Instructor Solution Manual For Marketing 6th Canadian Edition By Dhruv Grewal, Michael Levy, Shirley

Instructor Solution Manual For Marketing 6th Canadian Edition By Dhruv Grewal, Michael Levy, Shirley Lichti Chapter 1-17

Chapter One: Overview of Marketing

TOOLS FOR INSTRUCTORS       

Learning Objectives Annotated Chapter Outline with Instructor’s Notes/Teaching Tips Answers to End of Chapter Learning Aids Marketing Application Questions Marketing Digitally Chapter Case Study Video Activities Additional Teaching Tips Newsletter Teaching Aid

Learning Objectives 1.

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Define the role of marketing and explain its core concepts Describe how marketers create value for a product or service Summarize the four orientations of marketing Understand the importance of marketing both within and outside the firm

Annotated Chapter Outline Opening Vignette: Hydro Flask Today many people carry water bottles with them every day. Consumers have turned away from traditional plastic bottles, demanding higher quality, BPA free, reusable bottles. With numerous types of water bottles on the market, brands need to clearly communicate the features and benefits of their products, e.g., keep water cold and fresh longer, protect the planet. Clear communication efforts can show consumers the value their products offer.

Instructor’s Notes Ask students: Describe the value water bottle maker Hydro Flask provides customers. What do you consider are the main reasons for its growth and success?

Answer: (1) It positions its products as supporting a healthy lifestyle and a healthy planet to appeal to customers, (2) it offers the ability to personalize the bottles, and (3) it embraces social media to attract new users and spread its message.

LO1: What is Marketing?

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Annotated Chapter Outline 1.

Marketing is a set of business practices designed to plan for and present an organization’s products or services in ways that build effective customer relationships (The Canadian Marketing Association A. The marketing plan is a written document that specifies marketing activities in terms of the 4 P’s, action programs & projected or pro forma income & other financial statements, for a specific period of time.

Instructor’s Notes Marketing is used to create value in products & services.

The interrelated marketing mix – or the 4 P’s – creates, transacts, communicates & delivers value.

Good marketing is not a random activity and it requires thoughtful planning with an emphasis on the ethical implications of decisions made on the consumer and society in general.

Marketing is NOT just about buyers and sellers exchanging money for goods and services or about making a profit.

Group activity: The chapter opens by pointing out that people engage in marketing every day as both buyers and sellers. Have students make a list of all marketing transactions in which they were involved today. List the types of activities on the board and categorize them as buy or sell.

***Ethics

There is a strong ethics orientation in this book. At the start of the semester, stress that marketers’ actions have ethical implications that must be understood and addressed.

***Value is a key theme throughout the textbook, that is, creating value for both a firm and its customers. A more in-depth discussion follows later in the chapter.

Discuss how the same product can provide lots of value to one consumer but little or no value to another. Use the example of a recent movie that split the audience, e.g., people either love or hate Tom Holland in “Spider-Man No Way Home.”

Why?

B. Marketing consists of six core aspects that work together to create value for customers and the firm.

For a shorter lecture, one slide can be used to introduce all six core aspects. More detailed slides can be used for expanded discussion if desired.

2. Marketing Is About Satisfying Customers’ Needs and Wants A. The marketplace can be defined as the world of trade or more narrowly defined by segments.

B. It is often not practical to sell the firm’s product to everyone, so marketers focus on the groups or segments that are most profitable (referred to as the market).

Ask students if they have ever thought about the number of brands and types of toothpaste available.

Group activity: Ask students to list the types and brands of toothpaste they know. Then ask: Why do you think there are so many? Point out that the benefits of each one differ. Ask: Are these differences based on needs or wants or a combination of both?

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Annotated Chapter Outline

Instructor’s Notes

3. Marketing Entails an Exchange.

A. Exchange refers to the trade of things of value between the buyer and seller so that each is better off as a result.

Ask students to discuss how these exchanges occur in nonprofit settings. What is the exchange at a museum or a lecture?

You might also use the example of a swap or barter page. (An excellent example of swaps can be found on the First Canadian Barter Exchange website http://barterfirst.com/).

Each party to the exchange gives up something of value: The customer gives up not only money but also time and information, and the firm gives up the good or service. The exchange in the end is mutually beneficial.

You can visit the Chapters/Indigo website to initiate a discussion of what customers give up in exchange for the company’s products. http://www.chapters.indigo.ca/home/

LO2: Marketing Requires Marketing Mix Decisions The marketing mix (4Ps) of product, price, place, and promotion refers to the controllable set of activities the firm uses to respond to the wants and needs of its target market.

Stress that the concept of the 4Ps is fundamental to marketing. Remind students that “4Ps” and “the marketing mix” may be used interchangeably to refer to product, price, place, and promotion.

Products: Creating value 1. The fundamental purpose of the firm is to create value by developing a variety of offerings, including goods, services, and ideas, to satisfy consumer needs.

2. Goods are items that you can physically touch.

3. Services are intangible customer benefits produced by people or machines that cannot be separated from the producer.

4. Ideas include thoughts, opinions, philosophies, and intellectual concepts that also can be marketed.

Students often can relate to goods and services, but the marketing of ideas is a new concept to them. Use the example of drunk- driving prevention.

Ask: How is that idea marketed?

Organizations such as Mothers Against Drunk Driving or Students Against Drunk Driving often receive support from brewers and distillers in promoting responsible drinking and safe driving.

Ask students: What is the exchange these groups are asking consumers to enter?

Answer: They want you to consume alcohol in a manner that is consistent with safety, which means giving up some consumption or drinking responsibly – do not get behind the wheel if you

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Annotated Chapter Outline

Instructor’s Notes drink.

Price: Transacting value Price refers to everything the buyer gives up—money, time, and energy— in exchange for the product.

This is a good opportunity to remind students that the price paid is more than cash. Also tell them that later in the semester, you will look at how marketers view price, which often differs from the conceptions they may have been taught in finance courses about how to determine price.

Place: Delivering value.

Place includes all activities undertaken to get the product to the right customer when that customer wants it.

Of all the areas in marketing, place is the least recognizable in relation to marketing. Students tend not to think about the importance of getting goods from manufacturers to consumers, which currently requires global approaches.

This semester, they will learn about marketing’s role in this crucial process.

Distribution strategy can be complex and requires consideration of many factors, as well as a high level of coordination.

Promotion: Communicating value Promotion is communication by a marketer that informs, persuades, and reminds potential buyers about a product or service to influence their opinions or elicit a response.

Ask students to identify the target audience for an ad from Chapter 1. What value proposition is it offering and to which audience?

Marketing Can Be Performed by Both Individuals and Organizations A. B to C: Business-to- consumer marketing.

B. B to B: Business-to-business marketing.

C. C to C: Consumer-to-consumer marketing.

Students often fail to consider that the products they purchase have changed hands before. Offer them the following example: The computer you recently purchased from Best Buy (B to C) was purchased by Best Buy from the manufacturer (B to B). If you sell your computer to your roommate, you have engaged in C to C selling. Thus, the same product might be a part of all three types of marketing.

Marketing impacts many stakeholders: A. Both for-profit and not-for-profit entities use marketing.

B. Developing economies can benefit from marketing.

An interesting example of a nonprofit that makes extensive use of marketing is Heifer International (http://www.heifer.org/) Consumers choose from a series of options, ranging from a goat to an ark full of animals, to donate to a family in need, who

Answer: For example, the Street Smart ad is targeted at drivers to help them understand why they need to give cyclists room on the road. The ad promotes ideas, in this case, bicycle safety.

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Annotated Chapter Outline C. Entire industries can benefit from marketing.

Instructor’s Notes uses the donation as a source of both income and food, which means the recipients have access to new marketing opportunities.

The use of digital tools to easily & quickly create & share content to foster dialogue, social relationships & personal identities.

One thing is very clear: social media has quickly become an integral part of marketing & communication strategies.

Sustainable Marketing 1.1 Ekko: reduce, reuse, rethink

Sustainability is becoming an important aspect of business and marketing practices. However, it seems to mean different things to different people.

Companies embrace it for different reasons, most often to meet customer expectations.

Ask students what sustainability means to them and to indicate how a company’s reputation is tied to its sustainability initiatives.

LO3: The Four Orientations of Marketing Helps Create Value 1. Product-oriented era: Belief that the product would sell itself.

2. Sales-oriented era: Overcapacity led to a focus on personal selling and advertising.

3. Market-oriented era: Manufacturers focus on what consumers want and need before design or production.

4. Value-based oriented: Value entails the relationship of benefits to costs, or what you get for what you give up.

Ask students to consider each incarnation of the telephone presented in Exhibit 1.4. How has each been an improvement? Walk students through the eras and discuss how the firm’s focus went from the needs of the firm to the needs of the market.

How Do Firms Become More Value Driven?

Marketers must keep a vigilant eye on the marketplace so they can adjust their offerings to meet customer needs and keep ahead of the competition.

For firms to compete, they must constantly assess consumers’ perceptions of value. The advent of sophisticated databases has made it easier for firms to track consumers.

A. Share information about customers and competitors across the organization and supply chain.

How can sharing and coordinating information transmit into success?

Zara has been able to offer customers the latest fashions in a timely manner by reducing the time it

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Annotated Chapter Outline Zara is a Spanish clothing retailer that has aggressively expanded in recent years. For Zara, information is crucial to being able to meet the needs and wants of customers.

Instructor’s Notes takes to get goods from the manufacturer to stores. The retailer’s methods allow for quick replenishment of fast moving items.

Ask students: How many of you shop at Zara because of its ability to deliver new fashions quickly?

Marketing Analytics 1.1 Location, Location, Analytics: Starbucks' Use of Data to Place New Stores

Marketing analytics is becoming more important to all companies. Most chapters include discussions like this one about Starbucks and how it uses a Geographic Information System and predictive analytics to evaluate weather, demographics, population density, proximity to other Starbucks locations, and traffic patterns, to help determine new store locations.

B. Balance customers’ benefits and costs.

Use customer data to find opportunities to serve customers better and develop long-term loyalties.

With information, the firm can understand the key benefits customers seek, focus on those and eliminate the cost of providing other less strategic benefits.

To follow up on the Zara example, note that its ability to meet the needs of the market consistently has created loyal customers, because customers know they can always find the latest fashions at Zara.

C. Build relationships with customers 1. A relational orientation regards the buyer–seller relationship in terms of relationships rather than as a series of individual transactions. A relational orientation suggests buyers and sellers should develop long-term relationships.

2. Customer relationship management (CRM) is a business philosophy and set of strategies, programs, and systems that focus on identifying and building loyalty among the firm’s most valued customers.

Ethical Dilemma 1.1 After Axing Straws, Starbucks Still Faces Criticism for Single-Use Plastic

In early conceptions of marketing (before valuebased marketing), firms often viewed the closing of the sale as the termination of their relationship with the customer. Today, firms strive to create lifetime value among customers, hoping they will return to the firm for all their future needs.

Marketers steadily embrace new technologies, such as social and mobile media to allow them to better connect with their customers and thereby serve their needs more effectively.

As noted earlier, ethics is a theme that is revisited often throughout this textbook via Ethical Dilemma boxes like this one, as well as in Chapter

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Annotated Chapter Outline

Instructor’s Notes 17 which deals with Ethics and Social Responsibility.

Ask students how they feel about companies taking a stand on issues such as single-use plastics? Do such actions make a difference to the products they buy or the prices they are prepared to pay for them?

LO4: Why is Marketing Important?

Marketing has evolved into a major business function that crosses all areas of a firm or organization.

This slide introduces the next series of slides or can be used as in or shortened lecture.

1. Marketing Expands Firms’ Global Presence The same skills for understanding customers that allow marketing to be successful in the home country market may allow for global expansion as well.

Group activity: Starbucks is one of the fastest expanding global firms. Ask students to brainstorm why Starbucks has been so successful globally. You can visit the Starbucks’ website to identify products being promoted in all of the identified markets. (NOTE: This list varies by season.)

Ideas include type of product (beverages are universal), customer need (luxury and convenience items), local product adaptations, etc. Ideas include type of product (beverages are universal), customer need (luxury and convenience items), local product adaptations, etc.

2. Marketing Is Pervasive Across Marketing Channel Members The marketing department must work seamlessly with other functional areas of the company to design, promote, price, and distribute products.

A supply chain is the group of firms & set of techniques & approaches firms use to make & deliver a given set of goods & services.

3. Marketing Enriches Society Many firms now recognize that their business’s strong social orientation provides a sound strategy in the best interests of both themselves and their customers.

The Avon Breast Cancer Crusade is an excellent example of how a firm uses its knowledge of marketing to benefit society. Avon has long supported breast cancer awareness and prevention and, through its distributor network, has been able to educate women about the

Ask students: Have you ever considered how products from all over the world get to your hometown? Each step in the supply chain takes the good and increases its value by either improving it or delivering it to the end consumer.

Remind students that each step involves an exchange.

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Annotated Chapter Outline

Instructor’s Notes importance of early detection. Because of its primarily female sales force, Avon’s work was truly women helping women.

4. Marketing Can Be Entrepreneurial Marketing sits at the centre of the successes of numerous ventures initiated by entrepreneurs, or those people who organize, operate, and assume the risk of a business venture.

Entrepreneurial Marketing 1.1 Flow, founded in 2015 by Nicholas Reichenbach, is a good example of a new spin on an existing product. We will follow the theme of entrepreneurship throughout the textbook.

Ask students: Why is marketing so important for entrepreneurs?

The examples cited in the chapter of Canada Goose and Steeped Tea are important examples of successful entrepreneurial endeavours.

Almost every chapter features an entrepreneur. In some cases, the entrepreneurs are neophytes while others are seasoned veterans. Some Entrepreneurial Marketing boxes feature companies that have pitched their stories on CBC’s Dragons’ Den show.

Marketing Applications 1. Do you know the difference between needs and wants? When companies that sell coffee develop their marketing strategy, do they concentrate on satisfying their customers’ needs or wants? What about a utility company, such as the local power company or a humanitarian agency, such as Doctors without Borders?

Instructor’s Notes: This question is intended to make students think about the difference between customer needs and wants, as well as how companies might address one or both. It also challenges students to explore whether different types of companies address the needs and wants of consumers differently. Needs are essential items that individuals cannot live without. These include necessities like shelter, health care, basic food, and basic transportation. Wants are products that customers would like to have and view as improving their quality of life, like brand-name clothing, computers, and luxury vehicles.

Student responses should reflect an awareness of considering both consumers’ wants and needs.

Example answers: - Companies that sell coffee most likely concentrate on satisfying customers’ wants, as their products are not considered essential items. Firms also must respond to competitors’ offerings.

- A utility company might consider its customers’ needs more (e.g., reliable water or electric supply to homes and businesses) but also consider customers’ wants (e.g., how they wish to receive the service, how they prefer to be billed) to achieve higher customer satisfaction and provide offers that go beyond basic needs. It might have a strong imperative to satisfy customers’ needs for reliable electricity but not focus as much on customer wants quite as much because it faces little market competition.

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Humanitarian agencies, like Doctors without Borders, are satisfying customers’ needs, especially their basic needs for health care and medicine.

2. Choose a product that you use every day. Describe its 4Ps. Instructor’s Notes: This question is designed to personalize the four major marketing elements for students. Choosing a product that he or she uses everyday and analyzing its 4Ps (product, price, place, and promotion) forces the student to think about how the four elements might come together to make it attractive. This exercise takes the product away from the realm of something that the student simply uses and enjoys and into a better understanding of what makes the product appealing to the student personally.

Example Answer #1 Crest Product Place Promotion

Price

Example Answer #2 Honda Product Place Promotion

Price

Example Answer #3 McDonald’s Product Place Promotion

Price

Crest toothpaste Drugstores, grocery stores, wholesale clubs (Shoppers Drug Mart, Loblaws, Costco) Newspaper and magazine advertisements, supported by moderate TV and cable advertising. “Healthy beautiful smiles for life” (www.crest.com)  promotes beauty, vitality, and lifelong benefits Suggested retail price, but with price promotions depending on retail channel and new product release schedule (e.g., newspaper coupon inserts for new products) Honda Civic sedan Honda dealerships, preowned vehicle dealers Heavy TV and cable advertising, as well as full-colour magazine advertisements. “Evolution. Revolution. This is no time to stand still—the all-new Honda Civic is ready to take you places you’ve only imagined” (www.honda.com)  promotes freshness of design, speed, and dream fulfillment.

Manufacturer’s recommended pricing, with potential promotions at the dealership level. “Build-your-own-Civic” functionality via the Honda Web site, which allows customers to see the price of a car with their own option selections. burgers, fries, soft drinks, milk shakes, Combo meals widespread distribution in all major cities in the world uses a mix of advertising, sales promotion (e.g. Happy Meals), public relations (Ronald McDonald charities), personal selling (at the point of purchase) low cost to appeal to target markets

3. One of your friends was recently watching TV and saw an advertisement that she liked. She said, “Wow, that was great marketing!” Was the ad in fact marketing? Why?

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Instructor’s Notes: Students frequently associate advertising with marketing, but fail to recognize that advertising is just one part of all the functions encompassed by marketing.

Example answer: - Student responses should acknowledge that marketing is made up of product, price, place, and promotion decisions and advertising is one of the promotional tools available to marketers.

4. What is the difference between a good and a service? When you buy a music subscription on Spotify, are you buying a good or a service? Would your answer be different if you bought an MP3 album on Amazon?

Instructor’s Notes: This application question seeks to have students recognize how products and services differ.

Example answer: Goods are items that you can physically touch, whereas services are intangible customer benefits that are produced by people or machines and cannot be separated from the producer.

Students should understand that in terms of the creation of each, they are both “created” using raw materials that are “processed” into a finished output.

5. Assume you have been hired by the marketing department of a major consumer products manufacturer, such as Colgate-Palmolive. You are having lunch with some new colleagues in the finance, manufacturing, and logistics departments. They are arguing that the company could save millions of dollars if it just got rid of the marketing department. Develop an argument that would persuade them otherwise.

Instructor’s Notes: This scenario forces students to think about the purpose and value of marketing in an organizational context and allows for a variety of justifications. For example, a student could use an internal or external perspective and argue that finance, manufacturing, and logistics tend to worry less about the customer and more about internal processes, whereas the marketing and sales functions constantly focus outward on the customers the company serves. Using this argument, the student might question whether other departments are willing or prepared to take on customer relations and develop an understanding of how and why customers buy the company’s product or service. Another argument might simply demand how customers will even know about the company’s products if the marketing department doesn’t broadcast their features, benefits, and value outward.

Example answer: Marketing is a necessary function for three reasons:  It focuses on understanding what the company’s customers actually want and need, as well as how to derive value from the company’s products and services. A department dedicated to this function frees other departments to focus on what they do best—be it finance, manufacturing, or logistics.  It can act as a buffer between external customers and internal company functions, save other departments from customers’ direct demands, and cut down on the amount of churn within the organization.  It understands how to communicate the breadth and value of the company’s products to an external audience and ensures the audience knows that the company and its products even

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exist. Without this communication and the subsequent knowledge gained by the customer, there would be no sales revenue and, consequently, no company!

6. As described in this chapter, customer relationship management is a very important aspect of value-based marketing. Pick any one of Canada’s major retailers, e.g. The Bay (http://www.hbc.com/), Loblaws (http://www.loblaws.ca/), or Shoppers Drug Mart (http://www.shoppersdrugmart.ca/), and explain how they go about building strong customer relationships with their customers.

Instructor’s Notes: This question asks students to think about the ways in which marketers try to build strong customer relationships. Students should discuss how the techniques identified are actually used by marketers to build customer relationships and to what extent they think these measures are successful in influencing their own individual purchasing behaviour.

Example answers: Students may identify a variety of methods based on their individual experiences. However, most will likely focus on customer loyalty programs (and the many variations) as well as various marketing communication that are either general in nature or personalised. Ask students to discuss to what extent their purchase decisions are influenced by these techniques and whether or not they think they benefit from the various methods. Real practical examples should be solicited from the students.

7. Explain how a $45 Timex watch and a $10,000 Rolex watch deliver value to respective target markets? Which factors account for the dramatic difference in watch prices?

Both Timex and Rolex watches meet the basic need of providing the time to consumers. Both are worn on the wrist and deliver the time, and often the date, in a readily-available format. Timex has a mass distribution channel strategy and a low price point that allows multiple segments of consumers to be able to afford and use this product. Timex has also built a reputation for reliable, tough watches that can be used by active people or consumers that work in harsh environments. Timex wearers are those looking for an affordable, durable watch that does its job.

Rolex watches are hand-crafted, built to meticulous standards, and often contain precious gems or metals. The watches incorporate the latest in technology and are known to become collectors’ items.

Wearing this watch convey elite status and the watches are recognizable as a luxury item. Rolex wearers are consumers who can afford one of the best watches money can buy and desire the craftsmanship and technical precision present in a handmade watch. They want a watch that conveys to the world more than just the day or time.

