customers in the market have similar needs and wants that can be reasonably satisfied with a single marketing program Multisegment approach: Seeking to attract buyers in more than one market segment by offering a variety of products that appeal to different needs Need: When an individual’s current level of satisfaction does not equal their desired level of satisfaction Niche market: A small, well-defined market segment One-to-one marketing: When a company creates an entirely unique product or marketing program for each customer in the target segment Permission marketing: When customers give companies permission to specifically target them in their marketing efforts Product specialization: Adapting product specifications to match the different needs of individual customer groups Psychographic segmentation: Dividing markets into segments based on state-of-mind issues such as motives, attitudes, opinions, values, lifestyles, interests, and personality Selective targeting: When a firm cherry picks the most attractive market segment opportunities and the firm has multiple capabilities in many different product categories Single segment targeting: When firms target a single segment because their capabilities are intrinsically tied to the needs of a specific market segment

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 5: Customers, Segmentation, and Target Marketing

Soft costs: Include downtime, opportunity costs, and human resource costs associated with the compatibility of systems in the buying decision Want: A consumer’s desire for a specific product that will satisfy the need [return to top]

What's New in This Chapter

The following elements are improvements in this chapter from the previous edition: • • • • • • • • • • •

New boxed feature discusses social media segmentation and how it impacts strategy Updated stats on social media use Revised and updated The Consumer Decision Journey to better illustrate the ongoing consumer journey with new labels for select stages Updated Exhibit 5.1 Stages and Issues of the Consumer Purchase Decision Journey New Exhibit 5.2 The Consumer Purchase Journey New section Active Evaluation Updated Exhibit 5.3 Common Situational Influences in the Consumer Buying Process New section Value Outcomes Over Experience Updated boxed feature discusses the opportunities in multicultural marketing New boxed feature explores shifting strategies in the beverage industry New content on firm segmentation as it relates to potential for growth

[return to top]

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 5: Customers, Segmentation, and Target Marketing

Chapter Outline

In the outline below, each element includes references (in parentheses) to related content. "CH.##” refers to the chapter objective; “PPT Slide #” refers to the slide number in the PowerPoint deck for this chapter (provided in the PowerPoints section of the Instructor Resource Center); and, as applicable for each discipline, accreditation or certification standards (“BL 1.3.3”). Introduce the chapter and use the Ice Breaker in the PPT if desired, and if one is provided for this chapter. Review learning objectives for Chapter 4. (PPT Slides 1-3).

XXIII.

XXIV.

Introduction (PPT Slide 4) a. Firms can attempt to reach… i. All buyers in a market ii. Smaller groups or segments of the market iii. Specific buyers on an individual level b. Firm must have comprehensive understanding of current/potential customers i. Motivations ii. Behaviors iii. Needs iv. Wants Buyer Behavior in Consumer Markets (PPT Slide 7) a. On the journey well before initiating a search i. Loyalty loop…purchase newer version of a previous product ii. Not only which product…but, where to buy: price and availability iii. Merchant might influence more than product 1. Loyalty to a dealer/retailer (cars, home improvement…)

2. Store credit cards or loyalty programs b. Stages and issues in consumer decision making i. Need recognition trigger 1. Starts the purchase process 2. Needs (currently not satisfied) and wants (specific product to satisfy) are not the same 3. To segment markets, understand wants 4. How do marketers trigger need recognition ii. Initial consideration set 1. Translate needs into specific products/brands 2. Evaluate portfolio's ability to satisfy needs 3. Keep your product in consumers’ evoked set 4. What are consumers’ choice criteria a. How important are specific attributes iii. Active evaluation 1. Consumers trust personal sources of information and other consumer reviews a. More than firm provided information 2. Time and effort expended vary a. Risk involved in the purchase

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 5: Customers, Segmentation, and Target Marketing

b. Experience with the product category c. Actual cost of search and product (time and money) 3. Consumers narrow the potential evoked set iv. Moment of purchase 1. Even if a product is selected for purchase, several factors can change the decision a. Product is not in stock b. Does not qualify for financing c. Something goes wrong in purchase experience d. Illness, job loss, national disaster 2. Marketers must assure product availability and increase the probability of purchase v. Post-purchase experience 1. How connected is the buying process and a long-term customer relationship 2. Marketers should monitor consumers’ feedback on the product’s performance to assess if it met/exceeded expectations a. Delight b. Dissatisfaction c. Satisfaction d. Cognitive dissonance c. Factors that affect the consumer purchase decision journey i. Decision-making complexity 1. Highly complex decisions 2. High personal, social, or financial risk 3. Coupled with a lack of experience 4. Excessive time, effort, and money to ensure ―right decision‖ 5. Low complexity, low involvement (routine) 6. Marketers provide information to help in process 7. Need to be aware of what past buyers are saying ii. Individual differences 1. Age, life cycle, occupation, socioeconomic status affect marketing strategies and tactics 2. Perceptions, motives, interests, attitudes, opinions, or lifestyle 3. Market to generations: a. Gen Z b. Millennials c. Boomers d. Silent Generation iii. Social influences 1. Culture, subculture, social class, reference groups, and family 2. Family is a key influencer (often reflect your parents’ influence) 3. Reference groups and opinion leaders impact buying decisions

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 5: Customers, Segmentation, and Target Marketing

XXV.

4. Marketers may seek out opinion leaders (social media influencers) to speak about their products 5. Software companies release beta versions to get user input iv. Situational influences 1. Physical and spatial a. Atmospherics, crowding, store layout, and design 2. Time a. Short on time, emergencies, and convenience 3. Social and interpersonal a. Group shopping, salesperson, and other customers 4. Purchase task or product usage a. Special occasions and buying a gift for others 5. Consumer dispositional a. Stress, anxiety, fear, fatigue, emotional, involvement, and mood Buyer Behavior in Business Markets (PPT Slide 22) a. Business buying behavior i. Similarities with consumer buying behavior 1. Similar stages in the buying process 2. Focus on customer satisfaction ii. Differences from consumer behavior 1. Products are not bought for personal use 2. Buying products for use in operations b. Four types of business markets i. Commercial 1. Buying raw materials for finished goods ii. Reseller 1. Buy producer finished goods and sell at a profit 2. Wholesalers, retailers, or brokers iii. Government 1. Federal, state, local, county, city purchases to provide services to citizens—education, fire, road, police, etc. iv. Institutional 1. Noncommercial: churches, schools, hospitals, etc. c. Unique characteristics of business markets i. The buying center 1. Group responsible for making purchases a. Economic buyers i. Responsible for achieving firm’s objectives b. Technical buyers i. Narrow the number of product options with the economic buyer (within budget) c. End user buyers

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 5: Customers, Segmentation, and Target Marketing

i. Greater role in buying process, for more technologically advanced products ii. Hard and soft costs 1. Hard costs a. Price of goods and shipping/handling costs 2. Soft costs a. Downtime, opportunity costs, and HR costs b. New systems and software require installation, implementation, and training iii. Reciprocity 1. When firms enter into exchange relationships to mutually benefit both parties 2. Reciprocal buying relationships iv. Mutual dependence 1. Supplier closure or limited production can be devastating 2. There may be limited or ―sole-sourced‖ materials sought 3. Customers lost due to shortages/sell outs 4. Supplier replacement can take months to years v. Value outcomes over experience 1. Importance of product value vs experience 2. Products should provide value and reliability d. The business buying process i. Problem recognition 1. The recognition of needs can stem from a variety of internal and external sources a. Employees, members of the buying center, or outside salespeople 2. Business buyers often recognize needs due to special circumstances a. When equipment or machinery breaks or malfunctions ii. Develop product specifications 1. Detailed product specifications often define business purchases 2. This occurs because new purchases must be integrated with current technologies and processes iii. Vendor identification and qualification 1. Business buyers must ensure that potential vendors can deliver on needed product specifications, within a specified time frame, and in the needed quantities iv. Solicitation of proposals or bids 1. Depending on the purchase in question, the buying firm may request that qualified vendors submit proposals or bids 2. Will detail how the vendor will meet the buying firm’s needs and fulfill the purchase criteria established during the second stage of the process

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 5: Customers, Segmentation, and Target Marketing

XXVI.

v. Vendor selection 1. The buying firm will select the vendor or vendors that can best meet its needs vi. Order processing 1. Often a behind-the-scenes process, order processing involves the details of processing the order, negotiating credit terms, setting firm delivery dates, and any final technical assistance needed to complete the purchase. vii. Vendor performance review 1. Both product and vendor specifications can be reevaluated and changed if necessary 2. The overall value received by the purchaser will affect future purchase decisions Market Segmentation (PPT Slide 32) a. Dividing the total market for a product into homogenous segments or groups i. Members will have similar likes, desires, needs, wants, or preferences ii. Big decision, whether to segment at all iii. Most firms opt to target one or more segments b. Traditional market segmentation approaches i. Mass marketing 1. No segmentation a. Treat the whole market the same 2. Assumes all customers in the market have similar needs and wants a. Only a single marketing program is needed 3. Production efficiency and low marketing cost 4. Risky, as competition responds ii. Differentiated marketing 1. Dividing the market into groups of customers with homogenous needs a. Developing a marketing program to appeal to these specific segments 2. Multi-segment approach a. Offer a differentiated variety of products that appeal to different segments (Arm & Hammer) 3. Market concentration a. Focus on a single market segment with one product line (Armor All) iii. Niche marketing 1. Focus your marketing efforts on one small, well-defined market segment 2. Unique and specific set of needs 3. Attractive niche has growth and profit potential a. But does not attract competitors 4. A highly desirable, specialized option

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 5: Customers, Segmentation, and Target Marketing

c. Individualized segmentation approaches i. One-to-one marketing 1. Creating a wholly unique product or marketing program for each customer in the target market 2. More common in luxury and custom products (homes, yachts…)

3. Service firms customize their marketing programs (lawyers, doctors, hair stylists, etc.) ii. Mass customization 1. Unique products and solutions to individual customers on a mass scale 2. Customer chooses from variety of options 3. Neighborhoods based on basic plans with options iii. Permission marketing 1. Giving marketers permission to target you 2. Opt-in email lists are most common 3. Already showing an interest in the product 4. Precisely targeting your market d. Criteria for successful segmentation i. Identifiable and measurable ii. Substantial 1. Worth your time to target iii. Responsive 1. Engage in interaction iv. Accessible 1. Reachable v. Viable and sustainable XXVII. Identifying Market Segments (PPT Slide 49) a. Segmenting consumer markets i. Behavioral segmentation 1. Consumer behavior or product usage a. Heavy, medium, or light user 2. Why people buy and use the product 3. Powerful but difficult to execute 4. Key is to understand the basic needs and benefits sought by different groups 5. Combine with other segmentation variables ii. Demographic segmentation 1. Gender, age, income, education…

2. Most widely used way to segment 3. Data is widely available and easy to measure 4. Does not help in understanding motives a. How you think, feel, and what you value iii. Psychographic segmentation 1. State of mind

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 5: Customers, Segmentation, and Target Marketing

b.