8. Using the four Ps, discuss how Hydro Flask creates value for customers with its water bottles.

Instructor’s Notes: This question encourages students to not only identify the 4Ps from the tons of information on a company’s website but also to think how a company develops marketing mixes for different market segments. They must also be able to link the differences in the marketing mix to the characteristics or needs/wants of the different customer segments.

Example answer: 4Ps Product

Vacuum insulated stainless steel water bottles that can be

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Price Promotion

Place

personalized.

The bottles are $44.99, more expensive that some competitors, but price can vary based on the retail outlet.

The company tends to stay away from more traditional advertising to promote its bottles. Social media features in its communications and rabid fans help to promote as well.

Hydro Flask water bottles are distributed in a variety of ways, are available online and at a variety of retailers nationwide including Walmart, Urban Supply, and Simple Modern.

9. Why do marketers find it important to embrace societal needs and ethical business practices?

Provide an example of a societal need or ethical business practice being addressed by a specific marketer.

Instructor’s Notes: This question centres on the role of social and ethical issues in a marketing context.

Students might mention efforts such as keeping the environment clean and offering fair wages to workers, then argue why a marketer should be concerned about those issues.

Example answers: - Ben & Jerry’s donate a percentage of its proceeds from certain products to worthy causes.

- Starbucks Coffee promotes its fair trade coffee blends and bottled water sales that support third-world water purification programs.

- The Body Shop commits to no animal testing for its cosmetics line.

10. Using Why do marketers like those at Apple find it important to embrace societal needs and ethical business practices? Provide an example of a societal need or ethical business practice that Apple is addressing.

Instructor’s Notes: This question centres on the role of social and ethical issues in a marketing context.

Students might mention efforts such as keeping the environment clean and offering fair wages to workers. For example, Apple develops multiple green initiatives. Some examples: Example answers:  The Apple Supplier Code of Conduct Our Supplier Code of Conduct outlines our high standards for creating safer working conditions, treating workers fairly, and using environmentally responsible practices. It’s one of the strictest in our industry and often requires practices above and beyond local law. To comply with the Code of Conduct, all suppliers must meet the stringent requirements in our Supplier Responsibility Standards.  Clean Energy Program In 2015, we launched our Clean Energy Program to reduce carbon emissions across our supply chain, which makes up nearly three-quarters of Apple’s total carbon footprint. In China alone, we’re working with our suppliers to install more than 2 gigawatts of clean energy.

Marketing Digitally

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1. Happy Planet (http://www.happyplanet.com/), a Vancouver-based organic juice producer is an emerging player in the organic beverage market supplying all of Canada and some of the U.S. with organic juice. Visit its Web site and describe how it delivers value above and beyond that provided by traditional grocery retailers. Describe the ways in which the company communicates this value through its Web site.

Instructor’s Notes: This exercise allows students to analyze how a socially responsible grocery retailer creates value and communicates that value to its customers. Students might examine the images and words Happy Planet uses to express its message, the breadth of the appeal of those elements to different customer segments, which elements appear most prominently on the Web site, and what that selective prominence says about the priority of value being expressed.

Example answers: The company gives an overview of not just the nature of the company but also its social values. To reinforce that message, the company has chosen to include its mission statement in the centre of its homepage and discusses it contribution to the community through its Community Partners Program.

2. Visit the site of any company from which you receive some free service (e.g., Facebook, Spotify, TikTok, Twitter, Gmail). Check your settings to see what information you have given to the company in exchange for the service. Is the value of the information you have provided equivalent to the value the company provides you with its service?

Instructor’s Notes: This exercise is intended to get students to determine the value of their privacy versus the service they get in return.

Example answers: Student answers will vary greatly depending on the service they visit and the privacy settings they have.

Many people set up these services without really checking what information they don’t have to share and what they do. Those who blindly set up these services without investigating the restrictions they can give in the privacy settings. The looser the privacy settings, the less likely students will believe that the exchange is worth it Another factor that comes into play is that many times students lack the life experience to realize that negative ramifications that can come with sharing too much information so they may not realize how much they are giving away.

End-of-Chapter Case Study: A Flood of Water Consumption Choices 1. How does marketing impact the consumption of water, and how has this impact changed since the mid-20th century?

Example answers: Student answers will vary, but they should include at least one of the following: as different consumer groups have diverse needs, marketers have expanded their offerings and thus provided more customer value. A wide range of companies produce a variety of products offered at distinct price points with unique promotions and found in expected places. Since the mid-20th century, these actions have added to the expansion of the consumption of water.

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2. Describe three distinct target markets for drinking water. How does marketing create value for each of these segments using the four Ps; product price, place, and promotion?

Example answers: Answers will vary as this question is asking the students to identify different target markets. For example, first, for outdoor enthusiasts, marketers offer stainless steel containers that can withstand extreme temperatures and powerful impacts. These items are priced at a slight premium due to premium manufacturing costs. These items are sold at outdoor stores, alongside outdoor gear and hiking boots. These items are advertised in outdoor magazines and demonstrated at outdoor enthusiasts’ trade shows. Second, for urban commuters, marketers offer vacuum insulation technology for max temperature retention. These items are priced at a competitive level to be appealing to this cost-conscious target market. These items are sold at general and discount retailers where these commuters do most of their shopping. These items are advertised with banner ads alongside search results for urban transportation information. Finally, for the fashion-conscious, marketers offer chic designs that can be used in customer’s style choices. These items are priced at a high premium in alignment with this customer’s other fashion choices. These items are sold at high-end clothing and shoe stores where fashion-forward customers shop. These items are advertised with banner ads alongside search results for fashion choices and style recommendations.

3. How has changing societal values impacted the ways in which water is purchased and consumed?

Example answers: Answers will vary but should include sustainability. Recent changes reflecting societal and ethical norms have prioritized sustainability. These changes have led to different pricing structures. Conventional spring water in a single-use plastic bottle is quite inexpensive; however, some are willing to pay $60 to obtain a sustainably produced, reliable, safe water bottle that they can use for years. They also might seek water that has been filtered or otherwise certified safe, which constitutes a growing concern. The products have shifted and expanded to meet consumers’ diverse needs.

4. How has the way you consume water changed in the last five years?

Example answers: Answers will vary as this question is asking the students to identify their own behaviour.

Video Activities Video: Making a Market: Vosges Haut-Chocolat Core Concepts Covered: Marketing Mix Activity Summary: This video case presents a marketing mix for a small brand that seeks to differentiate itself through luxury and innovation. After the video ends, students are asked questions about the video and related course concepts.

Activity  Introduction: Vosges Haut-Chocolat is a chocolate brand seeking to make consumption of their chocolate a luxury experience which has grown along with the market for high-end chocolate. The

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

video discusses how Vosges has created a cohesive marketing strategy focused on luxury and innovation. This activity is important because successful marketing requires an understanding of the full range of marketing activities, and of the importance of ensuring that all these activities serve a common strategy. The goal of this exercise is to test your understanding of the basic concepts of marketing.

Video: The video is presented to the student below the introductory information. The video plays embedded on the page, after which questions are presented.

Follow-Up Activity  Compare Vosges to Godiva, which is probably the best-known luxury chocolate brand in the USA. What advantages does Godiva have over Vosges? How can Vosges compete successfully with Godiva (both in terms of its current activities and other things it might do)? Points to consider: o Godiva has far more brand recognition, more of its own stores, and a wider distribution network. o Vosges has its innovative flavors; in addition, the very fact that it is not as well-known might allow the brand to create a more exclusive, super-premium image.

Video: Marketing at The Gluten Free Bar (GFB) Core Concepts Covered: Define Marketing, Marketing Mix, Importance of Marketing Summary: The snack market is the largest in the food and beverage industry. Most individuals have at least one a day. The selection is vast including granola bars, nuts, trail mix, dried fruits, and cereal.

Granola bars is the largest in this category. However, less than 10 years ago the choices for healthy bars, especially gluten-free, were limited. When Marshall Radar was diagnosed with Celiac Disease in 2010, only a couple of gluten-free bars were available. One didn’t have enough protein, so he was always hungry after eating it. The other had lower-quality ingredients giving a taste he didn’t like.

Marshall took matters into his own hands and created the Gluten Free Bars (GFB). He and his brother created a unique gluten-free bar with high-quality ingredients. They started selling to coffee shops.

Now, the GFB has its products in over 11,000 stores in the United States and Canada. The GFB recently expanded into other markets and has plans to grow its international market share. While it still sells to coffee shops, only about ten percent of its business is still in that market. Its smallest, yet most profitable market is e-commerce. One thing it does to differentiate itself from other bars is producing them in-house to keep tight control over quality. It has developed trust with consumers by obtaining certifications that reflect the quality of the GFB. Activity Summary: Students watch a video that addresses how the marketplace is divided into groups of potential customers who are important to Gluten Free Bar (GFB) for different reasons.

Activity Introduction: Marketing creates value in organizations. This video shows that marketing is a core part of everyone’s life regardless of the time of day. From early morning until late at night buyers and sellers trade things of value so that each is better off. Understanding the needs and wants is essential to marketing success.

Questions:

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1. The Internet is the smallest portion of GFB’s business, yet the most profitable. The company considers the consumers who shop on its website as special. What does the company do to create value for its online shoppers and encourage them to continue shopping on its website?

Brief Answer: GFB does a variety of things for its e-commerce patrons, such as:  Providing new flavors not available from other sources  Allowing customers to taste new flavors and provide feedback  Giving free products monthly  Sending free gifts, such as t-shirts 2. How does GFB build trust and create value through its products?

Brief Answer: The GFB’s products are certified vegan, non-GMO, soy and dairy free, gluten free, and kosher.

Follow-Up Activity Discuss the criteria for segmenting a market. Depending on the size of the city or town in which your school is located, have students think of products that can successfully be marketed in your location and others that might not. If the city is large, consider products that succeed there but might not in a smaller town. If school is in a small college town, consider products that are available in larger areas but not yours. Lead the students in a discussion of why those products can succeed or why they can’t based on the criteria required for segmenting a market.

Video: Introduction to Marketing: Red Mango Core Concepts Covered: Value Creation, Marketing Mix (four Ps: Product, Price, Place, and Promotion) Summary: In 2007, Founder and Chief Concept Officer, Dan Kim opened the first Red Mango frozen yogurt shop in the United States. In five years, Red Mango has grown to 150 locations. Red Mango delivers value to its customers by offering a healthy product made with 100% all natural ingredients, fortified with probiotics. Customer value is also achieved through the design, decor and comfort of the stores themselves. By allowing customers to use the self-service area to customize their own dish of frozen yogurt, Red Mango engages its customers in value co-creation. Rather than use traditional marketing, Red Mango uses social marketing tools to allow its customers to engage with the brand through Facebook, Twitter, Instagram, and Pinterest.

Questions: 1. How does Red Mango deliver value to its customers through the marketing mix (the 4 Ps)?

Brief Answer: Product - by providing a 100% all natural product fortified with probiotics, and by advertising the health benefits of the product Price - by fulfilling an emotional need state (hunger, happiness, reward) at a fair price. The average price of a customer ticket is $5-$7 Place - by providing cool, comfortable stores that invite customers to socialize Promotion - by engaging customers in value cocreation through its self-service area and by engaging customers in social media through Facebook, Twitter, Instagram, and Pinterest

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2. Central to Red Mango's marketing is giving customers the opportunity to engage with the brand.

How does Red Mango accomplish this?

Brief Answer: Red Mango engages its customers through the use of social media and value cocreation. In locations that offer a self-service area, customers are allowed to create their own "Red Mango." Customers are encouraged to share their creations with others via Instagram, Twitter, Pinterest, and Facebook.

Additional Teaching Tips In this chapter, the goal is to provide an overview of marketing and encourage students to think about the specific aspects of the marketing mix.

Place is one of the most difficult concepts for students because it is largely invisible to them as consumers. They touch hard goods, experience services, view and hear promotions, and pay for what they buy, but it can seem that products almost appear magically. One recent trend among environmentally-conscious consumers is to seek out products produced within a 100-mile radius of their home towns. Buying these products reduces costs and detrimental environmental effects by reducing emissions associated with transportation and storage. Students should visit local grocery markets, identify goods, and investigate how far the products traveled (and by what means) to reach the store’s shelves. From this experience, a rich discussion of both distribution decisions and marketing’s impact on society can evolve.

To make the eras of marketing clear to students, divide the class into groups with each group assigned to a specific era. Ask the students to identify a business that adheres to their assigned era in terms of its business philosophy and approach. They should present the business to the class with evidence of the business’s philosophy. Each brief presentation should include an assessment of whether the orientation is appropriate to the business given its competitive environment, target audience, and positioning strategy and if not, what orientation would be best.

Newsletter Teaching Aid Remember to subscribe to “Grewal Levy Marketing News” at https://grewallevymarketing.com/.

Published regularly, each newsletter contains a feature article on current topics, for example Lime Rental Scooters, with discussion questions that can be used in class. Each article is tagged so instructors can quickly identify relevant chapters for the newsletter content. The site also features a selection of related articles, links to current videos that can be used in class, as well as links to archived articles sorted by chapter for ease of use in your class.

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Chapter Two: Developing Marketing Strategies and a Marketing Plan TOOLS FOR INSTRUCTORS   

   

Learning Objectives Annotated Chapter Outline with Instructor’s Notes/Teaching Tips Answers to End of Chapter Learning Aids Marketing Application Questions Marketing Digitally Chapter Case Study Video Activities Additional Teaching Tips Newsletter Teaching Aid

Learning Objectives 1.

2.

3.

4.

5.

6.

Define a marketing strategy Describe the elements of a marketing plan Analyze a marketing situation using a SWOT analysis Explain how a firm chooses what group(s) to pursue with its marketing efforts Outline the implementation of the marketing mix as a means to increase customer value Describe how firms grow their businesses

Annotated Chapter Outline

Instructor’s Notes

Opening Vignette: PepsiCo Although PepsiCo is best known for carbonated beverages, most of it revenue and growth comes from snacks and food today. The industry has numerous competitors. Both PepsiCo and CocaCola compete for customers along with numerous other competitors. As consumers search for more healthy options, PepsiCo has introduced new guiltfree products including baked potato chips, lowersodium chips, tortillas, granola bars, oat bites, and even snacks made from green peas and pinto beans. And as consumers search for more healthy beverages, PepsiCo has increased juice and sports drink offerings, and Bubly, a new sparkling water brand.

Chapter 2 focuses on Developing Marketing Strategies and a Marketing Plan. There are 6 Learning Objectives as noted. Students will most likely be familiar with Nike products.

Ask Students to comment on any commercials they can recall and the company itself. Students will start to mention many topics in the chapter including target markets, marketing mix and sustainable competitive advantage.

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Annotated Chapter Outline

Instructor’s Notes

LO1: What is a Marketing Strategy?

A company’s marketing strategy should identify its target market(s), related marketing mix—the four Ps, and the bases upon which sustainable competitive advantage can be built.

Ask students: What competitive advantage(s) do companies such as Nike, Starbucks and Tim Hortons have?

A. Sustainable competitive advantage refers to something the firm can persistently do B. A sustainable competitive advantage acts like a wall that the firm builds around its position in a market.

For Nike, their competitive advantages revolve around their strong brand, technological breakthroughs and a strong customer base of very loyal customers.

For Starbucks, they reach and appeal to customers that want a coffee-drinking experience and customers are willing to pay a lot for this. For Tim Hortons, their customers just want a good cup of coffee at a fair price in a timely manner.

Ask students: What can a firm to do compete against a well-established market leader?

When competing with an entrenched competitor, firms must be creative to meet the needs and wants of their customers. Apple, for example, consistently does just that and continually builds sustainable competitive advantages.

Four Overarching Strategies that create and deliver value and develop sustainable competitive advantages: 1.

2.

3.

4.

These strategies are expanded upon in the next sections. You can hold a brief discussion of the overarching strategies or introduce the following, more in-depth discussion. It covers the four strategies to create and deliver value and a sustainable competitive advantage.

Customer excellence Operational excellence Product excellence Locational excellence

Ask students to think of companies who they are very loyal to in many categories (food, electronics, personal care)? Is it their product, location, operational, or customer excellence that draws the student’s loyalty?

1. Customer Excellence: Retain loyal customers by providing excellent customer service.  Retain loyal customers: Customer loyalty means that customers are committed to buying from a particular firm. Marketers use several methods to build customer loyalty.

- Develop a clear and precise positioning strategy.

- Create an emotional attachment through loyalty

Loyal customers enable a firm to introduce new products and change price points without the risk of losing them. This is a good place to talk about loyalty programs.

Ask students if they belong to any (or if their parents do). Most frequent programs would include airlines, hotels and video stores. Then ask

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Annotated Chapter Outline

Instructor’s Notes

programs.  Offer excellent customer service.

- Train employees to deliver a consistently superior customer experience.

2. Achieve operational excellence. Ensure that customers get the merchandise they want, when they want it, in the required quantities, and at a lower delivered cost than that of competitors.

- Customer excellence derives from efficient operations, excellent supply chain management and strong relationships with their suppliers.

- Supplier relationships must be developed over time.

3. Offer product excellence through branding and positioning.

them how the program affects their patronage.

You can also ask if they are loyal to any products.

This would lead to a discussion about what it means to be loyal—customers are committed to buying from a particular firm.

The text highlights how firms can use the various elements of the marketing mix to achieve a competitive advantage.

In recent years, firms such as Amazon have achieved competitive advantage by utilizing operational excellence. By controlling price and how products are delivered, they have been able to offer customers low prices on a wide array of goods. This is made possible through the use of efficient operations and excellent relationships with suppliers.

Building a strong brand and unique positioning in the marketplace can be a strong deterrent to other competitors that look to enter the market. Some brands employ a unique positioning.

Abercrombie and Fitch and Virgin Records are designed to appeal to young adults and college students. These stores use cutting edge images and unique promotions to appeal to this demographic, feature quality goods and are considered trendy.

4. Offer locational excellence. A competitive advantage based on location is sustainable because it is not easily duplicated.

Ask students where they go to buy coffee or fast food. Do they choose Starbucks or Tim Hortons because there are many locations well situated and easily accessible? When it comes to fast food, is it easier to find a McDonald’s than other burger outlets? Discuss how location has played a role in building and sustaining these businesses.

In most cases, a single strategy is not sufficient to build a sustainable competitive advantage. Firms often require multiple approaches to build a wall around their position. Multiple approaches include providing excellent customer value, customer service, offering superior customer relations and of course, great prices!

LO2: The Marketing Plan

There are three phases of a marketing plan:

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Annotated Chapter Outline

Instructor’s Notes

A marketing plan is a written document composed of an analysis of the current marketing situation, opportunities and threats (SWOT), marketing objectives and strategy specified in terms of the 4Ps, action programs, and projected or pro forma income (and other financial) statements. The three major phases of the marketing plan are:

planning, implementation, control. Exhibit 2.2 shows these phases and strategic focus of each when developing a marketing plan.

Ask students why companies tend to not write down marketing plans. The most likely answer is that they don’t take the time or haven’t organized the strategy.

Planning Phase - Step 1: Define Business Mission & Objectives - Step 2: Conduct a situation analysis (SWOT analysis) Implementation Phase - Step 3: Identify and evaluate opportunities through segmentation, targeting and positioning process - Step 4: Develop and implement marketing mix (4Ps) Control Phase - Step 5: Evaluate performance by using marketing metrics and take corrective action as necessary

Regarding the importance of planning. Sergio Zyman, former CMO of Coca-Cola, points out in his book The End of Marketing as We Know It that no one would ever go to the airport and say “I have $200—where can I go?” Instead, they say, “I need/want to go to San Francisco; how much will it cost me?” The same is true for marketing planning; you must know your final destination to get there.

Planning and executing the plan are crucial to success.

Developing a marketing plan consists of three major phases: 1. Planning phase: Marketing executives and other top managers define the mission and/or vision of the business, conducts a situation analysis, and identifies and evaluates opportunities by engaging in a process known as segmentation, targeting, and positioning.

2. Implementation phase: Marketing managers design the marketing organisation, allocate resources through by making budgets, and develops detailed schedules and action plans.

3. Control phase: Marketers evaluate the performance of the marketing strategy and take any necessary corrective actions.

A poorly executed plan leads to failure, regardless of how good or solid the plan is. The world is full of good plans poorly executed.

Step 1: Define the Business Mission and Objectives A. The mission statement provides a broad description of a firm’s objectives and the scope of activities it plans to undertake as

Group activity: Students should develop a mission statement for their school. The resultant mission statement would offer a good way to assess and set student expectations.

Refer to Appendix2A to walk students through an example of a marketing plan.

When initially introduced, diapers designed differently for boy and girls bombed because the market was not ready for the product; through improved execution, the diaper manufacturer ultimately found success. However, even wellexecuted plans require monitoring and updating, because the needs of any market constantly change.

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Annotated Chapter Outline

Instructor’s Notes

it attempts to answer two main questions: What type of business are we? What do we need to do to accomplish our goals and objectives?