XXVIII. a.

b.

c.

d.

a. Motives, attitudes, opinions, values, lifestyles, interests, personality 2. Much more difficult to measure/assess 3. VALS framework a. Eight categories of psychographic segmentation i. Innovators ii. Thinkers iii. Achievers iv. Experiencers v. Believers vi. Strivers vii. Makers viii. Survivors iv. Geographic segmentation 1. Weather, culture, access 2. Geodemographic a. Looking at neighborhood profiles based on demographic, geographic, and lifestyle variables 3. PRIZM a. Geoclustering tool breaking down neighborhoods into 68 different demographic and behavioral clusters Segmenting business markets i. Type of organization ii. Organizational characteristics iii. Potential for growth iv. Benefits sought or buying process v. Personal and psychological characteristics vi. Relationship intensity Target Marketing Strategies (PPT Slide 57) Single segment targeting i. Capabilities are tied to the needs of a specific target market ii. Complete understanding of customer’s needs, preferences, and lifestyle iii. Focus on quality and customer satisfaction Selective targeting i. Multiple capabilities in many product categories ii. Focus on the most attractive market segments iii. Diversification of the firm’s risks Mass market targeting i. Development of multiple marketing programs to serve all customer needs simultaneously Product specialization i. When expertise in one product category can be leveraged across different markets

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 5: Customers, Segmentation, and Target Marketing

ii. Adapt product specifications to match different needs of individual customers iii. Research and development integral to marketing success e. Market specialization i. Extensive knowledge and expertise in one market ii. Can offer customized marketing solutions [return to top]

Discussion Questions

You can assign these questions several ways: in a discussion forum in your LMS; as whole-class discussions in person; or as a partner or group activity in class.

13. Discussion: Is marketing manipulative? (PPT Slide 5) Duration: 30 minutes. a. Many people criticize marketing as being manipulative based on the argument that marketing activities create needs where none previously existed. Marketers of SUVs, tobacco products, diet programs, exercise equipment, and luxury products are typically the most criticized. Given what you now know about the differences between needs and wants, do you agree with these critics? Explain. i. Answer: Most students will argue that marketing does not create needs, but rather it makes consumers more aware of needs that are not expressed.

That is, marketing gives consumers the appropriate language with which to express their needs. However, most students do believe that marketing can create wants where none previously existed. This is especially true with trendy products.

14. Discussion: Segmentation approaches (PPT Slide 34) Duration: 30 minutes. a. Many consumers and consumer advocates are critical of individualized segmentation approaches due to personal privacy concerns. They argue that technology has made it far too easy to track buyer behavior and personal information. Marketers counter that individualized segmentation can lead to privacy abuses, but that the benefits to both consumers and marketers far outweigh the risks. Where do you stand on this issue? What are the benefits and risks associated with individualized segmentation? i. Answer: The benefits and risks of individualized segmentation are fairly easy to discuss. The key for most students will be whether the consumer has control over how this information is used. Techniques like permission marketing are not problematic because the consumer chooses to participate. However, when consumers are targeted without their knowledge or permission, the issues of privacy and security become more prevalent. In the future, this issue will become more important as technologies such as RFID and near field communication (NFC) allow marketers to track consumers with an exceptionally high degree of specificity.

15. Discussion: Changing demographics (PPT Slide 52) Duration: 30 minutes.

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 6: The Marketing Program

a. As we have seen thus far, the size of the consuming population over the age of 50 continues to grow. What are some of the current ethical issues involved in targeting this age group? As this group gets older, will these issues become more or less important? Explain. i. Answer: Older populations are less knowledgeable about technology, so the use of any advanced technology to track these consumers is a major ethical issue. Marketers must also be cognizant of how this information is used as many older consumers do not fully understand their rights in this area. A major fear is that health-related information could potentially be used to discriminate against older consumers. These issues are likely to become more important for a while (10–15 years perhaps), and then gradually lessen in importance as the population as a whole becomes more informed about these issues. [return to top]

Instructor Manual Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 6: The Marketing Program

Contents Purpose and Perspective of the Chapter.................................................................................................................52 Cengage Supplements ..................................................................................................................................................52 Chapter Objectives ......................................................................................................................................................... 52 Key Terms .........................................................................................................................................................................52 What's New in This Chapter .......................................................................................................................................54 Chapter Outline ..............................................................................................................................................................55 Discussion Questions.....................................................................................................................................................63

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 6: The Marketing Program

Purpose and Perspective of the Chapter

In this chapter, we examine the four elements of the marketing program in more detail. Issues such as product design, affordability, distribution convenience, and product awareness are major considerations in developing an effective marketing program. Problems in any one area can create obstacles that customers may be unwilling to overlook as they search for the best offering that will fulfill their needs.

Cengage Supplements

The following product-level supplements provide additional information that may help you in preparing your course. They are available in the Instructor Resource Center.

• • • •

Test Bank (contains assessment questions and problems) PowerPoint (provides text-based lectures and presentations) Case Notes (provides a case summary and teaching questions) Marketing Plan Worksheets (assists in writing a formal marketing plan)

Chapter Objectives • • • • •

Understand and explain key issues and challenges in product strategy Understand key issues in pricing strategy Describe supply chain strategy and strategic supply chain issues Explain the components of integrated marketing strategy Describe the strategic implementation of personal selling and sales management

[return to top]

Key Terms

Advertising: Paid, nonpersonal communication transmitted through media such as television, radio, magazines, newspapers, direct mail, outdoor displays, the Internet, and mobile devices AIDA model: The classic model for outlining promotional goals and achieving this ultimate outcome based on attention, interest, desire, and action Assortment: The depth of each product line Breakeven pricing: The price point at which the costs of producing a product equal the revenue made from selling the product Business products: Products purchased for resale, to make other products, or for use in a firm’s operations Consumer products: Products used for personal use and enjoyment

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 6: The Marketing Program

Contact efficiency: Where channels reduce the number of contacts necessary to exchange products Cost-plus pricing: Adding a percentage of the manufacturer’s total cost to the total cost to establish the price of a custom-made product Customer churn: When subscriptions are not renewed because the customer stops using it and no longer sees value in the service Exclusive distribution: Giving one merchant or outlet the sole right to sell a product within a defined geographic region Integrated marketing communication (IMC): The coordination of all promotional activities (media advertising, social media, direct mail, personal selling, sales promotion, public relations, packaging, store displays, website design, personnel) to produce a unified, customer-focused message Intensive distribution: Making a product available in the maximum number of merchants or outlets in each area to gain as much exposure and as many sales opportunities as possible Marketing program: The strategic combination of the four basic marketing mix elements, commonly known as the 4Ps: product, price, place (distribution), and promotion Omnichannel: The concept of bringing together communication, products and services, supply chain management, payment options and terms, customer service, and more into a seamless experience for consumers Personal selling: Paid personal communication that attempts to inform customers about products and persuade them to purchase those products Price elasticity: Customers’ responsiveness or sensitivity to changes in price Product line: A group of closely related product items Product mix (product portfolio): The total group of products offered by the company Public relations: Tracking public attitudes, identifying issues that may elicit public concern, and developing programs to create and maintain positive relationships between a firm and its stakeholders Pull strategy: When a firm focuses promotional efforts toward stimulating demand among final customers, who then exert pressure on the supply chain to carry the product Push strategy: When a firm focuses promotional efforts on members of the supply chain, such as wholesalers and retailers, to motivate them to spend extra time and effort on selling the product Sales promotion: Activities that create buyer incentives to purchase a product or that add value for the buyer or the trade

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 6: The Marketing Program

Selective distribution: Giving several merchants or outlets the right to sell a product in a defined geographic region Slotting allowances: Fees paid by manufacturers to get a product placed on store shelves or featured as a "choice" product on e-commerce sites Supply chain: The connection and integration of all members of the marketing channel Supply chain management: The coordination of activities related to the flow and transformation of supplies, products, and information throughout the supply chain to the ultimate consumer, integrating the functions of operations management, logistics management, procurement, and marketing channel management Value: A customer’s subjective evaluation of benefits relative to costs to determine the worth of a firm’s product offering relative to other product offerings Variety: The number of product lines to offer; also known as width [return to top]

What's New in This Chapter

The following elements are improvements in this chapter from the previous edition: • • • • • • • • • •

• • • • • • • • • •

New boxed feature explores Tesla’s marketing program Updated Exhibit 6.1 Procter & Gamble’s Portfolio of Fabric and Home Care Products Updated Exhibit 6.2 Unique Characteristics of Services and Resulting Marketing Challenges Phrase discontinuous innovation updated to disruptive innovation New boxed feature discusses the pitfalls of clearance pricing strategies New content on subscription-based pricing models and customer churn New content on freemium pricing New content on tiered pricing New content on per unit/user pricing technique Expanded content on supply chain strategy and supply chain management key areas, including operations management, procurement management, logistics management, and channel management New Exhibit 6.5 Supply Chain Management Key Areas Expanded content on marketing channel functions New key term omnichannel Updated section Technological Improvements, including content on sensors, data, and blockchain New Exhibit 6.6 U.S. E-Commerce Percent of Total Retail Updated boxed feature discusses Walmart’s leadership in supply chain management New section Expecting and Planning for Disruption New Exhibit 6.8 Digital vs. Traditional Ad Spending in the United States New Exhibit 6.9 Digital Advertising Revenues by Format New content on enabling salespeople via operations

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 6: The Marketing Program

[return to top]

Chapter Outline

In the outline below, each element includes references (in parentheses) to related content. "CH.##” refers to the chapter objective; “PPT Slide #” refers to the slide number in the PowerPoint deck for this chapter (provided in the PowerPoints section of the Instructor Resource Center); and, as applicable for each discipline, accreditation or certification standards (“BL 1.3.3”). Introduce the chapter and use the Ice Breaker in the PPT if desired, and if one is provided for this chapter. Review learning objectives for Chapter 4. (PPT Slides 1-3).

XXIX.

Introduction (PPT Slide 4) a. The marketing program refers to the strategic combination of the four basic marketing mix elements, commonly known as the 4Ps: i. Product ii. Price iii. Place (distribution) iv. Promotion b. Marketing program has as its outcome a complete offering that consists of an array of physical (tangible), service (intangible), and symbolic (perceptual) attributes designed to satisfy customers’ needs and wants i. Strives to overcome commoditization by enhancing the service and symbolic elements of the offering

XXX. a. b. c. d.

e.

Product Strategy (PPT Slide 6) Lies at the heart of every organization in that it defines what the organization does and why it exists Is about delivering benefits that enhance a customer’s situation or solve a customer’s problems Strategic issues in the product portfolio The product portfolio i. Products used for personal use and enjoyment are called consumer products ii. Products purchased for resale, to make other products, or for use in a firm’s operations are called business products iii. Consists of a group of closely related product items (product lines) and the total group of products offered by the firm (product mix) 1. Involves strategic decisions such as the number of product lines to offer (variety), as well as the depth of each product line (assortment) iv. Benefits 1. Can create a number of important benefits for firms, including economies of scale, package uniformity, standardization, sales and distribution efficiency, and equivalent quality beliefs The challenges of service products

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 6: The Marketing Program

XXXI.

i. Challenges stem mainly from the fact that services are intangible ii. Other challenging characteristics of services include simultaneous production and consumption, perishability, heterogeneity, and clientbased relationships iii. Include the following issues: 1. Service firms experience problems in balancing supply (capacity) with demand 2. Service demand is time-and-place dependent because customers or their possessions must be present for delivery 3. Customers have a difficult time evaluating the quality of a service before it is purchased and consumed 4. Service quality is often inconsistent and very difficult to standardize across many customers 5. The need for some services is not always apparent to customers; consequently, service marketers often have trouble tying their offerings directly to customers’ needs 6. Many services cannot easily be delivered when barriers exist to purchasing the service f. Developing new products i. A vital part of a firm’s efforts to sustain growth and profits ii. Considers six strategic options related to the newness of products: 1. New-to-the-world products (disruptive innovations)—involve a pioneering effort by a firm that leads to the creation of an entirely new market 2. New product lines—represent new offerings by the firm, but they become introduced into established markets 3. Product line extensions—supplement an existing product line with new styles, models, features, or flavors 4. Improvements or revisions of existing products—offer customers improved performance or greater perceived value 5. Repositioning—involves targeting existing products at new markets or segments 6. Cost reductions—involves modifying products to offer performance similar to competing products at a lower price iii. Depends on the ability of the firm to create a differential advantage for the new product iv. Typically proceeds through five stages: idea generation, screening and evaluation, development, test marketing, and commercialization Pricing Strategy (PPT Slide 19) a. Pricing is a key factor in producing revenue for a firm i. Is the easiest of all marketing variables to change ii. Is among most complex decisions b. Important consideration in competitive intelligence

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i. Considered to be the only real means of differentiation in mature markets plagued by commoditization c. Key issues in pricing strategy i. The firm’s cost structure 1. Is typically associated with pricing through the use of breakeven analysis or cost-plus pricing 2. Should not be the driving force behind pricing strategy because different firms have different cost structures 3. Should be used to establish a floor below which prices cannot be set for an extended period of time ii. Perceived value 1. Is a difficult term to define because it means different things to different people 2. Is defined as a customer’s subjective evaluation of benefits relative to costs to determine the worth of a firm’s product offering relative to other product offerings iii. The price/revenue relationship 1. Is usually based on two general pricing myths: (1) when business is good, a price cut will capture greater market share, and (2) when business is bad, a price cut will stimulate sales 2. Means that firms should not always cut prices but should instead find ways to build value into the product and justify the current, or a higher, price iv. Pricing objectives 1. Setting specific pricing objectives that are realistic, measurable, and attainable is an important part of pricing strategy 2. Common pricing objectives: a. Profit-oriented b. Volume-oriented c. Market demand d. Market share e. Cash flow f. Competitive matching g. Prestige h. Status quo v. Price elasticity 1. Refers to customers’ responsiveness or sensitivity to changes in price a. Price elasticity is higher in the following situations: i. Availability of substitute products ii. Higher total expenditure iii. Noticeable price differences iv. Easy price comparison b. Price elasticity is lower (more inelastic) in these situations:

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i. ii. iii. iv. v. vi.

Lack of substitutes Real or perceived necessities Complementary products Perceived product benefits Situational influences Product differentiation

d. Pricing service products i. Is critical because price may be the only cue to quality that is available in advance of the purchase experience ii. Becomes more important—and more difficult—when: 1. Service quality is hard to detect prior to purchase 2. The costs associated with providing the service are difficult to determine 3. Customers are unfamiliar with the service process 4. Brand names are not well established 5. The customer can perform the service themselves 6. The service has poorly defined units of consumption 7. Advertising within a service category is limited 8. The total price of the service experience is difficult to state beforehand iii. Can follow a subscription-based pricing model. Subscription services suffer from customer churn when subscriptions are not renewed because the customer stops using it and no longer sees value in the service iv. Is often based on yield management systems that allow a firm to simultaneously control capacity and demand in order to maximize revenue and capacity utilization e. Base pricing strategies i. Price skimming—intentionally sets a high price relative to the competition, thereby ―skimming‖ off the profits early after the product’s launch ii. Price penetration—designed to maximize sales, gain widespread market acceptance, and capture a large market share quickly by setting a relatively low initial price iii. Freemium pricing—offering a free trial in order to gain customers with the goal that individuals will continue their subscription once the trial period ends iv. Prestige pricing—sets prices at the top end of all competing products in a category v. Value-based pricing (EDLP)—set reasonably low prices but still offer highquality products and adequate customer services vi. Competitive matching—matching competitors’ prices and price changes vii. Non-price strategies—builds the marketing program around factors other than price f. Adjusting the base price

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g.

XXXII. a.

b. c.

d. e.

i. Discounting—temporary price reductions to stimulate sales or store traffic ii. Reference pricing—compare the actual selling price to an internal or external reference price iii. Price lining—price of a competing product is the reference price iv. Odd pricing—not using whole, round numbers v. Price bundling—brings together two or more complementary products for a single price vi. Tiered pricing—offering a base-level service and additional levels of service that include more features Strategies for adjusting prices in business markets include: i. Trade discounts—manufacturers will reduce prices for certain intermediaries in the supply chain based on the functions that the intermediary performs ii. Discounts and allowances—sales and price breaks iii. Per unit/user—offer different plans for businesses based on the number of employees that use the product iv. Geographic pricing—reductions or increases based on transportation costs or the actual physical distance between the seller and the buyer v. Transfer pricing—when one unit in an organization sells products to another unit vi. Barter and countertrade—use products, rather than cash, for payments Supply Chain Strategy (PPT Slide 29) Centers around supply chain management, the coordination of activities related to the flow and transformation of supplies, products, and information throughout the supply chain to the ultimate consumer i. Has become more salient to consumers Important to providing time, place, and possession utility for consumer and business buyers Consists of four interrelated components: i. Operations management—managing activities from production to final delivery through system-wide coordination ii. Procurement management—processes to obtain resources to create value through sourcing, purchasing, and recycling including materials and information iii. Logistics management—managing the efficient and effective flow of materials, products, and information from the point of origin to consumption iv. Channel management—channel members that direct the flow of products The term supply chain expresses the connection and integration of all members of the marketing channel Only effective when all channel members are integrated and committed to: i. Connectivity—the informational and technological linkages among firms in the supply chain network

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f.

XXXIII.

ii. Community—the sense of compatible goals and objectives among firms in the supply chain network iii. Collaboration—the recognition of mutual interdependence among members of the supply chain network Strategic supply chain issues i. Marketing channel functions 1. Organized systems of marketing institutions through which products, resources, information, funds, and/or product ownership flow from the point of production to the final user 2. Greatly increase contact efficiency by reducing the number of contacts necessary to exchange products 3. Have been disrupted by omnichannel, the concept of bringing together communication, products and services, supply chain management, payment options and terms, customer service, and more into a seamless experience for consumers ii. Marketing channel structure 1. Exclusive distribution, where a firm gives one merchant or outlet the sole right to sell a product within a defined geographic region 2. Selective distribution, where a firm gives several merchants or outlets the right to sell a product in a defined geographic region 3. Intensive distribution, which makes a product available in the maximum number of merchants or outlets in each area to gain as much exposure and as many sales opportunities as possible iii. Power in the supply chain 1. Can lead to conflict as each firm attempts to fulfill its mission, goals, objectives, and strategies by putting its own interests ahead of other firms 2. Can result from five different sources: a. Legitimate power—based on the firm’s position in the supply chain b. Reward power—ability to help other parties reach their goals and objectives c. Coercive power—ability to take positive outcomes away from other channel members d. Information power—having and sharing knowledge e. Referent power—personal relationships and the fact that one party likes another party iv. Trends in supply chain strategy 1. Technological improvements 2. Balancing the risks and benefits of supply chain functions 3. Expecting and planning for disruption Integrated Marketing Communications (PPT Slide 36)

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a. Integrated Marketing Communications (IMC) includes conveying and sharing meaning between buyers and sellers, either as individuals, firms, or between individuals and firms i. Refers to the strategic, coordinated use of promotion to create one consistent message across multiple channels to ensure maximum persuasive impact on the firm’s current and potential customers b. Strategic issues in integrated marketing communications i. Important to take a holistic perspective that coordinates not only all promotional elements but also the IMC program with the rest of the marketing program (product, price, and supply chain strategy) ii. Typically sets goals and objectives for the promotional campaign using the AIDA model—attention, interest, desire, and action iii. Can change depending on whether the firm uses a pull or push strategy with respect to its supply chain 1. When firms use a pull strategy, they focus their promotional efforts toward stimulating demand among final customers, who then exert pressure on the supply chain to carry the product 2. In a push strategy, promotional efforts focus on members of the supply chain, such as wholesalers and retailers, to motivate them to spend extra time and effort on selling the product c. Advertising i. Identified as paid, nonpersonal communication transmitted through the media such as television, radio, magazines, newspapers, direct mail, outdoor displays, the Internet, and mobile devices ii. Is rapidly expanding online as consumers spend less time with traditional media iii. Online is evolving, with influencer marketing iv. Offers many benefits because it is extremely cost efficient when it reaches a large number of people. On the other hand, the initial outlay for advertising can be expensive v. Is sometimes difficult to measure in terms of its effectiveness in increasing sales d. Public relations i. Tracks public attitudes, identifies issues that may elicit public concern, and develops programs to create and maintain positive relationships between a firm and its stakeholders ii. Can be used to promote: 1. The firm 2. Its people 3. Its ideas 4. Its image 5. Or to create an internal shared understanding among employees

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iii. Can improve the public’s general awareness of a company and can create specific images such as quality, innovativeness, value, or concern for social issues iv. Often confused with publicity; however, publicity is more narrowly defined to include the firm’s activities designed to gain media attention through articles, editorials, or news stories v. Can involve the use of a wide variety of methods, including: 1. News or press releases 2. Feature articles or content 3. White papers 4. Press conferences and webinars 5. Event sponsorship 6. Product placement 7. Employee relations e. Personal selling and sales management i. Personal selling is paid, personal communication that attempts to inform customers about products and persuade them to purchase those products.

1. Is the most precise form of communication because it assures companies that they are in direct contact with an excellent prospect 2. Has a serious drawback of high cost per contact 3. Costs can be reduced via new processes and systems 4. Goals are typically associated with finding prospects, informing prospects, persuading prospects to buy, and keeping customers satisfied through follow-up service after the sale 5. Has evolved to take on elements of customer service and marketing research in order to generate repeat sales and develop ongoing relationships with customers 6. Sales management activities include a. Development of sales force objectives b. Determining the size of the sales force c. Recruiting and training salespeople d. Enabling salespeople via operations e. Controlling and evaluating the sales force 7. Has been greatly impacted by technological advances, especially online sales training and sales automation systems that push integrated customer, competitive, and product information toward the salesperson ii. Sales promotion involves activities that create buyer incentives to purchase a product or that add value for the buyer or the trade 1. Can be targeted toward consumers, channel intermediaries, or the sales force 2. Has one universal goal: to induce product trial and purchase

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3. Is typically used in support of advertising, public relations, or personal selling activities rather than as a stand-alone promotional element 4. Consumer sales promotion a. Can be initiated by any member of the supply chain, but manufacturers or retailers typically offer them b. Represents an effective way to introduce new products or promote established brands c. Can include such activities as coupons, rebates, samples, loyalty programs, point-of-purchase promotion, premiums, contests and sweepstakes, and direct mail 5. Business (trade) sales promotion a. Is undertaken to push products through the channel by increasing sales and encouraging increased effort among channel partners b. Uses many of the same promotional methods that are targeted toward consumers; however, it involves a number of unique methods including trade allowances, free merchandise, training assistance, cooperative advertising, and selling incentives offered to an intermediary’s sales force [return to top]

Discussion Questions

You can assign these questions several ways: in a discussion forum in your LMS; as whole-class discussions in person; or as a partner or group activity in class.