B. A well-defined, firm-wide mission must exist before marketing executives can get involved.

C. Each firm answers these questions in different ways, depending on the industry, size, and type of firm.

Instructors can also discuss the different between mission statements and objectives that exist between profit and non-profit organizations. A good example of a non-profit is the Heart and Stroke Foundation. Instructors can go through this mission statement and discuss differences vs. Tim Hortons as noted above.

LO3: Step 2: Conduct a Situation Analysis Using SWOT A. A situation analysis using SWOT assesses both the internal environment with regard to its strengths and weaknesses and the external environment in terms of its opportunities and threats.

B. SWOT 1. Strengths 2. Weaknesses 3. Opportunities 4. Threats

A SWOT analysis is comprehensive, in that it offers both an internal and an external assessment.

LO4: Step 3: Identify and Evaluate Opportunities Using STP An STP analysis uses three steps to identify and evaluate opportunities for increasing sales and profits.

After completing the situation audit, the next step is to identify and evaluate opportunities for increasing sales and profits using STP (segmentation, targeting, and positioning).

1. Segmentation: The process of dividing the market into groups of customers with different needs, wants, and characteristics and who therefore might appreciate product or services geared especially to them.

2. Targeting: An evaluation of each segment’s attractiveness to determine which to pursue through target marketing.

3. Positioning: The process of defining the marketing mix variables to communicate a clear, distinctive, desirable understanding of what the product does or represents in comparison with competing products to target customers.

LO5: Step 4: Implement Marketing Mix and

The firm therefore must possess expertise in both what the firm can provide and what the market wants the firm to provide.

Students can take a few minutes and complete a SWOT analysis for their college/university as an inclass exercise.

With STP, the firm first divides the marketplace into subgroups or segments, determines which of those segments it should pursue or target, and finally decides how it should position its products and services to best meet the needs of those chosen targets.

Refer to Exhibit 2.6 for an example of segmentation.

Hertz realizes that its primary appeal for the SUV/Minivan collection centres on young families, so the bulk of its marketing efforts for this business are directed toward that group.

After companies have finished their segmentation,

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Annotated Chapter Outline

Instructor’s Notes

Allocate Resources

targeting and positioning efforts, they need to set the marketing objectives for their product or brand and develop the marketing mix.

1. Marketing managers are responsible for setting specific objectives for the product or brand over time.

2. Develop Marketing Mix

Refer to Exhibit 2.7 for a visual representation of Developing the Marketing Mix. This can be used to introduce the topic for a brief discussion. Or a more detailed discussion can follow based on the content that follows.

Each element of the 4 P’s must be fully integrated to achieve a coherent strategy:

Ask students: What value proposition does Dyson bring to its clients? Do you believe it is a good value compared with less expensive comparable products?

A. 1st P: Product and value creation. Firms attempt to develop products and services that customers perceive as valuable enough to buy.

Ask if they have seen/used Dyson fans. Do these products offer enough value to have students consider purchasing them?

B. 2nd P: Price and value for money. Valuebased marketing requires that firms charge a price that customers perceive gives them a good value in relation to the product they receive.

The concept of value will be covered again in the pricing chapter and throughout the course. It is worth spending some time on Value-based pricing.

Ask students what they think about Dyson’s new hair dryer that retails for $499.

Show students two differently priced products from the same category. Ask which one they view as better value and why? For example, an Apple iPhone vs. another smartphone.

Pricing Approaches: 1. Cost-based pricing uses the following equation: cost + fixed amount = selling price.

2. Competitor-based pricing uses competitor’s price ± a specified amount = selling price.

3. Value-based pricing dictates that customers’ perceived value = selling price.

The course covers pricing in more detail later; this section provides just a brief introduction. Many students will be familiar with cost-based pricing from their finance studies. Explain that marketers view price differently.

C. 3rd P: Place and value delivery. Firms must make products/services readily accessible where and when customers want it.

Getting the product to consumers at the exact moment they desire it is difficult. Firms therefore are experimenting with different forms of distribution, such as vending machines for cell phones, to offer consumers 24/7 access to

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Annotated Chapter Outline

Instructor’s Notes products.

Firms experiment with different forms of distribution, such as vending machines for cell phones, to offer consumers 24/7 access to products.

Staples has incorporated web kiosks in their stores to access Staples.com, allowing consumers to buy products that are out of stock in-store.

Ask students if they are familiar with Sephora, if they like it, and why? Most likely they will be very fond of this retailer. They offer an incredible assortment in a well-organized, well-lighted, exciting retail environment.

D. 4th P: Promotion and value communication 1. Use a variety of media.

2. Deliver the value proposition.

Consumers enter into an exchange only if they know that the firm’s product or service appears in the marketplace. This is why promotion is so important. They won’t buy if they don’t know about it.

Various tools, such as the Boston Consulting Group (BCG) matrix help marketers allocate resources.

In all firms, resources are scarce and must be allocated so that they create the most value for the firm. The Boston Consulting Group Matrix is a tool some companies use to help them do this.

Stars occur in high growth markets and are high market share products, for example the iPod Nano.

Cash cows are in low growth markets but have high market shares, e.g. Microsoft’s Office suite of software.

Question marks appear in high growth markets but have relatively low market shares, e.g. Toshiba’s High Definition TV versus Sony’s Blu-Ray. Blu-Ray appears to have won the battle and is moving over to becoming a Star.

Dogs are in low growth markets and have relatively low market shares.

Ask students to visit the P&G website to identify stars, cash cows and question marks (newer

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Annotated Chapter Outline

Instructor’s Notes products). They won’t find any dogs at P&G’s site.

Step 5: Evaluate Performance by using Marketing Metrics and Make Adjustments The firm must determine why it achieved or did not achieve its performance goals.

Performance objectives and metrics may be financial or related to social responsibility.

Firms cannot simply remain content with a strategy for too long. Over time, all strategies must be revised to adjust to new markets, new competitors, and new technologies. The firm must recognize not only its failures but also its successes to ensure continued success.

Strategic Planning Is Not Sequential Actual planning processes move back and forth among these steps.

The marketing planning steps are likely to not be sequential, since, planning entails an iterative process and is affected by market shifts, new research findings, and/or the introduction of new products. Thus, rarely will the process follow the identified steps neatly.

LO6: Growth Strategies

The growth strategies model is crucial for students to understand.

Fundamentally, all strategies involve one or a combination of the four factors pictured in this slide.

Each can be used to achieve different objectives. A series of slides follows that can be used to expand on these strategies if desired.

1. Market Penetration A market penetration strategy employs the existing marketing mix and focuses the firm’s efforts on its existing customers.

Sales encourage current users to consume more of the current product mix, but they also bring new customers to the business.

Many strategies can be used to get current consumers to consume more of your product.

Group activity: Ask students to brainstorm ways in which firms can get current consumers to consume more. Example solutions might include coupons, loyalty cards, or serving size changes.

2.

Market Development A. A market development strategy employs an existing marketing offering but extends it into new market segments.

B. International expansion is generally riskier

This might include targeting growing ethnic groups in Canada or global expansion, which is a popular way for many firms to improve their profitability.

Ask international students, if you have them in your class, what types of products and brands are

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Annotated Chapter Outline than domestic expansion.

Instructor’s Notes entering their markets?

Global expansion is a popular way for many firms to improve their profitability. Market development strategy can be explained using MTV as an example. It enjoys a competitive advantage in global markets because North American culture is widely emulated for consumer products.

3. Product Development A product development strategy offers a new product or service to a firm’s current target market.

A product development strategy requires that the firm understands its current consumers’ needs/wants well enough to identify other products/services that would be attractive to them.

Ask students for examples of products that are targeted to them by companies who already have their business. They will no doubt mention many food products including drinks, candy and fast food.

4. Diversification A diversification strategy introduces a new product or service to a market segment that currently is not being serviced.

A diversification strategy introduces a new product or service to a market segment that currently is not served. Diversification opportunities may be either related or unrelated.

In a related diversification opportunity, the current target market and/or marketing mix shares something in common with the new opportunity.

The firm might be able to purchase from existing vendors, use the same distribution and/or management information system, or advertise in the same newspapers to target markets that are similar to their current consumers.

In an unrelated diversification, the new business lacks any common elements with the present business.

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Marketing Applications 10.How have PepsiCo and Coca-Cola created sustainable competitive advantages for themselves?

Example answer: - PepsiCo and Coca-Cola have created sustainable competitive advantages for themselves by building brand awareness through strategic sponsorships, unique advertising campaigns, and efficient operations.

11.Perform a SWOT analysis for your college or university.

Instructor’s Notes: This exercise challenges students to think about their educational institution from the perspective of not a student but rather a marketing professional. To complete the SWOT analysis, students will need to think about what the school does well, how it might perform better, how those strengths might open new opportunities for growth, and the potential weaknesses created by the school’s identified weak areas.

Example answers: An example of SWOT analysis for the Telfer School of Management, University of Ottawa might contain the following: Strengths  Top-ranked program for innovation and entrepreneurship studies  AACSB accreditation  International student body and alumni network  Accomplished academic faculty Weaknesses  Image: Viewed as a French university outside in English Canada but as an English university in Quebec  No PhD in Management program Opportunities  Expansion of online program offerings  Leverage growing international alumni network  Expansion of Graduate Research Degree programs Threats  Many competing entrepreneurship programs in the Ontario and Canada  Potential for school ranking to drop 12.How does Coca-Cola segment its market? Describe the primary target markets for Coca-Cola. How does it position its various offerings so that it appeals to these different target markets?

Instructor’s Notes: Using this popular brand, students can explore to whom the products are targeted and how the companies apply this targeting to appeal to the consumer segment in question.

Example answers: Geographic segmentation Coca-Cola has a countrywide network of product distribution but the company segments more in urban and suburban areas as compared to rural areas and does the same in other countries.

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Demographic segmentation  Age: 15-25 years old and 40 plus  Gender: targets both genders with a wide variety of drinks  Income: segments different income levels, for example, by packaging  Family size: offers various bottle sizes: 500ml, 1L, 1.5L, 2L pack. People can easily choose a suitable pack based on their family size.

Psychographics segmentation  People who are brand conscious will try to show their status by drinking Coca-Cola.  Based on the level of education, the company can use ads to convey the company massage.  Because Coca-Cola is a recognized world brand, people will drink it without hesitation.

13. Pick your favourite product, service provider, or retailer. How do they add value through the implementation of the 4Ps? Instructor’s Notes: Students must think about how value might be created by his or her favourite product or service on the basis of the four elements of the marketing strategy—product, price, place, and promotion—and how they come together to create that value.

Example answers: - Toyota 86 (formerly Scion frs) automobile:  Product: A low-cost vehicle with many customizable options.  Price: Low company costs passed on to the consumer in the form of low prices, which makes the vehicle affordable even on a student’s limited budget.  Place: A combination of wide dealership distribution and robust online sales, which enables the student to choose his or her vehicle options online and have it ready for pick up at an associated dealership.  Promotion: Street-smart, hip, high-energy advertising that highlights how many options a student has in making the car his or her own unique, personal statement.

14. Choose three retailers. You believe the first builds customer value through product excellence, the second through operational excellence, and the third through customer excellence. Justify your answer.

Instructor’s Notes: Whereas the previous questions ask students to consider how various marketing elements (such as the 4Ps) create value for consumers, this exercise challenges them to consider more macro-level strategies for creating and delivering value, as well as for developing sustainable competitive advantage.

Example answers: - Product excellence: Apple effectively has branded its iPod media player and iTunes online media store so that comparable, cheaper MP3 devices and online music stores seem inferior.

- Operational excellence: WestJet Airlines offers consistent customer experience, regardless of the airport, and manages its logistics so that it meets or beats the on-time arrival and departure performance of all other major airlines.

- Customer excellence: Enterprise Rent-A-Car provides strong customer service, both at the counter and by offering to pick up customers at their homes or businesses when they rent a vehicle from the agency.

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15. Dyson successfully sells its fans and heaters for $150 to $400, whereas most conventional fans sell for around $25. Explain the value it creates and how this affects the price it can charge.

Instructor’s Notes: This question asks student to apply their knowledge of pricing to a real company and a real situation with which most of them would have a cursory knowledge. This exercise would not only show them first-hand how companies use pricing to create value while satisfying different customer needs and wants.

Example answers: Dyson fans and fan heaters draw in and redirect surrounding air without potentially dangerous or fast spinning blades or visible heating elements. These sculpturally beautiful appliances are perceived by consumers to be a valuable alternative to products that haven’t significantly changed since the early 1900s.

16. Of the four growth strategies described in the chapter, which is the riskiest? Which is the easiest to implement? Why? Instructor’s Notes: The focus of this question is to get students to think about the strategies and tactics companies can use to grow their businesses. They should be able to identify the factors that could influence the success or failure of these strategies.

Example answers: Of the four growth strategies, diversification is the riskiest because it involves significant reallocation of resources. Diversification requires firms to invest in both new products and new markets. Market penetration is probably the easiest to implement because it requires initiatives to get more of your current customers to purchase more of your current products. Programs that offer sales, discounts, twofor-one, or BOGO specials can assist in a market penetration strategy.

17. Imagine that you have just developed and launched a new sports bike for cycling enthusiasts and your business has become an instant success. You would like to capitalize on this success and fame to grow your business. Explain how you would go about expanding your business over the next three years Instructor’s Notes: The goal of this question is get students to think about how they may apply the four growth strategies – market penetration, product development, and market development, and diversification.

Example answers: Students should be able to identify an appropriate sequence in the application of the growth strategy.

Given that it is a new business that has been an instant success, students should likely suggest a market penetration strategy for most of the three years, if not all of it, followed by either a market development or product development strategy, depending on which of these two they consider more lucrative or risky. Students should be asked to justify their choice of growth strategies and to identify specific products they would develop or specific markets they would pursue.

18. Use the sports bike scenario from the previous question, describe what kinds of analysis you might conduct before deciding what growth strategies to implement?

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Instructor’s Notes: This question requires students to consider the type of information they would need in order to decide on which strategy to employ.

Example answers: Students who choose market penetration may decide to focus on customer satisfaction and feedback data in order to improve their offering. Those that intend to use market development will likely focus on researching the new market(s) or segment(s) in order to get insights about customers’ needs and wants and how they align with their existing resources and capabilities. Those that focus on a product development strategy will more likely collect information on customers’ unmet needs or latent needs in order to develop new products to satisfy those needs.

19. You and a few of your classmates are planning to open a new spa facility near the campus of your university. Explain how you would segment the market for your services, which segment would you target, and how would you position your spa to the chosen target market.

Instructor’s Notes: This question requires that students apply their knowledge of the process of segmenting a market and to list the criteria for selecting a market segment.

Example answers: Students’ answers may vary but they must clearly indicate that segmentation is about creating groups of customers that respond similarly to the firm’s marketing efforts. They must state bases for segmenting the market, for example, using demographic factors (e.g., age, sex, income, location, etc) or psychological or behavioural considerations. Students must also identify the criteria for selecting a target market i.e. a segment’s attractiveness in terms of factors such as size and growth potential.

Marketing Digitally 3. The mission statement for The Estée Lauder Companies is “‘Bringing the best to everyone we touch’. By ‘The best’, we mean the best products, the best people and the best ideas. These three pillars have been the hallmarks of our Company since it was founded by Mrs. Estée Lauder in 1946. They remain the foundation upon which we continue to build our success today.” HarleyDavidson, Inc.’s mission statement is more straightforward: “We fulfill dreams through the experience of motorcycling, by providing to motorcyclists and to the general public an expanding line of motorcycles and branded products and services in selected market segments.” (Both statements were taken from www.missionstatements.com/fortune_500_mission_statements.html) These different perspectives also reflect the quite different positioning adopted by each company. Visit the websites of each manufacturer and review the descriptions of the company, its mission, and its values. Do you believe these two disparate mission statements reflect what the firms do and how they are portrayed in the media? Justify your answer.

Instructor’s Notes: Students should discuss the difference between the two mission statements and how they relate to both Estee Lauder’s and Harley-Davidson’s company’s official descriptions.

Example answers: About Estee Lauder

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Our culture is often described as a rare mix of family values with a high-performing public company. This unique mix translates into a caring, collaborative, and compassionate workplace that is also demanding—with a competitive spirit that is a powerful source of motivation. Above all else, there is a focus on long-term, sustainable growth which engenders loyalty and commitment from internal and external stakeholders.

About Harley-Davidson Fulfilling dreams of personal freedom is more than a phrase. It’s our purpose and our passion. We bring a commitment of exceptional customer experiences to everything we do—from the innovation of our products to the precision of our manufacturing—culminating with our strong supplier and dealer networks. We are Harley-Davidson.

4.

More and more firms seem to be entering the dating service industry. Visit eHarmony (http://www.eharmony.ca) and tour its website to find the types of activities and methods such companies use to help match compatible couples. Now, analyse the environment that might affect Internet dating services using a SWOT analysis.

Instructor’s Notes: Students can apply what they have learned to a novel service area they might not have considered before. To obtain an understanding of how a company like eHarmony attempts to match singles, students must consider what factors affect online dating services in the guise of a SWOT analysis.

Example answers: - eHarmony uses questionnaires to probe what people think about relationships (i.e., what they want, what’s important, what they like or don’t like), as well as personality tests to create a high-quality dating match.

- According to the following SWOT analysis, eHarmony might face problems on two fronts. First, singles could use many other low-cost options—both online and real-world—to meet and get to know one another. With so many options, clients might not be willing to pay for the eHarmony subscription service. Second, there is no guarantee that clients can avoid potentially negative, or even dangerous, situations with bad matches or sexual predators who use the service for their own ends.

Strengths  At-home convenience factor  Multiple matching criteria  Low client risk Weaknesses  No guarantee that matches will be good or safe  Requires client subscription to enable communication between matches Opportunities  Use matching criteria for couples to provide inexpensive counselling  International expansion Threats  Many no-charge opportunities for singles to meet, online or off  Potential for sexual predators to use the service negatively

End-of-Chapter Case Study: The Coffee Wars 1-31

1. Perform a SWOT analysis for Starbucks and Tim Hortons. Based on your analysis, in which company would you invest? Justify your answer.

Example answers: SWOT analysis: Starbucks

Internal

External

 

Positive STRENGTHS Ubiquitous Stores Social Marketing Channels

OPPORTUNITIES  Growing Market

Negative WEAKNESSES  High Prices

THREATS  New competitors (McDonald’s and Taco Bell)

SWOT analysis: Tim Hortons Positive Internal

External

Negative WEAKNESSES  Foreign ownership has resulted in bad press and bad franchisee relations

STRENGTHS  Higher number of locations  Long history in Canada

OPPORTUNITIES  Growing Market Globally

THREATS  New competitors (McDonald’s and Taco Bell)

2. Which growth strategies have been pursued by Starbucks and Tim Hortons in the past? Which strategies do you believe will be most successful for the two firms in the future? Why? Example answers: Starbucks: Starbucks connects with fans through social marketing channels, including its popular My Starbucks Idea site. New capabilities available through the apps will allow greater connections for the company.

Tim Hortons:

5.

Through sponsorship of minor league sports teams (e.g., Timbits Hockey) Tim Hortons encourages consumers to interact more closely with it. It popular, vastly successful Roll Up to Win annual promotion will continue to bring fans to its stores.

Which marketing metrics would be most helpful for an executive in charge of developing new products for a coffee chain?

Instructor’s Notes: Not all students will be familiar with performance metrics. This question may require some students have to think about measures they might not have considered before.

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Example answers: Students will answer with different metrics. Some commonly used metrics to assess performance include revenues, or sales, and profits. An attempt to maximize one metric may therefore lower another. Thus, managers must understand how their actions affect multiple performance metrics. The metrics used to evaluate a firm vary depending on (1) the level of the organization at which the decision is made and (2) the resources the manager controls.

Video Activities Video: Marketing Strategy at Wham-O Core Concepts Covered: SWOT analysis, marketing strategy Summary: This video case views marketing strategy from the perspective of a toy company that has changed ownership many times over the years. Wham-O, creator of the Frisbee, Hula Hoop, Super Ball, Slip ‘N Slide, has introduced over 1,000 products throughout the past 70 years. All were designed to promote outdoor family fun. The company sold in 1982. In the 30 years that followed, it had a plethora of owners. In 2015, the company sold again. At the time, Wham-O’s revenue was just a fraction of what it once was. The president who took his position at the acquisition had grown up on Wham-O toys was determined to make the company successful again. A SWOT analysis was conducted to identify the strengths, weaknesses, opportunities, and threats, which is serving as a guide to developing the marketing strategies for the company. Wham-O is focusing on social media as well as restructuring its products and packaging to make them more e-commerce friendly.

Questions: 1: What might some of the key findings be for Wham-O when conducting a SWOT analysis?

Brief Answer: Strength: Large assortment of products Weakness: Lost reputation for novelty because of diminished quality by some of the many owners Opportunity: Build the bridge between the young generation and the heritage of the company through various media, especially social Threat: Changing lifestyles 2: One big problem for Wham-O is that it is not e-commerce friendly. What is the cause of this problem?

Brief Answer: With the size of some of some of the products and their low prices, the shipping costs are more than the price of the product. This makes shipping impractical.

Additional Teaching Tips In this chapter, the goal is to introduce students to an overview of the marketing plan, the concept of customer value, and the utility of the SWOT matrix. It is important to teach students that the importance of the marketing plan is to communicate the value proposition to consumers and to provide direction on how that will be achieved.

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The utility of the marketing plan must be conveyed throughout the course. Teach students that the marketing plan is a subset of the business plan that forms the foundational strategy of business.

Students come to realize the importance of the marketing plan when the instructor frequently makes connection to its purpose not only on the day the concept is taught but also throughout the course.

Customer value is a difficult concept for students to grasp. Instructors may want to ask students to write down something they find of value and what aspects lead to creating that value. The instructor can then ask what they would trade for that value. It is important that instructors communicate that value is more than monetary worth and can’t easily be measured. As a result, marketers must conduct target market research in order to create the value proposition of their marketing strategy.

The SWOT matrix may be easily demonstrated by dividing your class into groups and having each group contribute one item to each of the four quadrants using the college they are attending (common ground for all students) or a major chain food (such as McDonald’s) so that all students are familiar with strengths, weaknesses, opportunities, and threats that may apply. Students can work as a group and then each group may put their items on the white boar to form a collective classroom SWOT. Instructors should then make the link that the opportunities and strengths should filter into the marketing message delivered in advertising campaigns and other marketing tools. Online tip: Instructors may want to divide their class by last name A-E Strengths, F-J Weaknesses, and so forth to answer a discussion board question using the same concept. Students could then complete an individual SWOT as an assignment. Another option would be to use the same concepts and integrate it as an online team assignment where each team forms their respective completed SWOT.

Newsletter Teaching Aid Remember to subscribe to “Grewal Levy Marketing News” at https://grewallevymarketing.com/.

Published regularly, each newsletter contains a feature article on current topics, for example Lime Rental Scooters, with discussion questions that can be used in class. Each article is tagged so instructors can quickly identify relevant chapters for the newsletter content. The site also features a selection of related articles, links to current videos that can be used in class, as well as links to archived articles sorted by chapter for ease of use in your class.

Chapter Three: Analyzing the Marketing Environment

TOOLS FOR INSTRUCTORS   



Learning Objectives Annotated Chapter Outline with Instructor’s Notes/Teaching Tips Answers to End of Chapter Learning Aids Marketing Application Questions Marketing Digitally Chapter Case Study

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  

Video Activities Additional Teaching Tips Newsletter Teaching Aid

Learning Objectives 1.

2.

3.

Outline how the factors in a firm’s microenvironment influence its marketing strategy Identify the factors in a firm’s macroenvironment and explain how they influence the overall marketing strategy Identify important social and natural trends that impact marketing decisions

Annotated Chapter Outline

Instructor’s Notes

Chapter 3 will focus on micro and macroenvironmental factors that influence a firm’s marketing strategy.

These questions are the learning objectives guiding the chapter and will be explored in more detail in the following notes.

Opening Vignette: Roomba The opening vignette discusses how iRobot was able to use cutting edge technology in its Roomba vacuums. Incorporating advanced sensors and AI capabilities means convenience for consumers.

While Roomba is still fairly expensive, consumers put a premium on their time justifying the cost.

A Marketing Environment Analysis Framework The Consumer Rests at the Centre of All Marketing Efforts.

- The firm must consider the entire business from the consumer’s point of view - Firms must monitor the macroenvironment to determine how various factors influence consumers and how firms should respond.

LO1: Microenvironmental Factors - Outline how the factors in a firm’s microenvironment influence its marketing strategy

Ask students: What factors in the business environment seem to impact Roomba’s business strategy?

I.

Ask students: What are Pepsi’s core competencies? What do they do well?

Successfully Leverage Company Capabilities - Successful marketing firms focus on satisfying customer needs that match their core competencies.

- Firms should use information they gain from SWOT analyses to identify attractive opportunities that match existing competencies.

Students should focus on the macroenvironment, specifically technology, social/natural trends, demographics, as well as econmic factors.

In all marketing activities, the consumer is at the centre. Anything that affects consumers affects marketers. Any change in one of these environments likely requires an adjustment to the firm’s marketing mix. By identifying potential environmental trends, firms often can take proactive steps.

This introduces the discussion regarding the factors that affect consumers’ microenvironment: the company (i.e., its capabilities), its competition, and its corporate partners.

Answer: They know how to bottle beverages, distribute them to stores, and promote their brand.

Ask students: How they capitalized on their core competencies in the face of changing market

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trends?

Answer: The trend toward more diet-conscious consumers has led to the development of lowcalorie alternatives to soft drinks such as sparkling water.

II. Consider Competition - A firm’s competitors can have significant impacts on the firm’s consumers.

- By collecting and synthesizing information about its position with respect to rivals, a firm gains competitive intelligence.

Information about competitors is available from many sources. The Market Share Reporter is an annual publication found in most libraries that students may use to analyse companies in a variety of industries. Euromonitor is another source.

Group activity: Ask students to brainstorm a list of possible source of competitive intelligence. Have them discuss what they can learn from each source.

III. Work with Corporate Partners - Few firms operate in isolation; instead, firms must work together with their partners to create an efficient manufacturing system.

- Just-in-time (JIT) delivery systems minimize inventory levels.

Firms must work together to create a seamless system that delivers goods and services to customers when and where they want them. Many cite a key reason for Walmart’s success to be because of their close relationships with their suppliers.

LO2: Macroenvironmental Factors Macroenvironmental Factors Operate in the External Environment

You can use the main slide provided to review this topic instead of the ones that follow, which provide more in-depth discussions on each factor.

Culture, Country Culture and Regional Subcultures refer to the shared meanings, beliefs, morals, values, and customs of a group of people.

- Country culture involves the visible nuances of a country, such as artifacts, behaviour, dress, symbols, physical settings, ceremonies, languages, tastes, and food preferences, as well as more subtle differences.

- Regional Subculture reflects the area in which people live and often affects how they refer to and their preferences for products and services.

Regional Subculture - It's dinnertime, and two families, one in Quebec, the other in Ontario, are sitting down to eat. A hot meal is on the menu for both families but in Ontario, the meal is likely to be ready-to-eat purchased at the grocery store. In Quebec, the dinner is probably made from scratch at home. A Leger Marketing study found that Ontarians buy a hot prepared meal or meal they reheat at home two times per month on average, compared to 1.6 times for Quebecers. Quebecers, especially Quebec women, value themselves a lot through cooking and being directly involved in the feeding of their family. The survey also suggested Quebecers enjoy food more: 57% agreed that eating is one of the great joys of life, compared to 47% of Ontarians and 40% elsewhere in Canada.

Quebecers prefer smaller (40,000- to 50,000square- foot) grocery stores near their homes, (that’s why the supercentre store format hasn't

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taken off in the province.) Quebecers also tend not to choose stores on price as much as Ontarians.

IGA and Metro, proximity-based retailers, are two of the top three favourite grocery store banners in Quebec. In Ontario, two of the top three are No Frills and Food Basics, which are price-based banners.

Demographics are the characteristics of human populations and segments. These characteristics are particularly valuable for identifying consumer markets.

- Age, gender, and income demographics are readily available from a wide range of sources.

Ask students: What are some typical demographics?

Answer: age, gender, income, education.

Demographic segmentation is probably the most common form of segmentation because the information is so widely available.

Generational cohorts refer to groups of people of the same generation who have similar purchase behaviours because they have shared experiences and are in the same stage of life.

Gen Z  Born after 1993, live in a digital world Generation Y (also known as Millennials or Echo Boomers)  Skeptical  Web-savvy Generation X  Considerable spending power  Astute  Cynical about advertising  Significant knowledge about products and services Baby Boomers  Prioritize individualism and leisure time  Believe they will always be able to care for themselves  Youth obsessed Income has become increasingly polarized in

Group activity: Have students brainstorm a list of the defining characteristics of their generation.

Ask students: How does your generation differ from previous generations, such as their parents— the Baby Boomers. What macroenvironmental forces have had the most impact on your generation?

Ask students: What does the phrase “generation gap” mean to you? How do you experience this gap between your generation and that of your parents or grandparents? In what ways do you believe your generation is similar to that of your parents or grandparents?

Note: many Baby Boomers are now seniors, a group that makes up Canada’s fastest growing group. Millennials are now the largest cohort in Canada eclipsing even Baby Boomers.

The “middle-class squeeze” is a very real global

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Canada. The wealthiest families are getting wealthier, while middle- and lower-income families are losing ground. Consumers therefore increasingly search for value.

phenomenon. Many developing countries face similar income inequities to those found in North America. Pay gaps also cause problems for many new college graduates who find they cannot afford to live on their own and must move back in with their parents: 61% of recent graduates stated that they intend to live with their parents after graduating.

Education matters, because higher levels of education lead to better jobs and higher incomes, especially among college graduates.

In addition, a strong link connects income, occupation, and education.

Ask students: Do you plan to continue your education after graduation?

Gender traditionally has had a significant impact, but the blurring of gender roles has led many firms to search for gender-neutral positioning strategies.

Women now make up more than 60% of the postsecondary population.

Ethnicity The ethnic makeup of Canada has dramatically changed in the past 20 years. By 2030, 100 percent of Canada’s population growth will come from immigration. Various ethnic markets now offer lucrative segments, and marketers are responding with products and services to meet the specific needs/wants of those segments.

Ask students: What steps can and should marketers take to respond to the changing ethnic mix in Canada? Ask for specific examples, e.g. fast food, consumer packaged goods companies, service providers.

Technology Technological advances have accelerated greatly in the past few decades, affecting every aspect of markets.

Arguably the single most important change in the way we live is the introduction of new technology.

Many students believe they will never return to school after they finish their Bachelors’ degree, but modern conditions make this choice more and more unlikely. Lifelong learning of new skills and new knowledge has become key to survival in the global economy.

Ask students? How do you believe this will affect the workplace in the future?

Ask students? Do you believe that there are still significant gender differences? What are they?

Many marketers already have adjusted their marketing mix to meet the needs of ethnically diverse segments better.

New technologies that impact the market include Artificial Intelligence (AI), Robotics, and the Internet of Things (IOT).

Ask students: Name some new products, new forms of communication, and new retail channels that have been introduced because of technological advances. In particular, what is the impact of AI and IOT on their lives?

The Economic Situation comprises several

Depending on the time of year, discuss projections

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elements. The most common being: 1. Inflation is the persistent increase in the prices of goods and services.

2. Foreign currency fluctuations highlight the discrepancy in value between the currencies used by different countries.

3. Interest rates represent the cost of borrowing money.

4. Shifts in any of these elements make marketing either easier or harder for a firm.

5. Recession a period of economic downturn when the economic growth of the country is negative for at least a couple of quarters

about Christmas shopping, vacation planning, or home buying. Various economic factors affect each of these areas.

Political/regulatory environments comprise political parties, governmental organizations, and legislation and laws.

This list includes some legislation designed to ensure a competitive marketplace and clearly demonstrates the government’s long history of enacting laws that protect fair trade.

The Consumer Confidence Index takes into account how consumers feel about how the economy is doing. This economic indicator relates directly to spending.

Various laws ensure fair trade and competition by prohibiting activities that would damage a competitive marketplace.

LO3: Identify important social and natural trends that impact marketing decisions

Social and Natural Trends have dramatic Marketing Impacts.

Greener consumers appreciate green marketing, the strategic effort by firms to supply customers with environmentally friendly merchandise.

Privacy concerns plague many consumers. Many result from technology (e.g. social media, IOT) as well as the increasing number of security/data breaches that impact consumers.

This section introduces significant social trends (greener consumers, privacy concerns, health and wellness, time-poor society). All can be addressed using one slide or can be expanded on using the ones that follow.

Greener consumers purchase products based on issues beyond the tangible product. These issues can include a variety of social causes such as environmental awareness, protection of animals, etc. Consumers who purchase these products do so to support these causes.

In recent years, firms have had to inform consumers of the steps they take to protect their privacy. The government also has instituted new rules for privacy protection.

Ask Students: When you use for social media sites do you worry about how your posts will be used?

Does that affect how active you are on certain sites?

Time-poor Society

With more time spent at work, the amount of time available for home or leisure activities has shrunk.

In turn, services that complete the tasks that people no longer have the time to do, such as

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housecleaning, errands, and cooking, have grown.

Ask Students: What companies are doing a good job of helping consumers be more productive? E.g. apps like SkipTheDishes Efficient Distribution of Food

The UN Sustainable Development Goals include reducing hunger. Food waste has grown and makes up 28% of garbage in landfills. Canada is ranked third worst in the world for food waste.

Ask Students: How much food does your household buy but not use every week? What can you do to reduce this waste?

Health and Wellness concerns

Consumers are increasingly aware of healthy eating and lifestyles and are embracing fitness, yoga and other activities. Health concerns, especially those pertaining to obesity and children, extend far beyond short-term crises though.

Marketing Applications 1. Assume you are going to open a new store selling fitness equipment. Describe it. Who are your competitors? What would you do to monitor your competitors’ actions?

Instructor’s Notes: This question asks students to think about the kind of business they might start, as well as the competitive environment in which that business might operate. In particular, the question challenges them to think about their potential competitors and how they might stay abreast and ahead of any competitive actions.

Example answers: When asked to describe the store, students should consider the target market and the four Ps of the store. In addition, the question challenges students to think about their potential competitors and how they might stay abreast and ahead of any competitive actions. The social responsibility answer should include suggestions about how the store will contribute to the community as well as remain socially responsible. Students should consider the social implications of selling weight loss products and fitness products.

2. How do you approach buying a computer differently than your parents would? What about buying an outfit to wear to a party? How can firms use their knowledge of generational cohorts to market their products and services better?

Instructor’s Notes: Students need to think about the characteristics of their own and their parents’ generations and apply those characteristics to understand the potential differences in purchasing behaviour and marketing responses.

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Example answers: Members of Generation Z were born into a world that already was full of electronic gadgets and digital technologies. That translates into customers that are more familiar and comfortable than their parents when purchasing computers. In addition, these Digital Natives use computers is some ways differently than their parents.

When buying an outfit for a party, they may consider what peers and celebrities are wearing far more than parents do. In both cases, they shop online, unlike parents.

Consumers in a generational cohort have similar purchase behaviors because they have shared experiences and are in the same stage of life. Applying age as a basis to identify consumers is quite useful to marketers, as long as it is used in conjunction with other consumer characteristics. For example, age groups can identify the appropriate media in which firms should advertise. Firms can use their knowledge of generational cohorts to focus on key messages that will resonate with a particular targeted cohort, understand what information the cohorts care about most, and allocate marketing spending to the promotional channels that will reach the broadest number of people within the targeted cohort(s).

3. How can firms use customer demographics like income, market size, education, and ethnicity to market to their customers better?

Instructor’s Notes: Demographic data indicates more than just income distribution, levels of education, or ethnicity within a particular geographic area; as this question prompts students to recognize, these data can be used to improve marketing.

Example answers: Firms can use demographic data to target their products or services toward the customer segment that gets the most benefit from it or offers the most lucrative profit opportunity for the firm. Market size data similarly could help a firm determine whether a potential market is worth pursuing; if insufficient customers exist in the market to justify the expenditure to serve it, a firm can avoid making a costly mistake by analyzing demographic data.

4. Identify some of the changes in the gender landscape. Describe how they might affect the marketing practices of (a) men’s apparel retailers, (b) do-it-yourself home improvement retailers, and (c) upscale salon services.

Instructor’s Notes: This exercise challenges students to consider the implications of shifting gender attitudes and trends for retail and marketing organisations. The challenges to traditional considerations of gender force marketers to find ways to serve their customers better, regardless of their gender.

Example answers: One of the biggest changes has been the relaxing of strict gender boundaries; traits traditionally attributed solely to one gender are no longer constrained in this way. Therefore, the following effects might ensue:  For men’s apparel retailers: More men are getting more sophisticated in their clothing purchases, demanding higher quality and more selection than ever before. In addition, more women shop men’s apparel retailers for themselves and the men in their lives. With more women in the retail

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environment, marketers might consider how best to sell men’s clothing to people of both genders.  Do-it-yourself home improvement retailers: Home improvement is no longer the sole bastion of men, as more and more women get in on the act. The old model of unattractive stores cluttered with items has become less viable because female shoppers expect more open floor plans, knowledgeable customer service agents, and more attractive shopping environments.  Upscale salon services: Previously, women went to salons and men went to no-frills barber shops.

Now, more and more men are visiting salons and spas to express their greater affluence and appreciation for personal care. Salon owners should consider this new market when they organize their spaces, choose their color schemes, and determine which services to offer.

5. Identify some recent technological innovations in the marketplace and describe how they have affected consumers’ everyday activities.

Instructor’s Notes: Rather than just listing recent technological innovations, students must consider how they affect the way people live, whether positively or negatively.

Example answers: o iPhones: Consumers can carry around and listen to a broad range of music without the inconvenience of bulky CDs and a CD player or carrying a second music device. However, the greater usage of earphones by iPhone music listeners may increase hearing problems among a young generational cohort. o Hybrid vehicles: Consumers save money by decreasing the cost of refuelling their vehicles compared with a normal, nonhybrid vehicle.

6. Review the data and privacy policies published on the websites of two companies that you use frequently (e.g., Amazon, Facebook, your university). What topics do they consider, and how do they claim to protect users’ privacy? Are their precautions and prescribed actions sufficient? What other guarantees might be required?

Instructor’s Notes: Can the students’ own privacy be influenced by the efforts of marketers? By personalizing this issue, the question causes students to consider specific privacy violations and the degree to which such violations are acceptable to them personally.

Example answers: Student responses will vary but should address key components such as: how personal information is collected and stored, how the company will use the data it collects, how the company will protect the personal data (i.e., randomized), the company's policy for sharing information with law enforcement, and an individual’s rights to access, remove, and/or correct their own personal information.

In addition, third party partners should be a consideration in assessing a company's privacy policy. Will the company sell any personal data to third party partners? What information will be shared and in what format? What are the privacy policies of the third-party partner?

These are a few websites that analyze privacy policies:  https://www.priv.gc.ca/en/privacy-topics/privacy-laws-in-canada/the-personal-informationprotection-and-electronic-documents-act-pipeda/p_principle/  https://privacyrights.org/consumer-guides/social-networking-privacy-how-be-safe-secure-andsocial

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 

https://www.hotspotshield.com/resources/social-media-privacy-concerns/ https://www.nolo.com/legal-encyclopedia/social-media-and-your-privacy-rights.html

7. Why should Canadian companies selling goods in the United States care about the value of the US dollar?

Instructor’s Notes: In answering this question, students must address two different aspects: (1) how buyers in the US might purchase Canadian goods and (2) the value of goods produced in Canada to American buyers. In either case, the issues pertaining to raw material costs, production costs, freight, customs, and tariffs determine how a shoe retailer could be affected by a fluctuation in the foreign exchange rate.

Example answers:  If the value of the Canadian dollar increases, Canadian goods might become more expensive for Americans, which could decrease its sales opportunities there.  If the value of the Hong Kong dollar increases and the shoe retailer buys some shoes produced in Hong Kong, the overall cost of doing business could go up for the retailer.  If the value of the Canadian dollar decreases, more U.S. consumers might purchase Canadian goods rather than American goods, because imports into the United States become more attractive.

8. Time-poor consumers have adopted various approaches to “buy” themselves more time, such as (a) voluntarily simplifying their complex lives, (b) using new technologies for greater empowerment and control, (c) using their time productively when traveling or commuting, and (d) multi-tasking.

Identify and describe some products and services that consumers use to implement each of these strategies.

Instructor’s Notes: Students can reflect on how they manage their own time and business lives from the perspective of a consumer who uses products and services to save their precious time and energy.

Example answers:  Voluntarily simplification: Netflix saves movie viewers the hassle of driving to increasingly hard to find video stores and allows them to stream it online at their convenience.  Using new technologies for greater empowerment and control: iPhones and other mobile devices help keep a user organized and on schedule and provides a means to communicate with friends, family, classmates, and coworkers.  Productivity when traveling or commuting: A laptop computer can be used to do work or for leisure activities while commuting via train, or bus, or plane.  Multi-tasking: An iPhone enables a user to listen to music while exercising, studying, cleaning, or walking to class.

9. Identify a company that you believe does a particularly good job marketing to different cultural groups. Justify your answer.

Instructor’s Notes: To consider cultural perspectives other than their own in the context of product marketing, students must think about not just the marketing messages they see but also how those messages and images might appeal to other groups.

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Example answers: McDonald’s markets to different cultural groups through its advertisements that show a variety of people enjoying its product, as well as group-specific advertising in areas with higher concentrations of a particular ethnic or cultural group (e.g., Chinese-language ads in predominantly Chinese neighbourhoods).