16. Discussion: Freemium pricing (PPT Slide 25) Duration: 20 minutes. a. For subscription services, many use a freemium pricing strategy by offering a free trial in order to gain customers with the goal that individuals will continue their subscription once the trial period ends. Consider the last time you signed up for a freemium offering. Did you continue your subscription after the trial ended? Do you think freemium pricing is effective? Why or why not? i. Answer: Students’ level of personal experience with freemium pricing will vary. Some will argue freemium pricing does not work while others may say it is effective. It’s important to note that the pricing strategy is dependent on subscription renewal as the initial freemium is considered a customer acquisition cost that is only recovered with paid subscription renewal.

17. Discussion: Product strategy (PPT Slide 6) Duration: 15 minutes. a. Consider the number of product choices available in the U.S. consumer market. In virtually every product category, consumers have many options to fulfill their needs. Are all of these options really necessary? Is having this many choices a

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good thing for consumers? Why or why not? Is it a good thing for marketers and retailers that have to support and carry all of these product choices? Why or why not? i. Answer: Students should immediately see that this situation is not necessarily a good thing for marketers and retailers. It would be much easier and much less expensive to sell only a few products or choices in each category. The limited shelf space available in retail stores is also an important consideration (this is a good point to bring up slotting allowances). That said, students will have a harder time determining whether this situation is good for consumers. Obviously, more choices mean a higher standard of living. But at what cost? Encourage students to discuss how prices would change if marketers eliminated some or most of the options that they make available to consumers.

18. Discussion: Pricing strategy (PPT Slide 24) Duration: 30 minutes. a. Pricing strategy associated with services is typically more complex than the pricing of tangible goods. As a consumer, what pricing issues do you consider when purchasing services? How difficult is it to compare prices among competing services, or to determine the complete price of the service before purchase? What could service providers do to solve these issues? i. Answer: Most customers have few, if any, reference prices for what services should cost. As a result, the best way to consider prices for services is to shop around. Although this is easy in some service categories (hotels, air travel), it is extremely difficult or time consuming in others (professional services, hairstyling, dry cleaners). Many services quote prices by the hour.

However, this is also problematic because many customers will compare these rates to their own hourly wages. Service firms should be as open and transparent as possible about their prices. They should also make pricing information easy to find and easy to compare to competing firms. [return to top]

Instructor Manual Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 7: Branding and Positioning

Contents Purpose and Perspective of the Chapter.................................................................................................................66 Cengage Supplements ..................................................................................................................................................66 Chapter Objectives ......................................................................................................................................................... 66 Key Terms .........................................................................................................................................................................66 What's New in This Chapter .......................................................................................................................................68

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Chapter Outline ..............................................................................................................................................................68 Discussion Questions.....................................................................................................................................................73

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 7: Branding and Positioning

Purpose and Perspective of the Chapter

As the elements of the marketing program come together to create the complete offering, this chapter discusses how the marketing program can be used to create effective branding and positioning. These decisions are critical because they create differentiation among competing offerings in the marketplace. This differentiation is the antidote to commoditization; however, it is becoming increasingly difficult for firms to brand and position their offerings in meaningful ways.

For the firms that are successful, having a solid branding and positioning strategy is truly priceless.

Cengage Supplements

The following product-level supplements provide additional information that may help you in preparing your course. They are available in the Instructor Resource Center.

• • • •

Test Bank (contains assessment questions and problems) PowerPoint (provides text-based lectures and presentations) Case Notes (provides a case summary and teaching questions) Marketing Plan Worksheets (assists in writing a formal marketing plan)

Chapter Objectives • • • •

Define brand, brand name, and brand mark Understand strategic issues in branding Understand how branding is tied to differentiation and positioning Describe the product life cycle

[return to top]

Key Terms

Brand: A combination of name, symbol, term, or design that identifies a specific product Brand associations: The brand’s image, attributes, or benefits that either directly or indirectly give the brand a certain personality Brand equity: The value of a brand to the firm Brand licensing: A contractual agreement where a company permits an organization to use its brand on non-competing products in exchange for a licensing fee Brand loyalty: A positive attitude toward a brand that causes customers to have a consistent preference for that brand over all other competing brands in a product category Brand mark: The part of a brand that cannot be spoken, including symbols, figures, or a design Brand name: The part of a brand that can be spoken, including words, letters, and numbers

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Cobranding: The use of two or more brands within one product to capitalize on the equity of each brand Decline stage: The final stage of the product life cycle characterized by a persistent decline in revenue Development stage: The first stage in the product life cycle; begins with a concept, which has several components: (1) an understanding of the specific uses and benefits that target customers seek in a new product; (2) a description of the product, including its potential uses and benefits; (3) the potential for creating a complete product line that can create synergy in sales, distribution, and promotion; and (4) an analysis of the feasibility of the product concept, including such issues as anticipated sales, required return on investment, time of market introduction, and length of time to recoup the investment Differentiation: Creating differences in the firm’s product offering that set it apart from competing offerings Divesting: Withdrawing all marketing support from the product Family branding: When a firm uses the same name or part of the brand name on every product Growth stage: The stage in the product life cycle that begins after introduction; characterized by an upward sales curve and rapidly increasing profits following by decline toward the end of the stage Harvesting: A gradual reduction in marketing expenditures and uses a less resource-intensive marketing mix Individual branding: When a firm gives each of its product offerings a different brand name Introduction stage: The stage in the product life cycle that begins when development is complete and ends when sales indicate that target customers widely accept the product Manufacturer brands: Name brand products produced by a manufacturer Maturity stage: The stage in the product life cycle that begins after the growth stage when sales plateau; characterized by four general goals: (1) generating cash flow; (2) holding market share; (3) stealing market share; (4) increasing share of customer Perceptual map: A spatial representation of customer perceptions and preferences by means of a visual display Positioning: Creating a mental image of the product offering and its differentiating features in the minds of the target market Private-label brands: Brands owned by the merchants that sell them Strategy canvas: A tool for visualizing a firm’s strategy relative to other firms in a given industry; the horizontal axis identifies the key factors that the industry competes on with the products that are offered to customers; the vertical axis indicates the offering level that firms

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offer to buyers across these factors; the central portion of the strategy canvas is the value curve, or the graphic representation of the firm’s relative performance across its industry’s factors [return to top]

What's New in This Chapter

The following elements are improvements in this chapter from the previous edition: • • • • • • • • • • •

New boxed feature explores Made in U.S.A. labeling New, relevant brand examples throughout the chapter Updated Exhibit 7.1 Potential Brand Attributes to include influencers and mobile apps Updated Exhibit 7.2 The Strongest and Weakest U.S. Corporate Reputations Added ―product awareness‖ as an advantage of branding New content to address brands growing at a faster rate than in the past Updated Exhibit 7.4 The World’s Most Valuable Brands New boxed feature explores Mattel’s shifting strategy to reinvigorate sales New Exhibit 7.6 Hypothetical Strategy Canvas for the Ride-Sharing Market Updated Exhibit 7.7 Using Product Descriptors as a Basis for Differentiation Updated boxed feature discusses how Nintendo refined its strategy with the introduction of the Nintendo Switch

[return to top]

Chapter Outline

In the outline below, each element includes references (in parentheses) to related content. "CH.##” refers to the chapter objective; “PPT Slide #” refers to the slide number in the PowerPoint deck for this chapter (provided in the PowerPoints section of the Instructor Resource Center); and, as applicable for each discipline, accreditation or certification standards (“BL 1.3.3”). Introduce the chapter and use the Ice Breaker in the PPT if desired, and if one is provided for this chapter. Review learning objectives for Chapter 4. (PPT Slides 1-3).

XXXIV.

Introduction (PPT Slide 4) a. A brand is a combination of name, symbol, term, or design that identifies a specific product. Brands have two parts: i. Brand name—the part of a brand that can be spoken, including words, letters, and numbers ii. Brand mark—symbols, figures, or a design that cannot be spoken b. To be truly effective, a brand should succinctly capture the total offering in a way that answers a question in the customer’s mind XXXV. Strategic Issues in Branding (PPT Slide 10) a. Most firms consider their corporate brands to be equally as important as individual product-related brands i. Product-related brands and corporate brands are clearly intertwined ii. In some companies, the corporate brand dominates

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b. Branding typically starts with individual products, but the principles also apply to both physical and online stores as well as services c. Advantages of branding i. Product awareness and identification ii. Comparison shopping iii. Shopping efficiency iv. Risk reduction v. Product acceptance vi. Enhanced self-image and product loyalty d. Specific branding decisions i. Manufacturer brands 1. Reduced costs 2. Built-in loyalty 3. Enhanced image 4. Lower inventory 5. Less risk ii. Private-label brands 1. Higher profit 2. Less competition 3. Exclusive 4. Total control 5. Merchant loyalty e. Strategic branding decisions i. Individual branding 1. Each product gets a different brand name ii. Family branding 1. Same name for every product in the line 2. One product reflects upon others f. Strategic brand alliances i. Cobranding 1. Two or more brands on a product 2. Distinctive, differentiated products 3. Can increase perceptions of quality and customer familiarity 4. Leveraging other’s brand recognition ii. Brand licensing 1. Contractual relationship allowing a company to use its brand on noncompeting products, in return the licensor gets a licensing fee g. Brand value i. Brand loyalty is a positive attitude toward a brand that causes customers to have a consistent preference for that brand over all other competing brands in a product category. There are three degrees of brand loyalty: 1. Brand recognition—a customer knows about the brand and is considering it as one of several alternatives in the evoked set

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h.

XXXVI. a.

b.

c.

d.

2. Brand preference—a customer prefers one brand to competitive brands and will usually purchase this brand if it is available 3. Brand insistence—customers will go out of their way to find the brand and will accept no substitute ii. The value of a brand to the firm is often referred to as brand equity iii. Brand associations include the brand’s image, attributes, or benefits that either directly or indirectly give the brand a certain personality Packaging and labeling i. Protection, storage, and convenience ii. Play a role in product modification/repositioning iii. Improved functionality iv. Amplify branding v. More durable container/reusable vi. Recycled packaging vii. Resealable packaging viii. Individual but sold in bulk Differentiation and Positioning (PPT Slide 20) Differentiation i. Creating differences in product offerings that set it apart from the competition ii. Distinct product features, added services… iii. Relates to the product and marketing program Positioning i. Creating a mental image of the product offering that sets it apart from competitors ii. Differentiating features in the consumers’ minds iii. Consumers’ perceptions of the real or perceived benefits Creating positive positioning i. Identify needs, wants, and preferences desired by target market ii. Evaluate the differentiation and positioning of current, potential competitors iii. Compare the firm’s current relative position vis-à-vis the competition iv. Incorporate a vision of disruptive technologies and competition v. Identify unique differentiation and positioning not offered by the competition that matches the firm’s capabilities vi. Develop a marketing program to create the firm’s position in the minds of the target market vii. Continually reassess In differentiating and positioning the product offering, the principle task for the firm is to develop and maintain a relative position for the product i. This task is typically addressed using tools 1. A perceptual map represents customer perceptions and preferences spatially by means of a visual display

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e.

f.

XXXVII. a. b.

c.