10. You have recently been hired by a major department store in its marketing department. Your boss informs you that you are going to supervise a field research study being conducted. You arrive at your assigned store and find that the study consists of shadowing customers. The store has set up a "private" shopping event for store credit card holders, in which each person must swipe his or her card to receive a special discount coupon book. As the shadow shopper, you use a handheld device with a customer's information and past purchase behaviour loaded onto it. Thus, you and the other shadow shoppers know the name, address, income, family size, and spending patterns for each customer you observe. You begin to feel uncomfortable about this study, because the consumers have no idea they are being tracked or the amount of confidential information provided to strangers. You are also concerned that the shadowers are not regular employees or employees of an established marketing research provider. What, if anything, should you do about your concerns?

Instructor’s Notes: This ethical scenario forces students to question the degree to which a field study of this nature might violate ethical standards of privacy and confidentiality. Using the ethical decisionmaking framework discussed in Chapter 17, students should evaluate an appropriate course of action.

Example answers: According to the framework for ethical decision-making framework:  “Have you thought broadly of any ethical issues associated with the decision to be made?” In this case, I have concerns about keeping customers in the dark about the nature of the study, giving potentially noncredible agents access to customers’ confidential data, and having my customers followed, which may create a negative shopping experience. Therefore, I have thought broadly about the ethical issues.  “Have you involved as many possible people who might have a right to offer input into or have actual involvement in making this decision and action plan?” At this point, customers have not been involved at all, and they are likely the most important stakeholder to keep in mind. Also, a credible market research firm has not been engaged to conduct or give guidance on how the study could be improved to eliminate or mitigate some of the ethical issues.  “Does this decision respect the rights and dignity of the stakeholders?” Customers will likely feel their privacy has been violated if they find out that such confidential information has been shared with potentially noncredible sources. They also might object to being followed around the store, as if the store management expects them to act in some negative fashion.  “Does this decision produce the most good and the least harm to the relevant stakeholders?” The good produced (better marketing data) seems significantly outweighed by the bad (negative customer experience, potential identity theft).  “Does this decision uphold relevant conventional moral rules?” It likely violates the community’s standard for what is appropriate regarding privacy and information confidentiality. Although it does not violate any laws, it probably would offend the morals of the customers involved.  “Can you live with this decision alternative?” If the decision is to forgo the study or redesign it to be more confidential and less intrusive, then I can live with the alternative.

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The framework clarifies my discomfort with the study as it is currently designed. A better alternative might be to hire a credible market research firm that can conduct a more confidential study that does not require shadow shoppers to know the private details of the customers as they follow them around the store.

Marketing Digitally 6. Seventh Generation is the leading brand of nontoxic, environmentally safe household products in Canada (e.g., at Home Depot). Visit its Web site (www.seventhgeneration.com), and review the philosophy behind the business. Next, review the site to identify the products that the company offers. Briefly summarize some of the consumer trends you note, and describe the ways in which its products address the wants and needs of its customers.

Instructor’s Notes: To explore the topic of green marketing, this question uses a single company as an example. In addition to the company’s principles and products, students must consider larger trends that Seventh Generation attempts to address through its marketing efforts.

Example answers:  In general, the focus of the company is being a responsible corporate citizen by offering environmentally friendly products, giving back to the community, and taking a leadership position in pursuing socially responsible business practices with both customers and suppliers.  Seventh Generation addresses such trends as product recycling, animal testing, and greater efficiency to mitigate humanity’s impact on the environment. These efforts also can save consumers money, because they can consume less by using products like Liquid Laundry Detergent, Dish Soap, and White Paper Towels.

7. Visit The Cool Hunter (https://www.thecoolhunter.net/) and identify examples that would provide marketers with insights regarding social trends.

Instructor’s Notes: From their review of the Cool Hunter site, they should see the difficulty in identifying and following trends that change very quickly.

Example answers: Information on this website is constantly changing in order to highlight “all things creative.” The purpose of this website is to be a leading authority and a global hub for “what’s cool, thoughtful, innovative, and original.” The site showcases products, companies, and people from around the world that are doing innovative things. Many of the examples on Cool Hunter’s website will be symbolic of social trends. Students should be able to identify multiple examples of unique features on Cool Hunter’s website that are example of how changes in social trends are manifesting themselves.

8. Visit and explore the Peleton website (www.onepeloton.com). What demographic, technology, and social/natural trends impact this firm's ability to succeed?

Example answers: As the population ages and spends more time and energy working and raising families, it becomes more difficult to stay physically fit. Being able to get a strenuous physical workout at home without going a gym or coordinating a bike ride with friends can be very appealing. From a social perspective, interest in

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being healthy is growing, but many people struggle to motivate themselves to work out alone. Peloton products enable people to feel like they are working out and competing with others without physically meeting a group of people. Finally, Peloton offers much more than just a stationary bike or treadmill.

Because the machines are connected to the Internet (IoT), they facilitate communication with other users and can track individuals’ workout progress to help motivate users to perform at higher levels over time.

Chapter Case Study: Lululemon Looks in the Mirror for Growth Discuss the microenvironmental factors that were the most relevant to lululemon’s decision to purchase Mirror.

Answers: There is no information about Corporate Partners in the case. Students can discuss Company and Competition.

Company – lululemon has become a very successful global brand. This success has given access to capital, allowing it to buy tech startup Mirror. It has demonstrated the ability to grow beyond one facet of business, e.g., yoga wear, as well as a primary target audience of women and has introduced new clothing for sporting activities as well as casual wear and has dramatically increased its focus on men.

Competition – lululemon is known for its clothing being more expensive than competitors. However, its high-quality offerings have helped to establish the company’s products as worth the cost. At the outset of the pandemic many stores were closed, as were gyms. That created a unique environment for lululemon to introduce home workouts to consumers.

Which macroenvironmental factors played the biggest role in the success of Mirror to date?

Answers: Technology is likely the biggest factor students will mention. Streaming technology has come a long way and the pandemic accelerated how and what consumers streamed. The technology was simple and easy to use. Lululemon was able to concentrate on fitness for which no equipment was needed, mainly bodyweight. This was key at a time when sporting goods stores were closed and the availability of bikes, weights, and other equipment was limited. The technology offers real time feedback which might help attract a new target market of consumers who have not regularly worked out and need assistance. Social and natural trends such as time-poor consumers and health and wellness should be discussed. Limited time is key. Even though many consumers worked from home, there were more constraints on time as children may also have been doing school from home. And for consumers who were used to going to the gym, staying in shape to maintain a healthy life was important. Students could speculate about Demographics since the Mirror technology likely appealed to a young, more tech savvy crowd. However, income would also be important as the technology was not cheap. For Economics, some of the cost of the Mirror solution would be offset by the fact that consumers saved money during the pandemic when gyms were closed. This made the cost of Mirror and its subscription easier to justify.

And for consumers who planned to continue working out from home instead of returning to a gym, the cost could be spready out over a number of years.

How could lululemon leverage its strength in the women’s market to further develop Mirror offerings?

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Answers: Lululemon could introduce Mirror to consumers through demonstrations and/or free classes in malls where the company has a presence. Sign up would be required to ensure small class sizes and would also allow the company to follow up afterward. If trial classes proved to be popular, or drove traffic to the retail stores, regular studio classes could be considered. Incentives could be offered to have existing Mirror users refer friends and family. This could work for both the Mirror itself as well as for lululemon clothing. Shoppable content could be added to Mirror to allow consumers to buy clothing the instructor is wearing or equipment, if applicable, being used. More personalization features could be added, e.g., the ability to consult with a nutritionist or even a physiotherapist to address injuries.

How could lululemon change its strategy if more consumers than expected return to gyms in the future?

Many consumers will not return to gyms according to current research. However, some will. Lululemon will need to focus on the benefits of Mirror. For example, it lets consumers be 100% in control of what workout they do, when and with whom. There is incredible variety of workouts offered all from the convenience of a person’s home. The on-demand nature makes working out flexible to any schedule.

Discounts could be considered for loyal customers. For example, get a 20% discount on lululemon products on the anniversary date of your Mirror subscription. Extra perks could be made available only to longterm customers, e.g., a special workout with a celebrity personal trainer.

Video Activities Video: adidas: Boost Technology and the Marketing Environment Core Concepts Covered: micro and macroenvironmental factors Video Summary: Adidas introduced its Boost product line, offering superior cushioning in running shoes.

Adidas developed Boost technology in partnership with BASF, replacing standard EVA foam cushioning with thousands of individual foam capsules called Infinergy. Boost introduced this product line to respond to trends in the marketing environment: the marketplace seems to be moving away from a “barefoot running” style with a natural feel, and going back to a preference for comfort and cushioning.

Boost was designed to appeal to two different markets: an older one interested in performance, and a younger one interested in style.

Discussion Question #1: How did the micro environment affect the development of the Boost product line?

Brief Answer: Adidas has a long-standing partnership with BASF; they have worked together on many innovations. Thus, the “Corporate Partners” aspect of the immediate environment contributed to this innovation. In addition, adidas’s mission has always been to help athletes perform better, which means that they are committed to listening to athletes to understand their needs. This is related to the “Company Capabilities” aspect of the immediate environment.

Discussion Question #2: How did the macroenvironment affect the development of the Boost product line?

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Brief Answer: Customer preferences in the amount of cushioning in shoes seemed to be changing to favor greater cushioning. This is somewhat difficult to classify, but is presented in the case as being a cultural factor. In addition, adidas considered the preferences of two distinct age groups (a demographic factor): older runners who are looking for performance, and “mall kids” who care about style.

Video: Understanding the Marketing Environment at Anki Core Concepts Covered: micro and macroenvironmental factors Activity Summary: After watching the Anki video, students will demonstrate their understanding the marketing environment and how it influences consumers’ desires by answering a series of questions.

Introduction: A good marketer can identify potential opportunities by playing close attention to customer needs and continuously monitoring the business environment. The immediate environment can influence consumers. This video demonstrates how such factors influence consumers and how they firms should respond to them.

Discussion Question #1: What are the factors in the immediate environment that Anki must consider when evaluating the environment from the consumer’s perspective?

Brief Answer: Consumers’ greatest influences are:  Company capability  Competitors  Corporate partnerships Discussion Question #2: Anki’s considers its “secret sauce” to be the fact that its robots have personality. As such, it must understand who it is going to target and how it is going to reach that market. What are some of the things it must consider on its website?

Brief Answer: Students may generate a wide range of ideas including color palette, font style, and tone of voice its website.

Additional Teaching Tips Perhaps the most challenging aspect of this chapter is for students to truly understand the relationships between the areas of the marketing environment. Since Exhibit 3.1 Understanding the Marketing Environment appears to be self-explanatory, students tend to gloss over it in the reading since they understand most of the vocabulary in the figure. Instructors may want to lead a group assignment in which groups need to create a marketing situation which demonstrates the impact of the factors (instructors can assign one per team such as “social” to team 1, economic to team 2 and so on. The group also needs to go one step further in assessing that factor’s effect on the completion, corporate partners, the company and ultimately the consumer. The instructor also may elect to have teams come up with one example of each of the factors (though this may be time consuming). Students will tend to shy away from a marketing example so the instructor should emphasize it need to be a clear marketing example. Once those examples are shared (perhaps on the white board or transferred to an image of

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Exhibit 3.1), class discussion should follow addressing the impact of the environmental factors on the marketing strategy and how it may even impact the SWOT. Online Tip: This exercise is easily transferred to in either an online team assignment or separate posts with each of the external factors becoming one of the post topics (divide the class by last name alphabetically to answer some of the posts or have students contribute one example to each of the posts/external factors).

Newsletter Teaching Aid Remember to subscribe to “Grewal Levy Marketing News” at https://grewallevymarketing.com/.

Published regularly, each newsletter contains a feature article on current topics, for example Lime Rental Scooters, with discussion questions that can be used in class. Each article is tagged so instructors can quickly identify relevant chapters for the newsletter content. The site also features a selection of related articles, links to current videos that can be used in class, as well as links to archived articles sorted by chapter for ease of use in your class.

Chapter Four: Consumer Behaviour TOOLS FOR INSTRUCTORS   

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Learning Objectives Annotated Chapter Outline with Instructor’s Notes/Teaching Tips Answers to End of Chapter Learning Aids Marketing Application Questions Marketing Digitally Chapter Case Study Video Activities Additional Teaching Tips Newsletter Teaching Aid

Learning Objectives 1. Describe the steps in the consumer buying decision process 2. Identify what determines how much time consumers will search for information before buying a product or a service 3. Summarize how psychological, social, cultural, and situational factors influence consumers’ buying behaviour 4. Explain how involvement influences the consumer buying decision process

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Annotated Chapter Outline

Instructor Notes

Chapter 4 will focus on consumer behaviour and, in particular, the consumer buying decision process and factors that influence these decisions.

The chapter objectives are intended to help students understand the content to be discussed.

Opening Vignette: Meal Kits There are over 150 competitors in the meal kit industry globally. Many of the traditional brands are not profitable and half are not expected to survive. HelloFresh, Chefs Plate, GoodFood and Blue Apron have become the biggest national meal kit companies in Canada. During the pandemic, more consumers turned to meal kits to simplify their lives and save time. Now consumers are demanding that the companies they deal with offer environmentally friendly solutions as well as good tasting food and convenience.

Ask Students: Do you use meal kits? How did you decide which companies to order from? What was your decision criteria? Are you still using the service now? Why or why not?

LO1: The Consumer Decision Process

This section introduces the entire consumer decision process. Instructors may use a single slide if time is limited. Otherwise, the ones that follow will cover each of the steps in the process in further detail.

1. Step 1 - Need Recognition A. Consumers with an unsatisfied need or want attempt to move from their needy state to a different, desired state.

B. The greater the discrepancy between these two states, the more salient the need recognition.  Functional needs mean that the consumer absolutely must obtain the performance of the product or service.  Psychological needs pertain to the personal gratification consumers’ associate with a product and/or service.

The consumer decision process begins when consumers recognize they have an unsatisfied need. Consumer needs can be functional, which pertain to the performance of a product or service or consumer needs can be psychological, which pertain to the personal gratification consumers associate with a product or service.

2. LO2: Step 2 - Information Search A. Consumers seek information about how

After consumers recognizes a need, they must search for information about the various options

Ask students: Think about the difference between functional and psychological needs. What need do hair colouring products satisfy?

Consider the motorcycle or purse examples in the text. Many basic products (e.g. water) represent commodities, but many consumers go beyond their functional needs and purchase branded products specifically. For example, tap water might address the functional need to quench thirst while Evian or Perrier satisfies psychological needs.

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Instructor Notes

best to satisfy the need they have identified.

B. The length and intensity of the search depend on the degree of perceived risk associated with the purchase.

C.During an internal search for information, the consumer examines his or her own memory of, knowledge about, and experiences with the product or service.

D. During external search for information, consumers seek information beyond their personal knowledge base to make the buying decision.

E. Various factors affect consumers’ search processes:  Perceived benefits of search versus its perceived costs.

that exist to satisfy that need. In an internal search for information, buyers examine their own memory and knowledge about the product or service. In an external search for information, buyers seek information outside their personal knowledge base to help make the buying decision.

 The locus of control can be internal or external. a. An internal locus of control means consumers believe they have control over the outcomes of their actions. b. An external locus of control means they believe fate or other external factors control outcomes.  Risk includes actual or perceived factors and can be classified into several categories. a. Performance risk involves the perceived danger inherent to a poorly performing product or service. b. Financial risk is associated with a monetary outlay and includes the initial cost of the purchase, as well as the costs of using the item or service. c. Psychological risks entail the way people will feel if the product or service does not convey the right

Locus of control indicates how much control people think they have over the outcomes of various activities, such as purchasing a product or service.

Ask students where they looked for external information when conducting a search for university programs?

Many factors affect search including: perceived benefits versus cost, locus of control, actual or perceived risk, type of product or service and are discussed in more detail in the notes that follow.

Ask students: As consumers, how have you or your family members gathered information related to the following purchases?

- A car.

- Taking a class from a particular instructor.

- A new computer.

- A washing machine.

- A security system for your home.

Some people sense their own internal control, whereas others feel virtually powerless. The former engage in more search activities.

Risk and risk perceptions play crucial roles in determining the extent of consumer search.

Ask students to compare the risk levels associated with the following purchase situations: - A gift for the grab bag for the office holiday party.

- A gift for your mother’s birthday.

- A gift for your future mother-in-law’s birthday Ask students: What type of risk is associated with each decision? All involve increasing degrees of psychological risk.

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image. d. Social risk involves the fears that consumers suffer when they worry others might not regard their purchases positively. e. Physiological risk is linked to safety and the risk of harm if a product does not perform properly.

3. Step 3 - Alternative Evaluation A. Evaluative criteria consist of a set of salient, or important, attributes about a particular product.

B. Attribute sets include universal sets (all possible choices for a product category), retrieval sets (brands that are readily remembered), and evoked sets (the alternative brands or stores consumers consider when making a purchase decision.)

C. Determinant attributes are the product or service features important to the consumer and on which competing brands or stores are perceived to differ.

Research has shown that a consumer’s mind organizes and categorizes alternatives to aid his or her decision-making process.

D. When evaluating alternatives, consumers often rely on decision rules.  A compensatory decision rule assumes that the consumer, when evaluating alternatives, trades off one characteristic against another, such that good characteristics compensate for bad characteristics.  Noncompensatory decision rules cause consumers to choose a product or service on the basis of a subset of characteristics, regardless of the values of other attributes.

Consumer decision rules are a set of criteria that consumers use consciously or subconsciously to quickly and efficiently select among several alternatives.

E. Decision heuristics are mental shortcuts that help consumers narrow down the choices.

1. Price. Consumers can choose the more expensive option, believing they will get better quality along with the higher price

Ask students: Do you use a particular heuristic when purchasing certain merchandise? What heuristics do you use, and when do you use them?

Determinant attributes are product or service features that are important to the buyer and on which competing brands or stores are perceived to differ.

Group activity: Walk students through planning a vacation. Have students list all possible choices, and then organize them into categories (e.g. beach versus mountain, domestic versus international, inexpensive versus luxury). What evaluative criteria and determinant attributes did you use to determine the list of options? What are some of the features of a vacation that would be in your evaluative criteria?

Ask students: Did you use a decision rule in planning your vacation? How did you weigh your vacation alternative choices?

For example, some students will always buy the same brand of personal care products (e.g.

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Annotated Chapter Outline

Instructor Notes

2. Brand. Always buying brand name goods allows some consumers to feel safe with their choices.

3. Product presentation. The manner in which a product is presented often influences the decision process.

4. Step 4: Purchase Decision A. Value is a strong driver of consumers’ purchase decisions. Customers seek out and purchase the products and services that they believe provide them with the best value.

deodorant, soap, shampoo.)

Ask students: What benefits do you gain from using this heuristic?

Consumption experiences vary greatly. A haircut requires consuming the service, whereas eating a candy bar involves consumption of a tangible product. Other consumption experiences, such as eating in a restaurant, mix tangible products (e.g. food) and intangible aspects (e.g. service, décor, other patrons.) All these factors contribute to the consumption experience.

B. Consumption: The act or process of using something.

C. Ritual consumption pertains specifically to consumption for symbolic cultural purposes or to habitual consumption, such as stopping at Starbucks every day on the way to work.

5. Step 5 - Postpurchase A. Customer satisfaction relates to customers’ expectations. Therefore, to increase satisfaction, firms must: 1. Build realistic expectations, not too high and not too low.

2. Demonstrate correct product use, because improper usage can cause dissatisfaction.

3. Stand behind the product or service by providing money-back guarantees and warranties.

4. Encourage customer feedback to minimize negative word of mouth.

5. Periodically make contact with customers and thank them for their support. Customers appreciate human contact, though it is more expensive than e-mail or postal mail contacts.

Ritual consumption refers to a pattern of behaviours tied to life events that affect what & how we consumer. These behaviours tend to have symbolic meanings & vary greatly by culture. They might take the form of someone going to Tim Hortons every morning, or brushing your teeth, or special holiday rituals.

Setting unrealistically high consumer expectations of the product can lead to dissatisfaction when the product fails to achieve high performance expectations. Marketers can take several steps to ensure post-purchase satisfaction such as demonstrating correct product use, building realistic expectations, providing a money back guarantee, encouraging feedback, and periodically making contact with customers.

Remind students that postpurchase satisfaction is particularly important to marketers because it involves actual rather than potential customers.

Discuss how firms set customer expectations.

Ask students: What are the dangers of setting expectations too high or too low? WestJet satisfies expectations and keeps promises simple: low cost, on-time arrivals, and friendly service.

Ask students: What firms do a good job of

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Annotated Chapter Outline

Instructor Notes managing customer expectations?

B. Postpurchase dissonance, also known as buyers’ remorse, is the psychologically uncomfortable state produced by an inconsistency between beliefs and behaviours that in turn evokes a motivation to reduce the dissonance.

C. Loyalty can be solidified in the postpurchase stage.

D. Undesirable consumer behaviour sometimes occurs as well. Although firms want satisfied, loyal customers, sometimes they fail to attain them.

1. Passive consumers do not engage in repeat purchase or recommend the product to others.

2. More serious and potentially damaging is negative consumer behaviour, such as negative word of mouth and rumours.

3. Some consumers spread negative information about a product, service, or store to others.

4. When firms meet or even exceed consumers’ expectations, they often do not tell anyone about it, but when consumers believe they have been treated unfairly, they often complain.

LO3: Factors Influencing Consumer Buying Decisions

Virtually everyone has experienced postpurchase dissonance.

Ask students: Recall a purchase that resulted in a dissonant experience for you. Did the retailer or manufacturer help resolve your dissonant state?

Think about ways dissatisfied customers threaten businesses. Which is higher, the number of acquaintances people tell about a positive experience or those they tell about a negative experience?

By far, dissatisfied customers tell more people about their negative experience than about any positive experiences. Why is managing this consumer-to-consumer communication so important?

After examining the five steps in the consumer decision process, students should begin to focus on the aspects that influence that process. One slide can be used to introduce the topic. More detailed information follows.

Remind students that every unique person views a purchase situation differently.

1. Psychological Factors Influence Decisions A. Motives are needs or wants that are strong enough to cause the person to seek satisfaction of them.

B. Maslow’s hierarchy of needs comprises five categories - physiological, safety, love, esteem, and self-actualization.

Remind students of the discussion in Chapter One related to needs and wants.

Ask students: How many times have you experienced a need or want but, for whatever reason, lacked the motivation to act on it.

For example, the need for a drink of water at 3 am

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Instructor Notes

1. Physiological needs refer with the basic biological necessities of life.

2. Safety needs pertain to protection and physical well-being.

3. Love needs relate to interactions with others.

4. Self-esteem needs allow people to satisfy their inner desires 5. Self-Actualization occurs when you feel completely satisfied with your life and how you live.

often is not sufficient motivation for people to get out of a warm bed to meet their physiological need.

C. An attitude is a person’s enduring evaluation of his or her feelings about and behavioural tendencies toward an object or idea. Attitudes are learned and long lasting, and they might develop over the long term, though they can also abruptly change.

There are three components to attitudes: 1. The cognitive component reflects what people believe to be true.

2. Affective components pertain to what people feel about the issue at hand (i.e., likes and dislikes).

3. The behavioural component comprises the action(s) people undertake with regard to that issue.

Ask students: Imagine your car breaks down on the way to a date. You are panicked but luckily see a garage right on the same street. The mechanic assists you immediately, and you leave after paying only a $50 charge. The next day, you complete a survey about auto mechanics in the area. How do you rate the mechanic?

D. Perception is the process by which people select, organize, and interpret information to form a meaningful picture of the world. Perception influences acquisition and consumption because it assigns meaning to such things as color, symbols, taste, and packaging.

Just as your perception of the mechanic changed, societies’ perceptions can change. For example, tattoos used to be only considered acceptable for unsavoury individuals. There were clearly NOT mainstream, yet today people from a variety of demographic backgrounds get tattooed. Even some parents and children with matching tattoos.

E.

By experiencing lots of people with tattoos, we learn that they are “OK”. Learning changed our perception.

F.

Ask students: What other types of needs psychological needs have they experienced, how they might fill them, and when they are motivated to do so.

Learning refers to a change in a person’s thought processes or behaviour that arises from experience; it takes place throughout the consumer decision process.

Lifestyle is the way consumers spend their time and money to live.

2. Social Factors Affect Decision Making

Ask students: Have you had experiences similar to this scenario? Did it result in a perceptual change about the retailer or service provider? How did that change affect your subsequent purchase decisions?

Consumers generally tend to buy products that suit their lifestyles. Those with an outdoorsy and adventurous lifestyle tend to buy sporting goods and luxury items.

Group activity: Ask the students to think about and

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Annotated Chapter Outline

Instructor Notes

Family. When families make purchase decisions, they often consider the needs of all family members.

list the factors that went into their decision about where to go to college. The list likely included factors such as price, distance, ratings, friends, family recommendations, or suggestions from guidance counsellors.

Ask students about a purchase that their family recently made and have them determine the decision makers and the influencers.



Reference group. One or more persons whom Ask students: How was your choice of college a decision maker uses as a basis for influenced by your reference groups? comparison in terms of his or her beliefs, feelings, and behaviours. The reference group: 1. Offers information.

2. Provides rewards for specific purchasing behaviours.

3. Enhances a consumer’s self-image.



Culture. The shared meanings, beliefs, morals, values, and customs of a group of people.

Most weddings have four elements: gathering, ritual, vows, and celebration. The expression of these elements, however, varies dramatically. In parts of India, for example, weddings are extremely elaborate and span several days. Even within Canada, different religions and regions embrace unique ceremonial traditions.

Group activity: Ask students to consider how these differences affect the way the bride and groom make decisions. Discuss differences they may have observed in various wedding ceremonies they have attended. What effect did these differences have on their behaviour?

3. Situational factors. Specific to the situation, these factors override or at least influence various psychological and social issues.  Depending on the purchase situation, customers may be predisposed to purchase certain products or services because of some underlying psychological traits or social factors that change in various purchase situations.  Depending on the shopping situation, consumers who seem ready to purchase can be completely derailed once they arrive

Ask students: How many of you have walked into a store and immediately felt uncomfortable? What made you uncomfortable?

For some, the store may have seemed too expensive, whereas others may have perceived themselves as too masculine or feminine, too young or old.

Ask students: Now recall a positive experience you have had when you first walked into a store and felt immediately comfortable. What factors made

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Instructor Notes

in the store, or vice versa.

- Store atmosphere. Some retailers and service providers have developed unique images based at least in part on their internal environment, also known as atmospherics.

- Salespeople. Well-trained sales personnel can influence sales at the point of purchase by pointing out the advantages of one item over another or encouraging.

- In-store Demonstrations. The taste and smell of new food items may attract people to try something they normally would not buy.

- Promotions. Retailers employ various promotional vehicles to influence customers who arrive in the store.

- Packaging. To make their product stand out, marketers spend millions to design and update packages that appeal to and catch the eye of consumers.  Temporal state. A person’s state of mind at any particular time can alter his or her preconceived notions of what to purchase.

LO4: Involvement and Consumer Buying Involvement is the consumer’s degree of interest or concern in the product or service. Consumers may have different levels of involvement for the same type of product.

A. Extended problem solving is common when the customer perceives that the purchase decision entails a great deal of risk.

B. Limited problem solving occurs during a purchase decision that calls for, at most, a moderate amount of effort and time. A common type of limited problem solving is impulse buying, a buying decision made by customers on the spot when they see the merchandise C. Habitual decision making describes a purchase decision process in which consumers engage with little conscious effort.

you feel comfortable?

Ask students: How many of you have had retail sales or wait staff positions? What training did you receive? How did you contribute to the purchase decisions of the customers? Were you taught ways to influence customers?

Many training programs feature “up-selling,” such as offering dessert or suggesting the special entree. In retail settings, many salespeople are trained to suggest accessories or additional pieces that go with a particular outfit or item.

Infomercials offer a good example of product demonstrations that attempt to motivate purchase.

Ask students: Why do infomercials influence consumers? How?

Ask students: What drives them to make impulsive purchases. And, if they ever bought anything expensive impulsively.

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Marketing Applications 20. Does buying Kashi cereal satisfy a consumer’s functional or psychological need? How might this information help a Kashi brand manager better promote the product?

Instructor’s Notes: This question gets students to think about the differences between psychological and functional needs.

Example answers: Kashi cereal satisfies a consumer’s psychological need. While cereal might provide a basic functional need (to satisfy a consumer’s hunger), Kashi cereal appeals to more psychological needs, including the need to eat healthy or a social desirability need. Some consumers might choose to eat Kashi to fit in with a certain lifestyle or social group. Understanding why customers choose Kashi will help Kashi in its efforts to promote its brand as a lifestyle brand rather than just a basic cereal.

21. When consumers buy a new notebook computer, what sort (internal vs. external) of information search would they conduct? If you were a marketing manager for Microsoft, how would you use this information?

Instructor’s Notes: The focus of these questions is to help students understand that they likely start with an internal search and only resort to external search when they don’t have enough experience to make a decision.

Example answers: An internal search for information might include: understanding how they might use the laptop, previous experiences with other laptop brands, and personal budget. An external search for information might include: online reviews, reference groups, input from store sales associates, and consumer reports. The marketing manager for Microsoft should understand the various sources, both external and internal, that customers use in their decision making. Marketing managers want to make sure that customers have good experiences with a brand so that when customers do a future internal search, they will immediately think of that brand as an option. The Microsoft manager should also monitor online review sites and reports to understand how the brand is being portrayed in the marketplace as that will influence the customer’s search process.

22. Explain the factors that affect the amount of time and effort that a consumer might take when choosing an oral surgeon to get his or her wisdom teeth removed. How would your answer change if the consumer were looking for a dentist to get a cleaning? How should the office manager for a dental practice use this information?

Instructor’s Notes: Students must analyze the different information-gathering processes consumers use for related but different purchases. They should recognize that the length and degree of intensity of consumers’ information search often depend on the degree of perceived risk associated with a purchase.

Example answers: Students must analyze the different information-gathering processes consumers use for related but different purchases. They should recognize that the length and degree of intensity of consumers’ information search often depend on the degree of perceived risk associated with a purchase. Office

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managers for dental practice should understand that consumers searching for an oral surgeon might engage more in information search and evaluation of alternatives than those consumers just interested in a cleaning.

In choosing a doctor for oral surgery, consumers likely worry about his or her reputation, how long he or she has been practicing, other clients, the cost of the service, the location of the oral surgeon, and whether the office accepts the consumer’s insurance. The primary concern of the consumer therefore is to mitigate any perceived risk associated with the oral surgeon. For dental cleaning, however, consumers likely engage in less intensive, less time-consuming search for information, because the perceived risk is lower.

23. Explain how a consumer would use decision heuristics to narrow down the choice of restaurants when evaluating different alternatives for a Saturday night outing at a fine restaurant. Give examples of heuristics such as price, brand, and presentation in your answer.

Instructor’s Notes: Alternative evaluation often occurs as the consumer engages in information search and decision heuristics – mental short cuts –are often used to make their decisions. Students must understand how decision heuristics function during an alternative evaluation process.

Example answers: When considering fine restaurant alternatives, the decision heuristic around price might be, for example, let’s go for the most expensive restaurant since we will likely get the best food and service or let’s go to a restaurant that is not too expensive but not too cheap either so that we can get good food and quality at reasonable prices. In terms of brands, let’s choose a restaurant that is well-known for the quality of its food and service. In terms of presentation, let’s go to a restaurant where the atmospherics or ambience is really sophisticated, warm, and inviting and the staff and waiters are well-trained and courteous.

24. What can retailers do to make sure they have satisfied customers after the sale is complete?

Instructor’s Notes: Customer satisfaction is not limited to the experience leading up to and including the actual purchase event; it often extends beyond the purchase to user experiences after purchase.

Companies that want to ensure consumers have positive experiences with their products offer after-sales service to deal with any potential issues, so that the consumer thinks positively of the company and the product. In this way, companies can build their overall brand equity by mitigating the purchase risk for consumers.

Example answers: Retailers can do a variety of things to ensure customers are satisfied after the sale. They can start by setting realistic expectations of the product before the customer even purchases it, demonstrate how to use the product properly, provide money-back guarantees and warranties, encourage customer feedback, and periodically contact customers to thank them for their continued support.

25. Tazo blends exotic green teas, spearmint, and rare herbs into a tea called Zen. Using Maslow’s hierarchy of needs, explain which need(s) are being fulfilled by this tea.

Instructor’s Notes: A motive is a need or want that is strong enough to cause a person to seek satisfaction. Back in the 1970s, social researcher Abraham Maslow developed the PSSP hierarchy of

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needs, which postulates that people are motivated to satisfy higher-level human needs when their lowerlevel needs are addressed. That is, as people’s more basic needs (physiological and safety) are fulfilled, they turn to satisfying their more advanced needs (social and personal).

Example answers: Based on the hierarchy, the Zen tea helps satisfy consumers’ basic physiological need for one of the necessities of life: liquid to drink. It also helps satisfy consumers’ personal needs, because they can meet their desire to live a healthy lifestyle and experience a sense of refinement while doing it. Tea does not, however fulfill a safety need.

7. You recently were invited to a formal event at the home of the president of your university. You decide such an event warrants a completely new outfit. Describe three social factors that might influence your purchase decision.

Instructor’s Notes: This exercise reminds students that the consumer decision process is not influenced just by psychological factors but also by the external, social environment that consumers inhabit.

Example answers: Students should consider the social factors that might influence their decision for an event like this.

Some examples might include: family, reference groups, and cultures. A son or daughter might ask his/her family what is appropriate attire for an event. The son or daughter might consider their friends as a reference group for this event; maybe some of their friends have attended events like this and could give insight into what to wear. Finally, students might consider the culture of the university and its faculty in their purchase decision. A more laid back versus a more formal facility might influence the son or daughter’s outfit decision.

8. Trek has designed a new off-road bicycle designed to stand up to the rugged condition of trail riding. Develop a theme for an advertising strategy that covers all three components of attitude.

Instructor’s Notes: The cognitive aspect reflects what people believe to be true, the affective component refers to what they feel about the issue at hand, and the behavioural component consists of the action(s) people undertake. By considering all three components to create an advertising campaign, students should perceive how all three come together in a single theme meant to influence the attitudes of potential consumers.

Example answers: For a new, off-road bicycle designed to stand up to the rugged condition of trail riding, the cognitive aspect could be that off-road bicycling can be adventurous and fun. The affective component could emphasize an emotional tie to off-road biking for its health benefits. The behavioural component could encourage customers to buy the new bike for adventure and a healthy lifestyle.

9. What can a marketer do to positively influence a situation in which a consumer is ready to buy but has not yet done so?

Instructor’s Notes: Student must think of ways marketers can affect consumers’ buying decisions during the shopping experience. Thus, the question illustrates that the buying decision is not just a function of product attributes.

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Example answers: A marketer can enhance a consumer’s willingness to buy by creating a positive store atmosphere, ensuring salespeople act in a friendly and helpful manner, organizing the store to avoid customer crowding, providing in-store demonstrations of the product, running promotions of the product to make consumers believe they are getting a good deal, and packaging the product to attract the consumer’s attention and interest.

10. You were recently hired by a retail and catalogue company that promotes itself as a Canadian firm selling only Canadian-made goods. The products featured in advertising and in the catalogues tell the stories of the firms that produced the goods in Canada. The sales response to the firm’s Made in Canada position has been incredible, and growth has been impressive. One day while speaking to a vendor, you find out a shipment of merchandise will be delayed because the product is late coming from overseas. A few days later, you hear a similar story. As it turns out, the firm just barely earns its Made in Canada labels. Although technically the products meet the standard to be classified as Canadian-made, you worry that the firm is not being truthful to its customers. You decide to write a letter to the vice president of marketing to detail your concerns. What information do you include in the letter?

Instructor’s Notes: This ethical scenario forces students to trade off protection of consumers with ethical standards of privacy and confidentiality. If they use the ethical decision-making framework from Chapter 17, students can evaluate their ethical position and thereby determine the appropriate information to include in the letter.

Example answers: According to the ethical decision-making framework:  “Have you thought broadly of any ethical issues associated with the decision to be made?” I have thought broadly about the ethical issues. In this case, I have concerns about keeping the customers in the dark about where the products are actually made and worry about what consumers might think if they find out the company’s “Made in Canada” advertising is not entirely truthful.  “Have you involved as many possible people who might have a right to offer input into or have actual involvement in making this decision and action plan?” At this point, the customers are not involved at all, and they are likely the most important stakeholder to keep in mind. It might be beneficial to commission a study of consumers’ attitudes toward mixed product sourcing.  “Does this decision respect the rights and dignity of the stakeholders?” No, because customers likely will feel their trust has been violated. The company has not been entirely upfront about the standard it uses to determine what is “Made in Canada.”  “Does this decision produce the most good and the least harm to the relevant stakeholders?”

Consumers are not really buying what they think they are, so even though the product might be perfectly fine, the firm is misleading them. One of the reasons consumers might choose this product over another is its Made in Canada label. So this practice helps the company but hurts customers buying the product on the basis of false claims.  “Does this decision uphold relevant conventional moral rules?” It likely violates the community’s standard for what is appropriate regarding product advertising and sourcing. Most people likely would find the company’s practice dishonest.  “Can you live with this decision alternative?” At this point, because the Made in Canada labelling and advertising misleads customers about products that are not completely made in the country, I cannot live with it and believe I must take action.

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The letter should include strong objections to the practice of misleading customers this way, concerns about how it might look if the information got out to the public, how the company’s sales and subsequent future might be affected by this disclosure, and how the situation could be remedied by actually engaging in Canadian product sourcing rather than continuing to use components from overseas.

Marketing Digitally 1. Visit the Amazon website (www.amazon.ca) and describe the benefits it offers to consumers. Click on the “Try Prime” button. Which kinds of need appeals does Amazon use to encourage shoppers to join? Trace how you might go through the steps in the consumer decision process to make a purchase on Amazon. In which steps does Amazon excel, and where could it improve?

Instructor’s Notes: Why would a company like Amazon offer the Prime service in the first place? Students should recognize that marketing tries to create value to address consumers’ needs and wants, and Amazon does so by making the entire customer purchase experience a positive one.

Example answers: Student answers will vary. Benefits to the consumer may include that Amazon Prime allows customers to compare product features, prices, and customer reviews. Amazon Prime highlights its fast, free delivery, original content on Prime Video, vast select of artists and genres on Prime Music, and free Kindle titles on Prime Reading to encourage customers to join the subscription service. Therefore, Amazon uses a functional need to appeal to customers by highlighting the features that it offers.

Amazon also appeals to consumers’ psychological needs by using images of young people using a variety of gadgets including headphones and smartphones, which causes them to consider Amazon a young, tech-savvy company. In terms of the Consumer Decision Process, Amazon and most online retailers are OK at need recognition. Promotions and visits to stores are typically more useful in this step, tools for which Amazon cannot easily compete. Amazon’s search capability makes information search easy and efficient. The search capability also enables consumers to easily evaluate alternatives. Amazon’s “oneclick” and otherwise easy checkout makes purchasing easy. Although Amazon does not overtly ease post-purchase dissonance by following through on a sale, it does make returns relatively painless.

2. Companies often emphasize either the functional or psychological needs their products fulfill. Go to Car and Driver’s website (www.caranddriver.com) and identify a luxury car that emphasizes functional needs and one that emphasizes psychological needs.

Instructor’s Notes: This exercise illustrates how companies can appeal to customers in both a practical way, that is functional needs, as well as entice them with psycholological needs such as their sense of prestige, how others will view them as they drive the car, and so on.

Example answers: Functional needs pertain to the performance of a product or service.

Psychological needs pertain to the personal gratification consumers associate with a product and/or service.

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Students may choose from any number of car companies, makes and models.

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Chapter Case: Battle of the Titans: Amazon Echo vs. Google Nest 1. Trace how you might go through the steps in the consumer decision process if you were thinking of buying a smart home device.

Instructor’s Notes Answers will vary, but each student should discuss the steps of the consumer decision process: need recognition, information search, evaluation of alternatives, purchase and consumption, and postpurchase. In the need recognition stage, students should discuss the functional and psychological needs that may induce them to buy a smart home device, such as specific functions of the smart device that interests them and whether or not they would feel personal gratification from purchasing a smart home device. In the information search stage, students should explain the internal and external searches they would conduct. For example, they may discuss their experience or research related to a previouslypurchased product from a company that manufacturers smart devices or which sources they would use to find information on the available options. In the evaluation of alternatives stage, students should discuss what would be the most important factors and functions of the smart home device and whether they would use a compensatory or non-compensatory model for buying. In the purchase and consumption stage, students should discuss how they would purchase the device they selected. In the post-purchase stage, students should discuss their expectations of the smart home device and how their consumer loyalty would be affected if the device did not meet these expectations. They may also address expectations related to the company’s response to issues. Students may explain how they would act if the device did meet their expectations. For example, they might leave positive reviews online or recommend the device to friends or family.

2. Identify the four determinant attributes that set apart the Amazon, Google, and Apple smart home devices. Use those attributes to develop a compensatory purchasing model similar to the one in Exhibit 4.2. Based on your importance and performance ratings, which product would you buy?

Instructor’s Notes Student answers will vary, but from reading the case, they should identify at least four attributes on which to rank the products. A table is an easy way to convey this information and allows the students to see how the compensatory model works. In this instance, the choice based on a compensatory model would be Google. If the choice was made simply on the most important attribute, then the choice would be Amazon.