2. The strategy canvas is an excellent tool for demonstrating the firm’s relative position in terms of the competitive factors that are important to the target market Bases for differentiation i. The brand—most important 1. Real qualities 2. Psychological qualities ii. Product descriptors 1. Features—factual description of product, characteristics 2. Advantages—performance characteristics 3. Benefits—need satisfaction iii. Customer support services Positioning strategies i. Strengthening a current position 1. Monitor the target market’s wants and satisfaction 2. Continually raising the bar: customer expectations ii. Finding a new positioning 1. May require a focus on new products Managing Brands Over Time (PPT Slide 30) The traditional product life cycle is a useful tool for addressing the management of products, brands, and product strategy over time Development stage i. No revenue during product innovation and development 1. Net cash outflow from expenses ii. High financial, marketing, and opportunity risk 1. Uncertainty in developing new products and brands iii. Begins with a concept 1. Understanding uses/benefits that market wants 2. A description of the product and uses/benefits 3. Potential for having a complete line of products for synergy in sales, promotion, and supply chain 4. Feasibility studies 5. Anticipated sales, ROI required, timing of market introduction, and length of time to recoup costs Introduction stage i. Development is complete ii. Ends when sales indicate target customers widely accept the product iii. Marketing strategy goals common to the introduction stage include: 1. Attracting customers by raising awareness through promotion 2. Inducing trial 3. Engaging in customer education 4. Strengthening or expanding channel and supply chain relationships 5. Building on the availability and visibility of the product

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6. Setting pricing objectives that will balance the firm’s need to recoup investment with the competitive realities of the market iv. Length of stage can vary d. Growth stage i. Upward sales curve, and profits should rapidly increase, and then decline, toward the end ii. The length of the growth stage varies iii. Firm has two main priorities: 1. Establishing a strong, defensible market position 2. Achieving financial objectives that repay investment and earn enough profit to justify a long-term commitment to the product iv. Goals 1. Leverage the product’s perceived differential advantages to secure a strong market position 2. Establish a clear brand identity 3. Create unique positioning through advertising 4. Maintain control over product quality 5. Maximize availability of the product through distribution and promotion 6. Maintain or enhance the product’s ability to deliver profits to key channel and supply chain partners 7. Find the ideal balance between price and demand 8. Always keep an eye focused on the competition v. Strategy 1. Strategy shifts… a. From acquisition to retention i. Building brand loyalty b. From stimulating product trial to generating repeat purchases and building brand loyalty 2. Pricing becomes more challenging a. Competitors are entering the market b. Balance between price/cash needs c. Build a defensible position into maturity stage e. Maturity stage i. Maturity is the longest stage ii. Four goals 1. Generate positive cash flow 2. Hold market share…or exit 3. Steal market share 4. Increase share of customer iii. To achieve these goals, firm have four general options: 1. Develop a new product image 2. Find and attract new users to the product 3. Discover new applications and uses for the product

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4. Apply new technology to the product f. Decline stage i. Sales plateau and a decline in revenue begins ii. A firm has two basic options in the decline stage: 1. Attempt to postpone the decline (renewal) 2. Accept the inevitable a. Harvesting—gradual cut in marketing spending i. Funnel cash into other new product development b. Divesting—pull all marketing support i. Can keep the product or sell to another firm iii. Strategy 1. Market segment potential a. Loyal customers 2. Market position of the product a. Attract customers from competitors in decline 3. Firm’s price and cost structure a. Low-cost producers may be able to hold on 4. Rate of market deterioration [return to top]

Discussion Questions

You can assign these questions several ways: in a discussion forum in your LMS; as whole-class discussions in person; or as a partner or group activity in class.

19. Discussion: Branding (PPT Slide 6) Duration: 20 minutes. a. Consider the notion that a truly effective brand is one that succinctly captures the product offering in a way that answers a question in the customer’s mind. Now, consider these brands (or choose your own): Tesla, Coca-Cola, Disney, and Apple.

What questions do these brands answer? Why are these effective brands? i. Answer: Student answers will vary greatly with respect to this question. One interesting angle is the notion of brand preference or brand loyalty. Some students will argue that Coca-Cola does not answer any question for them because they do not drink Coca-Cola. The important point is not necessarily the question, but that each brand provides an answer.

20. Discussion: Brand Value (PPT Slide 16) Duration: 30 minutes. a. Compare the corporate reputation scores in Exhibit 7.2 with the brand valuations in Exhibit 7.4. Why is Amazon on both lists? How has the company used good branding and positioning strategy to achieve this result? Facebook is valuable, but it has a low reputation. How is it that Facebook can have a very high brand valuation, but a very low corporate reputation score? i. Answer: Students will argue that Amazon is on both lists due to the incredible popularity of its products and services. Encourage students to examine all of the possible attributes (Exhibit 7.1) that make up the

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Amazon brand, and how each contributes to the company’s reputation and its brand valuation. With respect to Facebook, it suffers from a damaged reputation due to data privacy issues among other problems.

21. Discussion: Most Valuable Brands (PPT Slide 17) Duration: 15 minutes. a. Look back at the top 15 brands in Exhibit 7.4. What bases do these brands use for differentiation? What strategies do they use to create a relative position in their respective markets? Why do these brands hold so much value? i. Answer: Most of these brands are considered to be the best in their respective industries. As such, creating a relative position for these companies is all about being the best/largest/strongest in their sector. It is also important to note that most brands on the list are based in the United States, which could enhance differentiation and positioning in many countries. Likewise, these brands have longevity in common. [return to top]

Instructor Manual Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 8: Ethics and Social Responsibility in Marketing Strategy

Contents Purpose and Perspective of the Chapter.................................................................................................................75 Cengage Supplements ..................................................................................................................................................75 Chapter Objectives ......................................................................................................................................................... 75 Key Terms .........................................................................................................................................................................75 What's New in This Chapter .......................................................................................................................................76 Chapter Outline .............................................................................................................................................................. 77 Discussion Questions.....................................................................................................................................................82

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Purpose and Perspective of the Chapter

In this chapter, we look at the dimensions of ethics and social responsibility, sustainability issues in marketing, the role of ethics and social responsibility in connection to marketing strategy, and the challenges of ethical behavior. We also address specific ethical issues within the firm’s marketing program, as well as organizational and self-regulating methods of preventing misconduct. We examine the organizational context of marketing ethics, including codes of ethics and the impact of ethical leadership. Additionally, we show the role of ethics and social responsibility in improving both marketing and financial performance. Finally, we discuss how ethics and social responsibility can be incorporated into strategic planning.

Cengage Supplements

The following product-level supplements provide additional information that may help you in preparing your course. They are available in the Instructor Resource Center.

• • • •

Test Bank (contains assessment questions and problems) PowerPoint (provides text-based lectures and presentations) Case Notes (provides a case summary and teaching questions) Marketing Plan Worksheets (assists in writing a formal marketing plan)

Chapter Objectives • • • • •

Understand the role of ethics and social responsibility in marketing strategy Identify ethical issues in the marketing program Describe how to manage and control ethical issues Understand the relationship of ethics and social responsibility to marketing and financial performance Consider ways to incorporate ethics and social responsibility into strategic planning

[return to top]

Key Terms

Bribery: When an incentive (usually money or expensive gifts) is offered in exchange for an illicit advantage Cause-related marketing: When firms link products to a particular social cause on an ongoing or short-term basis Codes of ethics: Codes of conduct that consist of formalized rules and standards that describe what the company expects of its employees

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Ethical issue: An identifiable problem, situation, or opportunity that requires an individual or organization to choose from among several actions that must be evaluated as right or wrong, ethical or unethical Greenwashing: Misleading a consumer into thinking that a good or service is more environmentally friendly than it actually is Marketing ethics: Principles and standards that define acceptable marketing conduct as determined by the public, government regulators, private-interest groups, competitors, and the firm itself Predatory pricing: When a firm charges very low prices for a product with the intent of driving competition out of business or out of a specific market Price discrimination: When firms charge different prices to different customers Price fixing: When rival firms collaborate to set prices Social entrepreneurship: When an entrepreneur founds an organization that strives to create social value rather than simply earn profits Social responsibility: A broad concept that relates to an organization’s obligation to maximize its positive impact on society while minimizing its negative impact Stakeholder orientation: The degree to which a firm understands and addresses stakeholder demands Strategic philanthropy: The synergistic use of organizational core competencies and resources to address key stakeholders’ interests and achieve both organizational and social benefits Superficial discounting: When a firm advertises a sale price as a reduction below the normal price when it is not the case Sustainability: The assessment and improvement of business strategies, economic sectors, work practices, technologies, and lifestyles—all while maintaining the natural environment [return to top]

What's New in This Chapter

The following elements are improvements in this chapter from the previous edition: • • • • • • •

Updated boxed feature discusses Salesforce’s adoption of a stakeholder orientation New and relevant examples throughout Updated boxed feature explores the popularity of ―green‖ products Updated Exhibit 8.2 Global Trust in Different Institutions New content discusses how social media makes it easy for consumers and the media to spread news of ethical misconduct New content on how social responsibility differs from marketing ethics New Exhibit 8.3 Types of Misconduct Observed in Organizations

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• • • • • •

New content on supply chain diversity New boxed feature discusses Evrnu’s use of sustainable fibers New section Ethics Dilemmas Related to Technology New content about how social responsibility has been found to be important in the reputation of a firm and brand image New Exhibit 8.6 The Impact of a Strong Organizational Culture New content about how management of ethics and social responsibility are two different areas from a strategic perspective

[return to top]

Chapter Outline

In the outline below, each element includes references (in parentheses) to related content. "CH.##” refers to the chapter objective; “PPT Slide #” refers to the slide number in the PowerPoint deck for this chapter (provided in the PowerPoints section of the Instructor Resource Center); and, as applicable for each discipline, accreditation or certification standards (“BL 1.3.3”). Introduce the chapter and use the Ice Breaker in the PPT if desired, and if one is provided for this chapter. Review learning objectives for Chapter 4. (PPT Slides 1-3).

XXXVIII. a. b. c.

XXXIX. a.

b.

Introduction (PPT Slide 4) Importance of marketing ethics and social responsibility has grown Their role in the strategic planning process has become increasingly important Research has shown that ethical behavior can… i. Enhance a company’s reputation ii. Contribute significantly to its bottom line Ethics and Social Responsibility in Marketing Strategy (PPT Slide 7) Social responsibility is a broad concept that relates to an organization’s obligation to maximize its positive impact on society while minimizing its negative impact Dimensions of social responsibility i. Economic and legal responsibilities 1. Firms must be responsible to all stakeholders for financial success a. Making profit serves employees and community at large 2. Expectation to obey laws and regulations, at a minimum a. Designed to keep U.S. companies’ actions within the range of acceptable conduct and fair competition ii. Ethical responsibilities 1. Marketing ethics refers to principles and standards that define acceptable marketing conduct as determined by the public, government regulators, private-interest groups, competitors, and the firm itself a. Most basic of these have been codified into laws, regulations b. Goes beyond legal issues

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c. Fosters trust 2. Marketing ethics decisions benefit… a. Organizational performance b. Individual achievement in a work group c. Social acceptance and advancement in the organization d. Stakeholders 3. Ignoring ethical issues can destroy stakeholder trust, prompt government intervention 4. Discussing, addressing potential problems during strategic planning could save a company millions 5. More and more companies create extensive ethics and compliance programs 6. Ethical and socially responsible behavior requires commitment a. Issues cannot be ignored b. Focus on ethics and philanthropy builds trust and loyalty iii. Philanthropic responsibilities 1. Promote human welfare or goodwill above and beyond legal and ethical goals 2. Cause-related marketing a. Linking of products to specific social cause 3. Strategic philanthropy a. Synergistic use of organizational core competencies and resources to address stakeholder interests 4. Social entrepreneurship a. When an entrepreneur founds an organization that strives to create social value rather than simply earn profits c. Sustainability includes the assessment and improvement of business strategies, economic sectors, work practices, technologies, and lifestyles all while maintaining the natural environment i. Green marketing—a strategic process involving stakeholder assessment to create meaningful long-term relationships with customers, while maintaining, supporting, and enhancing the natural environment ii. In contrast, greenwashing involves misleading a consumer into thinking that a good or service is more environmentally friendly than it actually is iii. Organizations have developed certification systems to help consumers make informed decisions d. Marketing ethics and strategy i. Principles and standards that guide behavior ii. Ethical companies benefit: 1. More customer trust/loyalty 2. Less employee turnover 3. Greater profitability e. Ethics and social responsibility challenges i. Business decisions involve complex and detailed discussions