Compensatory Model for Purchasing Home Devices

Importance Weight Apple Google Amazon

Correct Answers to Questions 0.2 6 8 2

Connect to Multiple Devices 0.3 6 8 4

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Product Search and Purchasing 0.4 4 5 8

Price 0.2 1 5 4

Total 4.8 7 5.6

3. Which device features examined in this chapter might have the greatest impact on consumers’ propensity to buy one of these products?

Instructor’s Notes Again, student answers will vary depending on their experience with smart speakers. They may discuss the main risk factors discussed in the case: financial and privacy risk factors. For some students, prices will incur financial risk, as they range from $50 to $349. For some, even the least expensive options will still be more than what they would be willing to spend. For others, the less expensive options may be within their budgets, but these items may not have the most important features for the students.

Another risk factor students may discuss is the privacy concerns related to these devices. As stated in the case, these devices are always listening for commands, which makes some customers concerned that they are being listened to and recorded at all times.

4. After purchasing one of these products, why might you experience postpurchase cognitive dissonance? What might the seller do to help you resolve this dissonance?

Instructor’s Notes Post-purchase cognitive dissonance might occur because the buyer may not have assessed the risk factors well enough or not have completely understood the extent of the communication abilities of these devices. Privacy is always a concern with items that always listen to for commands. The purchaser may worry about the system being hacked or that it may hear something the user did not intend to be heard. The seller can resolve the dissonance by offering a guarantee that they system is secure or a protection plan against the misuse of information or commands heard by the machine.

Video Activities Video: Impact of Social Influencers on Consumer Behaviour Core Concepts Covered: Reference Groups, Pyschological Factors (peer review culture) Video Summary: This video case discusses some of the influential factors the impact consumers in the decision-making process. Students will demonstrate their understanding of these factors through the questions that follow the video. One of the largest influencers in the consumer decision making process is reference groups, which include family, friends, celebrities, and social influencers. Influencers have always existed, but with the rise of social media platforms, the types of influencers are changing. Social media influencers are increasing in importance. These people have developed followings because of their knowledge or expertise on specific topics. Beginning with Generation X, trust in advertising has decreased. Consumers want to hear from people who have experience with products rather than the messages that companies develop. This video highlights the use of social influencers from the perspective of Branded Content Collab, a company that works closely with brands and social influencers.

Discussion Question #1: What is a social influencer?

Brief Answer:

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Someone who has gained a following on social media because of their knowledge or expertise on a topic, which can include a variety of things like makeup, parenting, or special effects.

Discussion Question #2: How did social influencers originate?

Brief Answer: Beginning with Gen X, trust in the marketers’ words had diminished. This generation started trusting user ratings over advertising to determine the products to purchase. Some reviewers gained followers.

Brands approached these people to create brand content, and the social influencer was born.

Psychological factors that are internal to the consumer, social factors that are external to the consumer, the marketing mix, and specific purchase situations influence the consumer decision making process.

Each generation has felt a growing distrust of the information that comes directly from brands.

Marketers are challenged to find new ways to expose consumers to the company's brand value, including social media.

Newsletter Teaching Aid Remember to subscribe to “Grewal Levy Marketing News” at https://grewallevymarketing.com/.

Published regularly, each newsletter contains a feature article on current topics, for example Lime Rental Scooters, with discussion questions that can be used in class. Each article is tagged so instructors can quickly identify relevant chapters for the newsletter content. The site also features a selection of related articles, links to current videos that can be used in class, as well as links to archived articles sorted by chapter for ease of use in your class.

Chapter Five: Business-to-Business Marketing TOOLS FOR INSTRUCTORS       

Learning Objectives Annotated Chapter Outline with Instructor’s Notes/Teaching Tips Answers to End of Chapter Learning Aids Marketing Application Questions Marketing Digitally Chapter Case Study Video Activities Additional Teaching Tips

Newsletter Teaching Aid

Learning Objectives 1. Describe the nature and composition of B2B markets 2. Explain the key differences between B2B buying and B2C buying 3. List the steps in the B2B buying process

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4. Identify the roles within the buying centre 5. Detail different buying situations

Annotated Chapter Outline

Instructor’s Notes Chapter 5 focuses on Business-to-Business (B2B) Marketing.

Opening Vignette: Mastercard Track

Mastercard’s new Track Business Payment Service illustrates how a B2B company can help its customers and facilitate their transactions.

Mastercard’s services go beyond its credit card business. It has established a B2B payment system, the Mastercard Track Business Payment Service to make it easier for companies to do business with them as well as reducing processing and labour costs. Mastercard Track guarantees the payment process and enhances security in a world where many B2B payments still rely on paper cheques.

Business-to-business (B2B) marketing refers to the process of buying and selling goods or services to be used in the production of other goods or services for consumption by the buying organization and/or resale by wholesalers and retailers.

Students must understand the distinction between B2B and B2C. If a couple purchases lemons to make lemonade for themselves, they are engaging in a B2C transaction. If a little boy buys them to make lemonade to sell to others, it is a B2B transaction.

The key distinction between B2B and business-toconsumer (B2C) marketing is not necessarily the product or service but rather the ultimate user of that product or service.

LO1: B2B Markets

A wide range of businesses participate in B2B transactions. This slide can be used on its own or in conjunction with those that follow, adding more detail.

I.

Manufacturers buy raw materials, components & parts that allow them to manufacture their own goods. Car companies are a great example of this.

Manufacturers or Producers Buy Raw Materials to Manufacture Goods.

When a company like Volkswagen Group, the largest auto manufacturer in Europe, buys raw materials from various suppliers, to build their vehicles, they are engaging in a B2B transactions.

When Volkswagen sells their vehicle to you, the

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Annotated Chapter Outline

Instructor’s Notes consumer, via their dealerships, they are engaging in B2C transactions.

II. Resellers Sell Manufactured Products Without Significantly Altering Their Form.

Resellers perform an essential service: They aggregate goods from manufacturers and sell them to retailers or, in the case of retailers, they sell them to consumers. Thus, one reseller can represent many different manufacturers, which saves the manufacturers the trouble of finding retailers or consumers and gives retailers or consumers the ability to buy only the desired quantity from the reseller.

III. Institutions Purchase a Variety of Goods and Services A. Hospitals.

B. Education providers.

C. Religions organizations.

Group activity: Have students consider their university as a purchasing institution. What types of products and services must universities purchase?

IV. Governments Are Often the Largest Purchasers of Goods and Services.

Many firms sell exclusively to government entities and therefore are adept at meeting the unique needs of governmental buyers. For example, firms in the defence industry generally sell exclusively to governments.

Remind students that governments represent a large opportunity for companies like Aeryon Labs who sell their drones for use in military and surveillance operations.

Key Challenges of Reaching B2B Clients a. Identify the right person in the buying organization b. Understand the buying process in the buying organization c. Identify the factors that influence the purchasing decision LO2: Differences between B2B and B2C Markets are grouped into four categories: market, product, buying process and marketing mix characteristics.

1. Market Characteristics – Demand for

These are key considerations to ensure that the selling effort is targeted to the right persons, in the right way, and with a clear appreciation of the buying process, so that appropriate actions can be taken at the right time to make a sale.

You can use Exhibit 5.2 to introduce this topic and then work through more detail using the notes that follow.

Ask Students: How do these four groups of B2B

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Annotated Chapter Outline

Instructor’s Notes

business products are derived – materials are purchased based on demand from final consumers for the final product; fewer customers, more geographically concentrated, larger orders; demand is more inelastic – less sensitive to price changes.

2.

characteristics different in the B2C market. Ask for examples in each category.

Product Characteristics – they are more technical, mainly raw material and finished goods, and heavy emphasis on delivery time, after sale service, financing, and technical assistance

3. Buying Process – more structured involving a buying centre – qualified, professionals following formal rules and procedures. Longterms relationships and reciprocal buying arrangements common. Online buying is increasing.

4. Marketing Mix – Direct and personal selling is the norm, physical distribution is often necessary, price is usually negotiated, and product are based on technical specifications.

LO3: The Business-to-Business Buying Process In parallel with the B2C process, the B2B buying process starts with need recognition, but its information search and alternative evaluation steps are more formal and structured.

Although B2B and B2C buying processes are similar, this chapter highlights some key differences. Use Exhibit 5.4 on its own to present the B2B buying process or can be expanded the discussion using the notes that follow.

Stage 1: Need Recognition A. The buying organization recognizes, through either internal or external sources, that it has an unfilled need.

B. Suppliers, salespeople, tradeshow demonstrations, ads in trade journals, Internet searches, and white papers provide awareness of the company’s evolving needs and wants.

Just like the consumer buying process, the B2B process begins with need recognition. Needs arise from a variety of sources.

Stage 2: Product Specification The organization considers alterative solutions to the recognized need and comes up with potential specifications.

After recognizing the need and considering alternative solutions, the firm will determine a list of potential specifications that vendors might use to develop their proposals.

For example, a salesperson from firm A attends a trade show and visits firm B’s booth, which features a demonstration of a new sorting process. Although firm A had been looking for ways to improve its efficiency, it had not yet considered the possibility of sorting efficiencies.

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Annotated Chapter Outline

Instructor’s Notes

Buyers often work with suppliers to develop specifications based on their extensive expertise.

Firms and suppliers will often work collaboratively during this process.

Stage 3: RFP Process During the request for proposal (RFP) process, buying organizations invite alternative suppliers to bid on the right to supply the necessary components.

Not only do RFPs enable the buyer to solicit pricing and other information from a variety of suppliers, but they also allow suppliers to learn about the buyer and its specific needs.

The MERX site exists for any firm that wishes to bid on government contracts. Potential suppliers can view the products/services being sought as departments publicly advertise their requirements using the electronic tendering service.

Suppliers can find out about the buyer’s needs and purchasing policies through the RFP process.

Stage 4: Proposal Analysis and Supplier Selection The buying organization and its key decision makers evaluate all proposals in response to an RFP.

Firms apply different strategies for vendor selection: Some always choose the lowest price, whereas others apply more complicated selection criteria. The government uses preferred contractor programs, designed to offer small and minorityowned firms greater opportunity.

Different firms have different rules about which and how many suppliers may enter negotiations.

Stage 5: Order Specification (Purchase) The buyer places an order with its chosen supplier or suppliers.

After a vendor is chosen, terms of the contract still need to be negotiated. When these terms have been agreed upon, the contract can be signed.

The order contains exact specifications.

Stage 6: Vendor Assessment Using Metrics Firms analyze their vendors’ performance to make decisions about future purchases.

After the vendor has performed the service or delivered the order, the buyer conducts a vendor analysis to judge whether the vendor should provide future purchases.

The buying team develops a list of issues it believes are important to consider in the evaluation of vendors.

The buying team assigns an importance score to each issue, such that more important issues receive higher scores.

The buying team assigns numbers that reflect its judgments about how well the vender has performed.

The overall performance rating of the vender combines the rankings and importance weights of

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Annotated Chapter Outline

Instructor’s Notes

each issue.

LO4: The Buying Centre Consists of Various Participants A. These participants range from employees with a formal purchasing role to members of the design team.

B. The initiator is the member who first suggests buying the particular product or service.

C. An influencer is a member whose views influence other members in making the final decision.

D. The decider ultimately determines either a portion of or the entire buying decision.

E. A buyer handles the paperwork associated with the actual purchase.

F. Users are those who consume or use the purchased product or service.

G. The gatekeeper controls information and access to decision makers and influencers.

Group activity: Have the students diagram a purchase situation that involves all of these roles.

The book uses the example of a doctor/patient relationship, but many similar examples also exist.

Organizational Culture Reflects the Values, Traditions, and Customs that Guide Employees’ Behaviour A. In an autocratic buying centre, though there may be multiple participants, one person makes the decision.

B. In a democratic buying centre, the majority rules.

C. Consultative buying centres mean one person makes the decision but solicits input from others.

D. A consensus buying centre reaches a collective agreement among all members to support a particular purchase.

Different firms assign different ultimate responsibility for purchase decisions. Even within a firm, different buying groups have unique buying styles. Marketers must understand the dynamics of the buying centre to succeed.

LO5: Buying Situations Take Three Forms A. In a new buy situation, a customer purchases a good or service for the first time, so the buying decision is quite involved because the buyer lacks experience with the item.

B. During a modified rebuy, the buyer has purchased a similar product in the past but decided to change some specifications.

As in B2C, different B2B buying situations require different levels of effort and the involvement of various parties. The effort required by each situation varies. Use Exhibit 5.8 to introduce the topic.

Ask students: Assume your family or the household in which you live is a buying centre. Is it an autocratic, consultative, or consensus when making group buying decisions such as planning a vacation or shopping for groceries.

Ask Students: Suppose you represented a private label manufacturer of women’s apparel that was selling to Target. Think about the differences in

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Annotated Chapter Outline

Instructor’s Notes

C. Straight rebuys occur when the buyer simply buys additional units of products it previously purchased. Usually straight rebuys do not require the involvement of the entire buying centre.

the three buying situations? Which would be the easiest option for the apparel salesperson to accomplish? Which would be the hardest? Why?

Marketing Applications 26. Provide an example of each of the four key types of B2B organizations.

Instructor’s Notes: In providing a representative example of each type, students demonstrate their understanding of B2B organizations.

Example answers:  Manufacturer/producer: Ford Motor Co.  Reseller: Target  Institution: Dalhousie University  Government: Canadian federal government, provincial governments, municipal governments 27. Mazda is trying to assess the performance of two manufacturers that could supply music systems for its vehicles. Using the following information, determine which manufacturer Mazda should use: Performance Evaluation of Brands Importance Manufacturer A Issues Weights Performance Manufacturer B Performance Sound 0.4 5 3 Cost 0.3 2 4 Delivery time 0.1 2 2 Brand cache 0.2 5 1 Total 1 Notes: Performance is rated on a scale of 1–5, where 1 = poor and 5 = excellent.

Instructor’s Notes: This exercise challenges students to complete a vendor analysis matrix and evaluate which vendor would be the better choice. To complete this task, they must multiply the importance weights and performance scores for each criterion for each vendor, and then add those scores to determine which vendor earns the highest overall score.

Example answers: Based upon the overall (importance × performance) score for each manufacturer, Mazda should choose Manufacturer A. Issues Importance Mfr A Mfr A Imp × Mfr B Mfr B Imp ×

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Weights Sound 0.4 Cost 0.3 Delivery Time 0.1 Brand Cache 0.2 Total 1

Performance 5 2 2 5

Perf 2.0 0.6 0.2 1.0 3.8

Performance 3 4 2 1

Perf 1.2 1.2 0.2 0.2 2.8

28. Imagine you have written this textbook and are going to attempt to sell it to your school. Identify the six members of the buying centre. What role would each play in the decision process? Rank them in terms of how much influence they would have on the decision, with 1 being most influential and 6 being least influential. Will this ranking differ in other situations?

Instructor’s Notes: In large organizations, several people typically are responsible for buying decisions.

By taking the role of an author selling a book to an educational institution, students must think through the potentially involved parties to determine how best to approach the buying centre. Although the question asks students to rank the six members, they should understand that all members must agree to the purchase.

Example answers: 1. Decider: The marketing professor who decides to use this textbook for his or her classroom instruction.

2. Initiator: The author or sales rep, who suggests the school purchase this textbook.

3. Influencer: Other marketing professors who might be aware of the quality of previous work by the author.

4. Buyer: The head of textbook procurement or the bookstore, who fills out the paperwork needed to make the textbook purchase.

5. Gatekeeper: The school’s administrative assistant or course coordinators, who could prevent the author or sales rep from seeing or talking to the other members of the buying centre.

6. User: Students in the marketing class who will actually read and use the textbook.

29. Provide an example of the three types of buying situations that the bookstore at your school might face when buying textbooks.

Instructor’s Notes: Instead of taking the role of the author selling a book, this exercise asks students to put themselves in the shoes of the school’s textbook procurement manager.

Example answers:  New buy: The bookstore purchases textbooks it has never purchased before or never purchased from a particular supplier.  Modified rebuy: The bookstore buys textbooks it has ordered before but wants to change something about the order, such as the service quality, return policy, or price.  Straight rebuy: The bookstore simply orders more copies of a textbook it has ordered before, with no change in anything but the quantity ordered.

30. Describe the organisational culture at your school or job. How is it different than the last school you attended or the last job you had?

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Instructor’s Notes: A firm or school’s organisational culture often comprises a set of unspoken guidelines that employees or students share in various situations. By comparing two different cultures, students should gain an understanding of how different cultures can influence what people care about, how they act, when they act, and who they involve in important decisions.

Example answers: The organizational culture of this school is fairly conservative and collaborative, with a strong sense of entrepreneurial spirit and tradition. The culture at my summer job, in contrast, was more liberal in attitude but more structured in its approach and processes.

31. Nike manufactures shoes and sportswear. How has the Internet changed the way this company communicates with its suppliers and retail customers?

Instructor’s Notes: This question asks students to consider how the advent of the Internet has changed the way a major company like Nike communicates and does business.

Example answers: The Internet has allowed Nike to open up more lines of communication with both its suppliers and its customers. Using e-mail, suppliers can verify the receipt of orders, notify Nike of changes in orders or products, and follow up quickly when problems occur; Nike can do the same for its retail customers.

Nike’s website gives suppliers a way to manage their relationship with the company and provides retail customers with information about the latest products and promotions. It also provides a forum for suggestions, questions, compliments, or complaints. Overall, the Internet has allowed Nike to streamline its operations and cut costs while cementing stronger relationships with both suppliers and retail customers.

32. What are the major differences between the consumer buying process (discussed in Chapter 4) and the B2B buying process discussed in this chapter? Use buying iPads for personal use versus buying more than 100 iPads for a firm to illustrate the key points?

Instructor’s Notes: This situation forces students to think about how different the B2B buying process is from their own decision process as consumers.

Example answers: Students must be able to discern the difference between a consumer and a B2B buying process and could compare these processes in several ways. Compared with the consumer buying process, the B2B buying process tends to be much more formalized, involves more people in the actual decision, evaluates alternatives more extensively and often over a longer time period, and rarely contains any impulse or habitual behavior component.

In the B2C buying process, consumers are purchasing for themselves. In the B2B buying process, buyers are purchasing items for their organization, for production, or for consumption by their customers.

Demand is derived in the B2B buying process where it is not in the B2C buying process. A consumer buying a tablet for himself/herself is concerned with how well the product meets the individual customer’s needs. In the B2B process, a firm buying 100 tablets will be concerned with costs, how well the computers help the organization run, the users’ perspectives of the computers, and what influencers might suggest.

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8. You have recently been hired by IBM Cognos Analytics, as a salesperson for its suite of business intelligence applications. Pick one prospective company you plan to sell to and explain how you would go about identifying the persons in the different roles in the buying centre for the chosen company. How would you try to target the needs of the different members in the buying centre?

Instructor’s Notes: This question is designed to get students to think about the different roles in the buying centre, the information needs of each member of the buying centre and how they can initiate contact with these members. Most students will find this challenging since many will not have experience in B2B selling.

Example answers: Students can pick any company they are familiar with but a large company may be a better example to work with because they may more likely use and benefit from BI software and tools.

Take a medium-sized clothing retailer that is independently-owned and sells merchandise both online and in physical store. The roles of the buying centre members are: decider, initiator, influencer, buyer, gatekeeper, and user. The decider will need information on how the BI tools will improve the operational efficiency, sales revenues, profitability, quality of customer service, and speed decision-making while keeping costs low. The decider will also need information on how the BI application would change current organisational procedures and processes as well the level of training required for employees and users – organisational impact. The initiator and the influencer would need information about the capabilities of the product, its performance, who is using it, and customer reviews, and after-sale service and technical assistance. They would also need information on the technical requirements of the BI application as well as the cost. The buyer would need information about the cost and the procedures for ordering, delivery, and installation of the product. The user would need information about the ease of using the new product, the usefulness of the new product, how it will change – improve or worsen their jobs i.e. make it simpler or increase the complexity and workload, and what support and training will be offered.

The gatekeeper will need as much information as possible about the product and the company including new modules, updates, service contracts, re-ordering, competing products, contact information of technical and service reps, etc.

9. IBM Cognos Analytics has developed a new business intelligence application that they would like to sell to some of their existing customers. You are part of the sales team. How would your approach to selling to an existing customer be different than selling to a brand new customer?

Instructor’s Notes: This question forces students to think about the approach to personal selling in two quite different B2B contexts – a new customer versus an existing customer. Here the focus is on knowledge of the buying decision process in an organization where they know the buying process (an existing customer) versus and organization where they do not know the buying process (the new business customer).

Example answers: In the existing customer organisation, the salesperson would know more about the buying process such as the rules and procedures, buying centre members, the buying centre culture, the roles played by the different buying centre members, and the requirements to make a strong sales presentation. Essentially, who to target with what information and how that information is to be presented. Here the salesperson can emphasise their ongoing and beneficial relationships as well as being in a better position to negotiate with the buying centre. Thus, they can better target their

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information to the relevant buying centre members based on the buying centre cultures of the organisation. With the new customer organisation, the salesperson will first have to learn about the new customer’s buying process, rules and procedures, organisational and buying centre’s culture, buying centre members, their individual roles, negotiation strategies, etc. before developing and targeting them with the most appropriate information. Since the salesperson is new to the customer organisation, it will likely take some time to learn their procedures, understand their culture and earn their trust.