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ii. Both employees and managers need experience within their specific industry to understand how to…

1. Operate in gray areas 2. Handle close calls in evolving areas (e.g., Internet privacy) iii. Social responsibility relates to reputation iv. Marketing ethics relates more to decisions that are judged as right or wrong v. Personal values may not provide guidelines for complex business decisions XL. Ethical Issues in the Marketing Program (PPT Slide 20) a. An ethical issue is an identifiable problem, situation, or opportunity that requires an individual or organization to choose from among several actions that must be evaluated as right or wrong, ethical or unethical b. Product-related issues i. Firm fails to disclose risks associated with a product or information regarding the function, value, or use of a product ii. Common with automobiles, toys, pharmaceuticals iii. Ethical issues can arise in product design 1. Pressure to reduce costs iv. Counterfeit products 1. Loss of tax revenue 2. Leach profits needed for product development, employees c. Pricing-related issues i. Price discrimination—firms charge different prices to different customers ii. Price fixing—rival firms collaborate to set prices 1. Illegal under the Sherman Act iii. Predatory pricing—firm charges very low prices for a product with the intent of driving competition out of business or out of a specific market 1. Illegal but difficult to prove in court iv. Superficial discounting—firm advertises a sale price as a reduction below the normal price when it is not the case d. Supply chain-related issues i. Increasing global complexity ii. Suppliers may hire subcontractors iii. Variations in global regulations iv. Companies often create supplier codes v. Requiring regular ethics audits to ensure compliance vi. May result in public report of performance vii. Tension between procurement and ethics viii. Sourcing at the lowest prices e. Promotion-related issues i. False or misleading marketing communications ii. Ambiguous statements that can deceive

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iii. Bribery—incentive for an illicit advantage 1. U.S. Foreign Corrupt Practices Act (FCPA) 2. U.K. Bribery Act iv. Direct marketing is fraught with examples XLI. Managing and Controlling Ethical Issues (PPT Slide 28) a. Regulating marketing ethics i. Self-regulation helps prevent > laws/regulation 1. Better Business Bureau ii. Companies joining their industry trade association and adhering to trade guidance iii. Many have codes of ethics mandating behaviors iv. Many have industry reviews of practices v. Membership is contingent upon adherence b. Ethical dilemmas related to technology i. Big data challenges in data privacy ii. AI is used for personalization, smart segmentation, optimized subject lines…

1. Must avoid algorithmic challenges (discrimination) iii. Need principles for programming/evaluation c. Codes of conduct i. Codes of conduct (codes of ethics) consist of formalized rules and standards that describe what the company expects of its employees ii. Key considerations in developing, implementing a code of ethical conduct: 1. Examine high-risk areas and issues 2. State values and conduct necessary to comply with laws and regulations 3. Identify values that specifically address current ethical issues 4. Consider values that link the organization to a stakeholder orientation 5. Make the code of conduct understandable by providing examples 6. Communicate the code frequently and in understandable language 7. Revise the code every year with input from a wide variety of stakeholders d. Ethical leadership i. Ethics cultures come from ethical leadership ii. Leaders are role models and admired by many 1. Create a common vision 2. Obtain buy-in from stakeholders 3. Employ relevant resources 4. Motivate/manage towards ethical conduct 5. Maintain tenacity, passion, commitment iii. Ethics training can ensure that everyone in the firm…

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XLII. a.

b.

c.

d. e.

f.

XLIII. 40)

1. Recognizes situations that might involve ethical decision-making 2. Understands the values and culture of the firm 3. Can evaluate the impact of ethical decisions on the firm in the light of its value structure Relationship to Marketing and Financial Performance (PPT Slide 35) An ethical climate will trigger keeping stakeholder interests in their decision making i. Work to better understand customers ii. Ethical climate is linked to quality, trust Social responsibility linked to: i. Employee commitment, customer loyalty, profitability, reputation, brand image Looking more at long-term interests of society i. Sustainability ii. Social issues iii. Customer protection iv. Corporate governance Want to provide high quality products/services Stakeholder orientation i. The degree to which a firm understands and addresses stakeholder issues ii. Organization-wide generation of data about stakeholder groups and firm effects on these groups iii. Distribution of this information throughout the firm iv. Organizational response to this intelligence Marketing financial performance i. A climate of ethics and social responsibility…

1. Creates a large measure of trust among a firm’s stakeholders 2. Enhances the reputation of the firm in a positive direction ii. Most important contributing factor to gaining trust is the perception that the firm and its employees will not sacrifice their standards of integrity iii. Strong association between social responsibility and customer loyalty Incorporating Ethics and Social Responsibility Into Strategic Planning (PPT Slide

a. Companies that fail to incorporate ethics and social responsibility into their organizational culture may pay the price with… i. Poor marketing performance ii. Cost of legal violations iii. Cost of civil litigation iv. Cost of damaging publicity b. Strong organizational culture is correlated with favorable business outcomes c. Marketing ethics more internally, process-focused d. Social responsibility is much more voluntary [return to top]

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Discussion Questions

You can assign these questions several ways: in a discussion forum in your LMS; as whole-class discussions in person; or as a partner or group activity in class.

22. Discussion: Managing Marketing Ethics (PPT Slide 29) Duration: 20 minutes. a. Why is marketing ethics a strategic consideration in organizational decisions?

Who is most important in managing marketing ethics: the individual or the firm’s leadership? Explain your answer. i. Answer: For all of the reasons discussed in this chapter, marketing ethics clearly should be a strategic consideration. On the one hand, ethical marketing is simply the right thing to do. On the other hand, behaving ethically can actually increase the firm’s performance. This issue is not whether the firm should include ethics in its decision making, but how it should be included. Ultimately, ethics is based on the individual. It is the leader’s responsibility to ensure that ethics and social responsibility is pervasive throughout the firm’s culture.

23. Discussion: Marketing Ethics (PPT Slide 28) Duration: 30 minutes. a. Why have we seen more evidence of widespread ethical marketing dilemmas within firms today? Is it necessary to gain the cooperation of marketing managers to overstate revenue and earnings in a corporation? i. Answer: Students will likely argue two points. First, we see widespread ethical dilemmas because marketing often deals with ambiguous or ―gray‖ business decisions. Second, many ethical dilemmas occur simply because firms are able to get away with it. Recent changes in accounting practice—like Sarbanes-Oxley—have limited the opportunities for unethical behavior. Finally, we see ethical dilemmas because corporate executives are often rewarded for their unethical behavior. These individuals are under enormous pressures to increase firm performance in the short-term. A longterm perspective can help alleviate this issue.

24. Discussion: Organizational Performance (PPT Slide 36) Duration: 15 minutes. a. What is the relationship between marketing ethics and organizational performance? What are the elements of a strong ethical compliance program to support responsible marketing and a successful marketing strategy? i. Answer: Marketing ethics is tied to performance in many ways. Employees working in an ethical climate will serve customers more effectively. These employees are also more willing to personally support the quality initiatives of the firm. These actions lead to increased customer loyalty in that customers are likely to keep buying from firms perceived as doing the right thing. A strong ethical compliance program is based on having (1) a strong ethical leader, (2) a supportive ethical climate, (3) a code of conduct, and (4) employee buy-in to the code. [return to top]

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 9: Marketing Implementation and Control

Instructor Manual Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 9: Marketing Implementation and Control

Contents Purpose and Perspective of the Chapter.................................................................................................................84 Cengage Supplements ..................................................................................................................................................84 Chapter Objectives ......................................................................................................................................................... 84 Key Terms .........................................................................................................................................................................84 What's New in This Chapter .......................................................................................................................................85 Chapter Outline ..............................................................................................................................................................87 Discussion Questions.....................................................................................................................................................91

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 9: Marketing Implementation and Control

Purpose and Perspective of the Chapter

In this chapter, we examine the critical role of marketing implementation and control in the strategic planning process. First, we discuss a number of important strategic issues involved in implementation, including the major components of implementation that must work together for a strategy to be executed successfully. Then, we examine the advantages and disadvantages of major marketing implementation approaches. This discussion also describes how internal marketing can be used to motivate employees to implement marketing strategy. Finally, we look at the marketing evaluation and control process.

Cengage Supplements

The following product-level supplements provide additional information that may help you in preparing your course. They are available in the Instructor Resource Center.

• • • •

Test Bank (contains assessment questions and problems) PowerPoint (provides text-based lectures and presentations) Case Notes (provides a case summary and teaching questions) Marketing Plan Worksheets (assists in writing a formal marketing plan)

Chapter Objectives • • • • •

Define marketing implementation Explain strategic issues in marketing implementation Understand approaches to marketing implementation Describe the internal marketing process Understand how to evaluate and control marketing activities

[return to top]

Key Terms

Formal marketing controls: Activities, mechanisms, or processes designed by the firm to help ensure the successful implementation of the marketing strategy Implementation as organizational culture: An approach to implementing marketing strategies and motivating employees to perform implementation activities in which marketing strategy and its implementation become extensions of the firm’s mission, vision, and organizational culture Implementation by command: An approach to implementing marketing strategies and motivating employees to perform implementation activities in which the firm’s top executives develop and select the marketing strategies, which are transmitted to lower levels where frontline managers and employees implement them Implementation through change: An approach to implementing marketing strategies and motivating employees to perform implementation activities in which the basic goal is to modify the firm in ways that will ensure the successful implementation of the chosen marketing strategy

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Implementation through consensus: An approach to implementing marketing strategies and motivating employees to perform implementation activities in which some of the decisionmaking authority is moved closer to the frontline of the firm Informal marketing controls: Unwritten, employee-based mechanisms that subtly affect the behaviors of employees, both as individuals and in groups Intended marketing strategy: What the firm wants to happen—it is the firm’s planned strategic choices that appear in the marketing plan itself Internal distribution: The internal interactions that disseminate the marketing strategy throughout the firm Internal marketing: The use of a marketing-like approach to motivate, coordinate, and integrate employees toward the implementation of the firm’s marketing strategy Internal prices: The increased effort and changes that employees must exhibit in implementing the strategy Internal products: Marketing strategies that must be ―sold‖ internally Internal promotion: All communication aimed at informing and persuading employees about the merits of the marketing strategy Key performance indicators (KPIs): Measures of performance to evaluate success Marketing analytics: The use of big data and measurement methods enabled by technology to interpret the effectiveness of a firm’s marketing strategy Marketing implementation: The process of executing the marketing strategy by creating and performing specific actions that will ensure the achievement of the firm’s marketing objectives Marketing structure: The methods of organizing a firm’s marketing activities Realized marketing strategy: The strategy that actually takes place Shared goals and values: A shared set of guiding principles that bind the entire organization together as a single, functioning unit [return to top]

What's New in This Chapter

The following elements are improvements in this chapter from the previous edition: • • • • • •

Updated boxed feature discusses managing risk through culture New content on how subscription services must demonstrate their value New content discusses the remote workforce and its impact on shared goals and values New content on technology and how it can improve communication New boxed feature explores how Microsoft embraces the competition Updated Exhibit 9.5 A Framework for Marketing Controls

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• • • • •

Updated Exhibit 9.6 A Sample Marketing Audit New key term key performance indicators (KPIs) New key term marketing analytics New boxed feature discusses how AI can be beneficial for marketing Updated Exhibit 9.7 A Hypothetical Three-Month Marketing Implementation Schedule

[return to top]

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Chapter Outline

In the outline below, each element includes references (in parentheses) to related content. "CH.##” refers to the chapter objective; “PPT Slide #” refers to the slide number in the PowerPoint deck for this chapter (provided in the PowerPoints section of the Instructor Resource Center); and, as applicable for each discipline, accreditation or certification standards (“BL 1.3.3”). Introduce the chapter and use the Ice Breaker in the PPT if desired, and if one is provided for this chapter. Review learning objectives for Chapter 4. (PPT Slides 1-3).

XLIV.

XLV.

Introduction (PPT Slide 4) a. Marketing implementation—process of executing the marketing strategy by creating and performing specific actions that will ensure achieving marketing objectives i. Implementation miscues: 1. Items out of stock 2. Dysfunctional websites 3. Poor customer service Strategic Issues in Marketing Implementation (PPT Slide 7) a. Intended marketing strategy—what the firm wants to happen b. Realized marketing strategy—what actually takes place c. The link between planning and implementation i. Interdependency—Strategic planning and implementation are fluid ii. Evolution—Change is inevitable iii. Separation—Strategic planning at middle/upper level and implementation at the lower/frontline level d. The elements of marketing implementation i. Shared goals and values 1. All actions are more closely aligned with moving the organization forward 2. Employee training and socialization 3. Most important element of implementation 4. Challenged as more people work remotely ii. Marketing structure 1. Formal lines of authority and division of labor 2. Centralization 3. Top marketing executives handle marketing activities 4. Cost efficient with program standardization and control 5. Decentralization 6. Frontline coordinates and manages marketing activities 7. Place marketing decisions close to the customer 8. Allows creativity, adaptability, and responses to change iii. Systems and processes 1. Information systems, technology platforms, strategic planning, capital budgeting, procurement, order fulfillment, delivery,

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XLVI.

manufacturing, quality control, returns and performance measurement iv. Resources 1. Financial resources, manufacturing capacity, facilities, delivery capabilities and equipment…as well as marketing capabilities v. People (human resources) 1. Employee selection and training—Matching skills and abilities to marketing tasks 2. Employee evaluation and compensation a. Outcome i. Sales or margin b. Behavior based i. Effort, motivation, teamwork, attitude, and friendliness 3. Employee motivation, satisfaction, and commitment vi. Leadership 1. The art of managing people 2. Establish the corporate culture a. Create a climate of confidence and trust 3. Technology and social media open avenues for extended interaction Approaches to Marketing Implementation (PPT Slide 20) a. Implementation by command i. Marketing strategies at the top passed to lower-level frontline employees ii. Advantages 1. Reduces uncertainty and makes decision making easier 2. Works well with a powerful leader and good for simpler strategies iii. Disadvantages 1. Does not consider the feasibility of the strategy 2. Divides the firm into strategists and implementers 3. Can create motivation problems b. Implementation through change i. Firm modification to ensure successful implementation of the marketing strategy ii. Considers ―how‖ strategy will be implemented iii. ―Power at the top,‖ requires a skilled/persuasive leader, changes take time and can leave the firm vulnerable to environmental changes c. Implementation through consensus i. Varying organizational members come together and ―brainstorm‖ marketing strategy ii. Considers varying opinions, increases commitment to strategy, moves decision making closer to the frontline, good in complex, uncertain, and unstable environments

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d.

XLVII. a. b. c. d. e.

f.

g.

XLVIII.

iii. Can lead to groupthink, yielding high level authority and good in complex/unstable environments Implementation as organizational culture i. Top executives manage firm culture to ensure all employees are aware of the strategy ii. Increases commitment to organizational goals iii. Empowers employees iv. Can make implementation easier v. Must be diligent in hiring and creating the necessary culture 1. Can be difficult and time consuming Internal Marketing and Marketing Implementation (PPT Slide 26) Internal marketing—Using marketing to motivate, coordinate, and integrate employees to implement strategy Help all employees understand and accept their roles in implementation Create motivated and customer-oriented employees Deliver customer satisfaction The internal marketing approach i. Every ―manager‖ has two customers 1. Internal (employees) and external (customers) ii. Places responsibility on all employees, regardless of organizational level iii. Employees are listened to and taken care of 1. Take care of your employees, they take care of your customers The internal marketing process i. Internal products 1. Marketing strategies ―sold‖ internally (tasks required) ii. Internal prices 1. Effort and time required to implement strategy (training) iii. Internal distribution 1. Planning sessions, webinars, video conferences… iv. Internal promotion 1. Speeches, videos, blogs, newsletters, intranet…

Keys to internal marketing success i. Recruitment, selection, and training ii. Top level commitment to strategy and plan iii. Employee compensation must be linked to the plan 1. Rewards—based with right behaviors iv. Open communication at all levels v. Firm structure, policies, and processes must fit

Evaluating and Controlling Marketing Activities (PPT Slide 33) a. Why marketing outcomes vary i. Strategy was inappropriate or unrealistic ii. Implementation did not fit strategy iii. Implementation process was mismanaged

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b.

c.

d.

e.

iv. Internal/external environmental change v. Points to the need for ongoing controls and performance management Formal marketing controls i. Input controls—prior to implementation 1. Recruitment, selection, and hiring; financial allocations; capital investments (facilities, mobile…) and R&D ii. Process controls—during implementation 1. Evaluation and compensation; empowerment; internal communication and org structure; monitoring and audits iii. Output controls—evaluated after implementation of the strategy 1. Formal performance standards (e.g., sales, market share, and profitability); marketing audits 2. Key performance indicators (KPIs) should be embedded at the onset of a marketing strategy 3. Marketing analytics uses big data and measurement methods enabled by technology to interpret the effectiveness of a firm’s marketing strategy Informal marketing controls i. Employee self-control—control based on personal expectations and goals 1. Job satisfaction; organizational commitment; employee effort; commitment to the marketing plan ii. Social control—small-group control based on group norms and expectations 1. Shared organizational values; social and behavioral norms in work groups iii. Cultural control—cultural control based on organizational norms and expectations 1. Organizational culture; organizational stories, rituals, and legends; cultural change Goals of marketing audit i. Describe current marketing activities and performance ii. Gather external/internal environment info iii. Explore alternatives to improve implementation iv. Provide a framework to evaluate performance v. Bring diverse data sources together vi. Technology to guide usable metrics, insights, and actions Scheduling marketing activities i. Identify specific activities to be performed ii. Determine the time to complete each activity iii. Determine which activities precede others iv. Properly sequence and time activities v. Assign responsibility

[return to top]

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 9: Marketing Implementation and Control

Discussion Questions

You can assign these questions several ways: in a discussion forum in your LMS; as whole-class discussions in person; or as a partner or group activity in class.

25. Discussion: Implementation (PPT Slide 5) Duration: 20 minutes. a. Forget for a moment that planning the marketing strategy is equally as important as implementing the marketing strategy. What arguments can you make for one being more important than the other? Explain your answers. i. Answer: Most students will argue that marketing strategy is more important. First, a firm must have a plan before it can be implemented.

Thus, despite their interconnectedness, implementation by nature must follow the strategy. Second, if done correctly, the strategic planning process itself can deliver benefits (collaboration, communication) that are independent of the content of the marketing strategy. Third, if the strategy is flawed it really doesn’t matter how well it is implemented.

26. Discussion: Implementation Approaches (PPT Slide 19) Duration: 30 minutes. a. If you were personally responsible for implementing a particular marketing strategy, which implementation approach would you be most comfortable using, given your personality and personal preferences? Why? Would your chosen approach be universally applicable to any given situation? If not, what would cause you to change or adapt your approach? Remember, adapting your basic approach means stepping out of your personal comfort zone to match the situation at hand. i. Answer: Student responses will vary. Many students will be most comfortable with the change approach to implementation because they are most familiar with its use. They can see the benefits of the cultural approach, but the resources and time required to use it make it difficult to choose. Students who are in the military or former military often choose the command approach due to its familiarity and swift decision making.

27. Discussion: Internal Marketing (PPT Slide 27) Duration: 30 minutes. a. What do you see as the major stumbling blocks to the successful use of the internal marketing approach? Given the hierarchical structure of employees in most organizations (e.g., CEO, middle management, staff employees), is internal marketing a viable approach for most organizations? Why or why not? i. Answer: One of the biggest obstacles is that many executives just don’t get the approach. Equating changes and effort with pricing is difficult to understand. Most students will simply have never thought of looking at implementation in this way. Internal marketing is a viable approach for any organization. However, it must be practiced at all levels throughout the organization for maximum effectiveness. [return to top]

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 10: Developing and Maintaining Long-Term Customer Relationships

Instructor Manual Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 10: Developing and Maintaining LongTerm Customer Relationships

Contents Purpose and Perspective of the Chapter.................................................................................................................93 Cengage Supplements ..................................................................................................................................................93 Chapter Objectives ......................................................................................................................................................... 93 Key Terms .........................................................................................................................................................................93 What's New in This Chapter .......................................................................................................................................94 Chapter Outline .............................................................................................................................................................. 95 Discussion Questions.....................................................................................................................................................99

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 10: Developing and Maintaining Long-Term Customer Relationships

Purpose and Perspective of the Chapter

In this chapter, we examine how the marketing program can be leveraged as a whole to deliver quality, value, and satisfaction to customers. We begin by reviewing the strategic issues associated with the customer relationship management process. Developing long-term customer relationships is one of the best ways to insulate the firm against competitive inroads and the rapid pace of environmental change and product commoditization. Next, we address the critical topics of quality and value as we concern ourselves with how the entire marketing program is tied to these issues. Finally, we explore key issues with respect to customer satisfaction, including customer expectations and metrics for tracking customer satisfaction over time.

Cengage Supplements

The following product-level supplements provide additional information that may help you in preparing your course. They are available in the Instructor Resource Center.

• • • •

Test Bank (contains assessment questions and problems) PowerPoint (provides text-based lectures and presentations) Case Notes (provides a case summary and teaching questions) Marketing Plan Worksheets (assists in writing a formal marketing plan)

Chapter Objectives • • •

Examine how to manage customer relationships Understand the roles of quality and value in developing customer relationships Understand the importance of customer satisfaction and describe its role in customer retention

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Key Terms

Core product: The heart of the firm's product offering Customer advocacy: Action on behalf of the customer to spread either positive or negative information about a company across their social media and online rating platforms Customer relationship management (CRM): A business philosophy aimed at defining and increasing customer value in ways that motivate customers to remain loyal Customer satisfaction: The degree to which a product meets or exceeds the customer’s expectations about that product Customer success: Efforts to help customers to gain more value from products and utilize new features, services, and additional, complementary products that provide added value to the customer

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 10: Developing and Maintaining Long-Term Customer Relationships

Life cycle costs: Any additional costs that customers will incur over the life of the product, such as the costs of consumable supplies, maintenance, and repairs Nonmonetary costs: The time and effort customers expend to find and purchase goods and services Quality: The degree of superiority of a firm’s goods or services Relationship capital: A key asset that stems from the value generated by the trust, commitment, cooperation, and interdependence among relationship partners Share of customer: Increasing transactions to focus on more fully serving the needs of current customers Supplemental products: Goods or services that add value to the core product, thereby differentiating the core product from competing product offerings Symbolic and experiential attributes: Features, such as image, prestige, and brand, that are created primarily through the product and promotional elements of the marketing program Transactional costs: The immediate financial outlay or commitment that must be made to purchase the product Value: A customer’s subjective evaluation of benefits relative to costs to determine the worth of a firm’s product offering relative to other product offerings Value consumption gap: Occurs when the value of a product changes after the customer makes a purchase, but the customer is unaware of or even confused by the changing product [return to top]

What's New in This Chapter

The following elements are improvements in this chapter from the previous edition: • • • • • • • • • • • • •

Updated boxed feature explores how 1-800-Flowers fosters customer loyalty New content addressing CRM systems such as Salesforce and Zendesk New key term customer advocacy Updated Exhibit 10.2 Stages of Customer Relationship Development New key term customer success New content on subscription-based sales models and product innovation Updated Exhibit 10.4 Components of the Total Product Offering New box explores how artificial intelligence can be used to enhance customer service New key term value consumption gap New boxed feature discusses dealing with declining customer loyalty New content on investing in customer success Updated Exhibit 10.8 Examples of Customer Satisfaction Guarantees New content on how artificial intelligence has changed the ways marketers can collect customer feedback

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 10: Developing and Maintaining Long-Term Customer Relationships

[return to top]

Chapter Outline

In the outline below, each element includes references (in parentheses) to related content. "CH.##” refers to the chapter objective; “PPT Slide #” refers to the slide number in the PowerPoint deck for this chapter (provided in the PowerPoints section of the Instructor Resource Center); and, as applicable for each discipline, accreditation or certification standards (“BL 1.3.3”). Introduce the chapter and use the Ice Breaker in the PPT if desired, and if one is provided for this chapter. Review learning objectives for Chapter 4. (PPT Slides 1-3).

XLIX.

Introduction (PPT Slide 4) a. Marketing program activities have one key purpose: to develop and maintain long-term customer relationships b. Implementing an effective marketing strategy has proven difficult in today’s rapidly changing business environment c. Thorough research, strong competitive advantages, and a well-implemented marketing program are often not enough to guarantee success d. Emphasis has shifted to developing strategies that attract and retain customers over the long term L. Managing Customer Relationships (PPT Slide 7) a. Customer relationship management (CRM)—defining and increasing customer value in ways that motivate customers to remain loyal i. Customers (end users) ii. Employees 1. Retain and motivate employees iii. Supply chain 1. Keep supply chain partners satisfied iv. External stakeholders 1. Investors, government, media, facilitating organizations, etc. b. Relationship capital—value generated by trust, commitment, cooperation, and interdependence (partner firms) i. Strong relationships as a result of customer experience and customers’ ―value‖ of outcomes ii. Maybe the most important organizational asset iii. Advantage that can be leveraged in marketing relationships iv. Want customer advocacy c. Developing relationships in consumer markets i. Customer advocacy represents action on behalf of the customer to spread either positive or negative information about a company across their social media and online rating platforms ii. Increase the firm’s share of customer rather than its market share 1. Abandon the old notions of acquiring new customers and increasing transactions

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 10: Developing and Maintaining Long-Term Customer Relationships

2. Focus instead on more fully serving the needs of current customers iii. Stages of customer relationship development 1. Awareness 2. Initial purchase 3. Repeat customer 4. Client 5. Community 6. Advocacy 7. Success iv. Strategies for enhancing and maintaining customer relationships 1. Financial incentives 2. Social bonding 3. Enhanced customization 4. Structural bonding d. Developing relationships in business markets i. Customer success—efforts to help customers to gain more value from products and utilize new features, services, and additional, complementary products that provide added value to the customer 1. Changes in business relationships: a. Change in buyers’ and sellers’ roles b. Increase in sole sourcing c. Increase in global sourcing d. Increase in productivity through better integration e. Increase in subscription-based sales models f. Increase in product innovation LI. Quality and Value: The Keys to Developing Customer Relationships (PPT Slide 20) a. Understanding the role of quality i. Quality—degree of superiority of a firm’s goods or services ii. The Core Product—tangible good or intangible service iii. Supplemental Products—goods or services that add value to the core product iv. Symbolic and Experiential Attributes—based on branding b. Delivering superior quality i. Understand consumer expectations ii. Translate expectations into quality standards iii. Uphold quality standards iv. Don’t overpromise c. Understanding the role of value i. Value—customers’ subjective evaluation of benefits relative to the costs to determine the worth of a firm’s product offering relative to others ii. Core product, supplemental product, and experiential quality 1. Core product quality

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 10: Developing and Maintaining Long-Term Customer Relationships

a. Product strategy: Product features; Brand name; Product design; Quality; Ease of use; Warranties; Guarantees b. Pricing strategy: Image; Prestige c. Distribution strategy: Availability; Exclusivity d. Promotion strategy: Image; Prestige; Reputation; Personal selling 2. Supplemental product quality a. Product strategy: Value-added features; Accessories; Replacement parts; Repair services; Training; Customer service; Friendliness of employees b. Pricing strategy: Financing; Layaway; Image; Prestige c. Distribution strategy: Availability; Exclusivity; Delivery; Installation; On-site training d. Promotion strategy: Friendliness of employees; Personal selling 3. Experiential quality a. Product strategy: Entertainment; Uniqueness; Psychological benefits b. Pricing strategy: Image; Prestige c. Distribution strategy: Convenience; Retail atmosphere; Retail décor; 24/7 availability; Overnight delivery d. Promotion strategy: Image; Prestige; Reputation; Personal selling iii. Monetary and nonmonetary costs 1. Monetary transactional costs a. Transactional costs include the immediate financial outlay or commitment that must be made to purchase the product b. Product strategy: Quality; Exclusive features c. Pricing strategy: Selling price; Delivery charges; Installation charges; Taxes; Licensing fees; Registration fees d. Distribution strategy: Delivery charges; Installation charges; Taxes e. Promotion strategy: Image; Prestige; Reputation; Personal selling 2. Monetary life cycle costs a. Life cycle costs include any additional costs that customers will incur over the life of the product b. Product strategy: Durability; Reliability; Product design c. Pricing strategy: Maintenance costs; Cost of consumables; Repair costs; Costs of replacement parts d. Distribution strategy: Availability of consumables; Availability of replacement parts; Speed of repairs e. Promotion strategy: Reputation; Personal selling

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 10: Developing and Maintaining Long-Term Customer Relationships

3. Nonmonetary costs a. Nonmonetary costs are not quite as obvious as monetary costs, and customers sometimes ignore them b. Product strategy: Durability; Reliability; Product design c. Pricing strategy: Maintenance costs; Cost of consumables; Repair costs; Costs of replacement parts d. Distribution strategy: Availability of consumables; Availability of replacement parts; Speed of repairs e. Promotion strategy: Reputation; Personal selling d. Competing on value i. Firm can enhance value by increasing core, supplemental, or experiential quality and/or reducing monetary or nonmonetary costs ii. Growing number of products have value that is subject to a value consumption gap that comes from the changing nature of value LII. Customer Satisfaction: The Key to Customer Retention (PPT Slide 34) a. Understanding customer expectations i. Customer satisfaction—the degree to which a product meets or exceeds the customer’s expectations about that product ii. The zone of tolerance 1. Customer delight—actual performance exceeds the desired performance expectation 2. Customer satisfaction—actual performance falls within the zone of tolerance 3. Customer dissatisfaction—actual performance falls below the adequate performance expectation iii. Managing customer expectations 1. Why are customer expectations unrealistic?

2. Should we strive to delight our customers by consistently exceeding their desired expectations? b. Satisfaction versus quality versus value i. Customer satisfaction is defined relative to customer expectations, it becomes difficult to separate satisfaction from quality and value 1. Customers can hold expectations about any part of the product offering ii. The most narrowly defined concept is quality 1. Customers judge on an attribute-by-attribute basis iii. When customers consider satisfaction, they will typically respond based on their expectations of the item in question 1. Possible for customer to be satisfied with quality, dissatisfied with value 2. Think of satisfaction based on the totality of their experience without overtly considering issues like quality or value c. Customer satisfaction and customer retention i. Understand what can go wrong

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 10: Developing and Maintaining Long-Term Customer Relationships

ii. Focus on controllable issues iii. Manage customer expectations iv. Offer satisfaction guarantees v. Make it easy for customers to complain vi. Invest in customer success vii. Create relationship programs viii. Make customer satisfaction and ongoing priority d. Customer satisfaction measurement i. Simplest method involves the direct measurement of performance across various factors using simple rating scales ii. Lifetime value of a customer (LTV) iii. Average order value (AOV) iv. Customer acquisition/retention costs v. Customer conversion rate vi. Customer retention rate vii. Customer churn rate viii. Customer recovery rate ix. Referrals x. Social communication [return to top]

Discussion Questions

You can assign these questions several ways: in a discussion forum in your LMS; as whole-class discussions in person; or as a partner or group activity in class.

28. Discussion: Customer Satisfaction Measurement (PPT Slide 40) Duration: 30 minutes. a. One of the common uses of customer relationship management (CRM) in consumer markets is to rank customers on profitability or lifetime value measures. Highly profitable customers get special attention, while unprofitable customers get poor service or are often ―fired.‖ What are the ethical and social issues involved in these practices? Could CRM be misused? How and why? i. Answer: This use of CRM certainly has the potential for misuse. Students will understand the necessity of firing some customers. However, one could argue that customers should at least be warned ahead of time. The firm should make an effort to encourage these customers to become better customers before firing them. Students may also argue that some consumer groups—such as the elderly or low-income individuals—could potentially suffer if they are fired by firms on which they depend.

29. Discussion: Satisfaction Versus Quality Versus Value (PPT Slide 38) Duration: 30 minutes. a. Given the commoditized nature of many markets today, does customer relationship management—and its associated focus on quality, value, and satisfaction—make sense? If price is the only true means of differentiation in a commoditized market, why should a firm care about quality? Explain.

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Instructor Manual: Ferrell, Hartline, Hochstein, Marketing Strategy; Chapter 10: Developing and Maintaining Long-Term Customer Relationships

i. Answer: Student responses will vary. Many students will be most comfortable with the change approach to implementation because they are most familiar with its use. They can see the benefits of the cultural approach, but the resources and time required to use it make it difficult to choose. Students who are in the military or former military often choose the command approach due to its familiarity and swift decision making.

30. Discussion: Customer Expectations (PPT Slide 36) Duration: 30 minutes. a. Of the two types of customer expectations, adequate performance expectations fluctuate the most. Describe situations that might cause adequate expectations to increase, thereby narrowing the width of the zone of tolerance. What might a firm do in these situations to achieve its satisfaction targets? i. Answer: Adequate expectations vary based on the situation, the customer, and the conditions under which performance will be delivered. Adequate expectations will increase (and satisfaction will be harder to achieve) when customers are in a hurry, when the purchase is highly involving, and when the firm is known for delivering consistent performance. Some firms are held to higher standards and will always face a more challenging task in satisfying customers. To achieve satisfaction targets, it is vital that the firm manage customer expectations and never make promises that they cannot deliver. [return to top]

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