10. You have just started to work in the purchasing office of a major pharmaceutical firm. The purchasing manager has asked you to assist in writing an RFP for a major purchase. The manager gives you a sheet detailing the specifications for the RFP. While reading the specifications, you realize that they have been written to be extremely favourable to one bidder. How should you handle this situation?

Instructor’s Notes: This scenario encourages students to think about a common issue in B2B markets – reciprocal buying and the extent to which reciprocity is an ethical business practice.

Example answers: This ethical scenario forces students to determine any violations of their own ethical standards of fairness and business transparency. Using the ethical decision-making framework from Chapter Eighteen, students can evaluate the ethical implications of this work situation and determine an appropriate course of action. According to the ethical decision-making framework: “Have you thought broadly of any ethical issues associated with the decision to be made?” I have concerns about how fair the overall bidding process will be if the RFP specifications are written to favour one particular bidder, which might cause the firm to enter a less-than-optimal agreement. I also have considered how the lack of transparency in the process could damage the reputations of both my company and the bidder, which would cause us to lose face and run the risk of possible lawsuits.

“Have you involved as many possible people who might have a right to offer input into or have actual involvement in making this decision and action plan?” At this point, no one is aware of my concerns. I have not yet approached my boss or any members of the management team, nor have I approached the bidder to see if the specification came directly from that company.

“Does this decision respect the rights and dignity of the stakeholders?” My company’s management might not be aware of the situation, other bidders will not get a fair judgment, and I would compromise my beliefs if I go along with this specification as it stands.

“Does this decision produce the most good and the least harm to the relevant stakeholders?” No, because the company likely to get the contract might not deserve it, and then my company would not receive the quality of work it wants at the most reasonable and fair price.

“Does this decision uphold relevant conventional moral rules?” It likely violates the community’s standard for fair bidding procedures. Most people will likely think this situation is rigged to favour the bidder as part of some larger scheme.

“Can you live with this decision alternative?” If the decision alternative is to discuss my concerns about

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the fairness of the process with my management team, then yes, I can live with that.

"Therefore, I will approach the management team about my concerns and advocate that the RFP specification be written to avoid favouring one bidder over the others."

Marketing Digitally 1. Browse Public Works and Government Services Canada website (http://www.pwgsc.gc.ca) to learn more about the how you may sell goods and services to the federal government. Using the information on the website, describe the buying process used by the federal government and explain how the electronic tendering system supports buying and selling between Canadian companies and the government of Canada.

Instructor’s Notes: Students must go online to explore how the Government of Canada MERX system (electronic tendering system) works and how buyers and sellers may use it to transact business i.e. obtain information and bid on government contracts.

Example answer: The Government Electronic Tendering Service (GETS) is an on-line system that advertises government contracting opportunities to potential bidders. GETS is operated by MERX. All federal departments must use MERX to advertise all competitive opportunities subject to Trade Agreements the Government of Canada has signed with other countries such as NAFTA. MERX is accessible from any location and suppliers free access to basic services that include viewing notices on the MERX site, ordering bid documents electronically, and creating a single profile for your company for the MERX Opportunity Matching Service. This profile will ensure you received electronic notification when opportunities that match your profile are posted.

2. LinkedIn has grown into a platform that firms use for a variety of business needs. Choose a firm of interest and explore the content on its LinkedIn page. How is the firm that you selected using LinkedIn to attract customers, suppliers, or employees?

Instructor’s Notes: This question may be challenging for students who have not considered LinkedIn as a platform that companies use to search for customers or suppliers.

Example answer: Answers will vary depending on the company that the student chooses; however, all answers should include information about how the company uses its LinkedIn page to attract customers, suppliers, or employees. For example, if the student chooses Mercedes-Benz, they might highlight how it attracts new employees by posting about recent conferences and workshops. Students may also discuss the available jobs and employee insights posted on the page. On the other hand, students may select a company like Uber and highlight how it appeals to new customers with engaging posts highlighting its national presence and philanthropic partnerships.

End-of-Chapter Case: SHOPIFY

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3. Describe how you would expect merchants to interact with Shopify. Use the steps in the B2B buying process to facilitate your discussion.

Example answers: As a reminder, the steps in the B2B buying process are: Need Recognition, Product Specification, RFP Process, Proposal Analysis and Supplier Selection, Order Specification (Purchase), Vendor Performance Assessment Using Metrics.

Students should note that small businesses may not go through all steps pf this process. For example, while they would go through Need Recognition and Product Specification, they are unlikely to issue an RFP or do Proposal Analysis. They would likely do some form of Vendor Performance although it may be informal. The process would probably be fairly short, taking anywhere from a few days to a few weeks.

Large firms would go through all the steps. The process is likely to take months, if not longer. The entire process would be much more formal and complex.

4. What attributes should a small business use to evaluate Shopify as an ecommerce platform vendor? What about Amazon? Using those attributes for Shopify and Amazon, perform two separate vendor analyses.

Example answers: Shopify as an ecommerce platform vendor could be evaluated on:  Capabilities—what it can and cannot do or provide  Capacity to supply the appropriate services  Pricing tiers for various services  Reliability and quality  Reputation  Payment terms  Ability to offer delivery  Tech support services to design and maintain site  Ability to innovate and offer new services Amazon as a platform could be evaluated on:  Financial strength  Capabilities—what it can and cannot do or provide  Pricing for services  Reliability and quality  Reputation  Payment terms  Cost of delivery service 5. Many product-based businesses use Shopify. Discuss how Shopify could promote their capabilities to a service based business such as a small chain of yoga studios. Consider the B2B buying process in your answer.

Example answers:

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Students may have more difficulty applying the B2B process of a services based business. It may help to remind them that even a chain of small yoga studios would likely sell products such as yoga mats, blocks, and so on. Since this is a chain, consumers could buy classes for friends or relatives in other cities where there are studios. The fulfilment (delivery) of services would be much simpler than for products.

The size of the chain of yoga studios will determine how many of the steps in the B2B buying process (Need Recognition, Product Specification, RFP Process, Proposal Analysis and Supplier Selection, Order Specification (Purchase), Vendor Performance Assessment Using Metrics) they spend time on. Again, as with any small business, it may not issue an RFP or do a Proposal Analysis.

Video Activities Video: GE Healthcare Core Concepts Covered: B2B Markets, Business-to-Business Buying Process Video Summary: GE is typically known as a marketer of consumer products such as light bulbs and appliances. But GE also engages in business-to-business (B2B) marketing by selling jet engines to Boeing and lighting systems to museums. One very successful GE division is GE Healthcare, which sells a broad range of products and services to the healthcare market. Mark Phillips, Chief Marketing Officer for GE Healthcare, discusses how GE sets itself apart from the competition with its strong focus on innovation not only in product development, but also in its marketing efforts.

Discussion Question #1: What role does the buying center play in GE Healthcare's marketing efforts?

Brief Answer: GE Healthcare recognizes that B2B buying is a complex process involving many people from across the organization who may all have different needs. GE tries to tailor its marketing message to each person in the buying center. It trains its sales staff to recognize the different decision makers within an organization and makes sure that the sales staff can show how the product will benefit each of these groups.

Discussion Question #2: How has technology played a role in GE's B2B marketing efforts?

Brief Answer: GE sets itself apart as a firm focused on innovation. B2B marketers need to be in touch with the technological innovations that can help them market their products. GE makes use of its website, social media and opportunities to co-create with its customers. GE has developed a real-time online survey tool called Medallia that has allowed GE to respond to customer problems faster and incorporate customer feedback into new product development.

Additional Teaching Tips This chapter exposes students to business-to-business markets, the buying process for b-to-b, and factors affecting the buying process unique to B2B transactions. Students also learn the various buying centre roles.

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While students are quite familiar with business to consumer markets, most are unfamiliar with business-to-business markets. Students find it difficult to understand the buying process. Students may have not heard the term “RFP” and also may not know how detailed order specifications are and how they serve as a benchmark for RFP award. Instructors should spend some time fully reviewing the segmentation categories.

An in-class exercise is to divide the class into groups and assign them to be a business (pet shop, a fast food franchise, computer manufacturer, DVD store).

Have each group outline what would be included in each step of the business-to-business buying process. Student can outline a few product specifications and write a brief RFP. They can also list what they would seek in obtaining a supplier and use critical thinking skills to develop 2 or three vendor/performance assessment points. Each group then could present their business-tobusiness buying process to the class for discussion.

Online Tip: Use this exercise in a team setting where teams are assigned a business and have them post their business-to-business buying process to the class on a public forum (post or docShare). Have the other teams comment.

Instructors may want to go online to: http://www.census.gov/eos/www/naics/ and demonstrate how this classification system is used as benchmarks when evaluating other businesses as potential buying clients.

An in-class activity that students would find fun would be to divide the class into groups and have them prepare a skit that demonstrates the roles various Buying Centre roles. Students should include all 6 roles in the skit that is presented to the class. Ask the “audience” to keep track on a piece of paper who played the various roles. Have students jot down some marketing strategies that may work in influencing the people in these various roles. This will provide active learning as the student learns to recognize the various roles as their fellow students present their respective group skit.

Newsletter Teaching Aid Remember to subscribe to “Grewal Levy Marketing News” at https://grewallevymarketing.com/.

Published regularly, each newsletter contains a feature article on current topics, for example Lime Rental Scooters, with discussion questions that can be used in class. Each article is tagged so instructors can quickly identify relevant chapters for the newsletter content. The site also features a selection of related articles, links to current videos that can be used in class, as well as links to archived articles sorted by chapter for ease of use in your class.

Chapter Six: Segmentation, Targeting, and Positioning TOOLS FOR INSTRUCTORS

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      

Learning Objectives Annotated Chapter Outline with Instructor’s Notes/Teaching Tips Answers to End of Chapter Learning Aids Marketing Application Questions Marketing Digitally Chapter Case Study Video Activities Additional Teaching Tips Newsletter Teaching Aid

Learning Objectives 1. Describe the bases marketers use to segment a market 2. Identify the criteria for determining the attractiveness of a segment and whether it is worth pursuing (targeting) 3. Explain the differences among targeting strategies: undifferentiated, differentiated, concentrated, or micromarketing 4. Define positioning and describe how do firms do it

Annotated Chapter Outline Opening Vignette: SoCIAL LITE Vodka The cooler category in the alcohol market is highly competitive with numerous brands. SoCIAL LITE Vodka successfully launched a new product targeted at a group of consumers who were health conscious and looking for a “better for me” kind of drink that wouldn’t leave them feeling bad the day after. The vignette discusses many of the segmentation bases that needed to be considered (demographic, psychographic and behavioural), and how the drink was positioned in the minds of consumers. It also deals with some of the challenges related to getting distribution for a new product.

Instructor’s Notes Firms constantly look to introduce new products and find the right target consumers for them.

Ask students if they have seen SoCIAL LITE Vodka’s products on shelves in liquor stores. Does the positioning used by the company resonate with them? How well will a new drink like this do in a highly competitive market?

The Segmentation, Targeting, and Positioning Process

While previous chapters addressed how to plan marketing strategy, this chapter focuses on how firms use that strategy to identify the target markets they will serve.

Step One: Establish Overall Strategy or Objectives The strategy must be consistent with and derived from the firm’s mission and objectives, as well as its current situation (SWOT).

Remind students that any strategy must be consistent with the firm’s mission statement & be based on the current assessments from SWOT analyses. Use Exhibit 6.1 to show the process.

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Annotated Chapter Outline

Instructor’s Notes

LO2: Step Two: Segmentation Bases Segment descriptions help firms understand the profile of the customers in each segment.

Exhibit 6.2 shows the various segmentation bases or methods. A multiple segmentation method approach can also be used – geodemographics is one example and is discussed in later.

Bases used to define segments include geographic, demographic, psychographic and behavioural.

Group activity: Divide the class into groups.

Have them choose either a manufacturer or national retailer for running shoes. Have them describe their segmentation strategy and then evaluate whether it is the best segmentation strategy for that firm.

A. Geographic segmentation organizes customer into groups on the basis of where they live.

Geographic information software (GIS) aids in such segmentation. Many firms use regional brands of popular products. For example, FritoLay introduced new flavours of Lays Potato Chips such as Wasabi and Curry in Vancouver and Toronto where large ethnic populations live.

Understanding regional preferences can define a company’s success—or failure.

B. Demographic segmentation groups consumers according to easily measured, objective characteristics, such as age, gender, income, and education. These variables represent the most common means to define segments, because 1. They are easy to identify.

2. Demographically segmented markets are easy to reach.

Statistics Canada provides one of the most important marketing research tools: Census data, which offer a rich, free source of information about various consumers that suggests segmentation possibilities.

C. Psychographic segmentation relies on how consumers describe themselves.

1. Self-values: goals for life, not just immediate goals, which help determine the benefits the target market wants from a product.

2. Self-concept: the image people have of themselves.

3. Lifestyles: how people live their lives to achieve their goals.

Not just businesses segment their customers; segmentation also helps organizations that counsel drug addicts or other at-risk groups.

Many parents are becoming increasingly concerned about safety issues when their children go online. This segment responded positively to information and tools to effectively manage Internet use in the home and to teach their kids to be Web savvy.

On the Statistics Canada Web site, walk students through the information available about the postal code in which your university or college is located.

Group Activity: Divide students into groups.

Have each choose a product/service they like.

Have them describe that product/service in terms

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Annotated Chapter Outline

Instructor’s Notes of psychographics.

The values and lifestyle survey (VALS2) describes segments on the basis of their resources, including income, education, health, energy level, and degree of innovativeness, on horizontal dimensions, and on the basis of their primary motivation, such as how they see themselves and how that self-image governs their activities, on vertical dimensions.

A description of VALS categories can be found in Exhibit 6.3. Ask students to click on the VALS hyperlink in the textbook http://www.strategicbusinessinsights.com/vals/p resurvey.shtml and take the survey before class.

Group activity: Students complete the VALS survey individually, and then bring their completed survey to class. Ask students: Why might you fall into similar categories? Who fell into different categories?

For example, few business students likely belong to the Believers category, but art majors very well may.

D. Behavioural segmentation groups consumers on the basis of the benefits they derive from products or services.

Group activity: Have students identify products that provide different types of benefits. How else might these products be segmented?

This activity provides an opportunity to remind students that products exist in multiple segments, just as consumers do. Different motives lead different consumers to purchase the same product.

Firms encourage loyalty in various ways, such as airline miles or hotel point reward programs.

Ask students: Are you a loyal buyer of any single product, to the extent that you refuse to purchase a substitute?

Students may refer to soft drinks, but true brand loyalty is extremely rare.

Exhibit 6.4 Segmentation Bases Simplified

Students sometimes have difficulty understanding and remembering the bases and how they are applied. This exhibit should help to simplify this content.

Using Multiple Segmentation Methods

Firms often use a combination of segmentation methods.

Multiple segmentation methods in

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Annotated Chapter Outline

Instructor’s Notes

combination offer firms more refined segmentation. Using a combination of methods helps to more precisely segment targeted consumers. Geodemographic segmentation combines geography, demography and lifestyle.

PRIZM is a tool developed by Environics Analytics.

It groups all neighbourhoods in Canada into 68 different types based upon lifestyle and location.

Exhibit 6.5 gives examples of some PRIZM types.

Segmentation Grids are a useful tool when trying to identify possible segments, describe them using segmentation bases, and determine the most attractive segments to target.

Exhibit 6.6 provides an example of a segmentation grid showing three different segments identified by SoCIAL LITE Vodka.

LO2: Step 3: Evaluate Segment Attractiveness

Exhibit 6.7 introduces the criteria used to determine segment attractiveness. More detailed information follows that can be used to further elaborate on this discussion.

A. Identifiable. Firms must characterize their market to design products or services that meet its needs. They also must ensure that market segments are sufficiently distinct, because too much overlap means they are unnecessarily expending efforts to create distinct marketing strategies.

Many women would appear in the same segment if the segmentation variable were gender but in individual segments if based on race or lifestyle.

They also may be in different geographic or income segments, for example.

B. Reachable. The best product or service cannot have an impact if the firm cannot reach the market through persuasive communications and product distribution.

The Internet has enabled more people to be reached more easily, but various areas around the world simply cannot be served because they aren’t accessible to marketing messages or because there isn’t adequate distribution.

Ask students: What types of media influence the way they shop? The answer may lead to an interesting discussion about how difficult it is to reach Generation Y customers either because they don’t participate in traditional media such as newspapers or because they are skeptical about being influenced by commercial messages.

C. Responsive. Customers in the segment must react positively to the firm’s offerings.

Group activity: Nike is a very successful at selling sports related goods. Would consumers accept personal care products from Nike? Why or why not? Develop a list of potential products for Nike.

Ask students: Are any of the following

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Annotated Chapter Outline

Instructor’s Notes acceptable: cologne, deodorant, toothpaste, or hair gel. Why or why not? What about Nike towels, sheets, or pajamas?

What differences can you identify between these two types of product categories? Students are likely to say they will not understand the value proposition and the company’s expertise. Yet other students might say that they will believe in personal care product because Nike offers superior products.

D. Substantial and Profitable. Firms need to measure the size of the identified market, because a market that is too small or lacks sufficient buying power cannot generate profits that will support marketing mix activities.

Just because a firm can identify a segment does not necessarily mean it represents a good market. Size, in terms of number of people, is not the only consideration; despite its small size, the market for the original Hummer was incredibly profitable and therefore substantial.

A hot segment today may not last long enough to make it worth investment. Many firms are investigating when and how much to invest in the Millennial generational cohort. Financial services and housing firms see it as a potential market, but the debt levels this segment carries makes it difficult to target effectively.

LO3: Step 4: Select a Target Market Assess both the attractiveness of the opportunity and the firm’s own competencies to serve the market.

Companies selling jeans would choose a segment of jean buyers that would be most responsive to the value proposition of a new jean line. If the product is designed as a fashion jean with the latest styling and colours then a young woman might represent the best target market. However, if the product line is a functional jean, designed to be used for work and features a more durable fabric then an older man may represent the best target market.

Four strategies to serve the market:

Ask students: What is an example of a mass market product?

Answer: There are very few mass market products. Even commodity goods such as flour now get differentiated. For different products, consumers fall in different segments.

A. An undifferentiated targeting strategy, or mass marketing considers everyone a potential consumer. Products/services in this category provide the same benefits to everyone.

Ask students: What are examples of products

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Annotated Chapter Outline B. A differentiated targeting strategy targets several market segments with different offerings and thus helps firms obtain bigger shares of the market while simultaneously increasing the market for their products overall.

C. A concentrated targeting strategy selects a single primary target market and focuses all its energies on providing a product to fit that market’s needs.

Instructor’s Notes that use differentiated, concentrated, and micromarketing segmentation strategies?

Differentiated = Vanilla Coca Cola Concentrated = Clinique cosmetics Micromarketing = Mariposa which makes custom-built bicycles for racers; Financial Services Providers such as BMO Harris Private Banking for very wealthy clients

D. With micromarketing or one-to-one marketing, a firm tailors its product or service to suit an individual customer’s wants or needs.

LO4: Step 5: Identify and Develop a Positioning Strategy This step defines the marketing mix variables to give target customers a clear, distinctive, desirable understanding of what the product does or represents in comparison with competing products.

Positioning is how consumers view a company’s products and services based on important attributes. It places a company in mind relative to competing products.

A. Value is a popular positioning method because the relationship between price and quality represents one of the most important considerations when consumers make a purchase decision.

Selling to Grandpa Tony and the millions of other value-conscious consumers is not easy. Firms like Wal-Mart use an everyday low price (EDLP) strategy to stress how a dollar can go further in their stores. Other firms position themselves as reasonably priced with outstanding quality and selection, e.g. The Bay.

B. Product attributes are those product attributes that are most important to the target market.

Like Melissa, many students develop a list of product attributes when choosing a college.

These lists often include price, but price might not be the most important attribute in the purchase decision.

Positioning may use one or more of the following strategies: Value – e.g. relationship of price to quality Product Attributes – e.g. innovation, quality, performance, and reliability Benefits and Symbolism Competition – e.g. head to head, differentiation Market Leadership – e.g. leadership position within an industry

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Annotated Chapter Outline

Instructor’s Notes Group activity: Develop a list of the product attributes you used to choose a college. How well did this university meet the criteria on your list?

Compare lists to determine how your school positioned itself to appeal to the various attributes you desired.

C. Benefits and Symbolism can be powerful positioning tools.

Ask students: What commercial symbols resonate with you? Do you feel positively or negatively toward these firms based on their commercial symbol?

Ask students: How does SoCIAL LITE Vodka use benefits sought in its positioning?

D. Competition, whether with a specific competitor or an entire product/service class, can position a firm’s offering effectively.

Firms that lack market leadership often position themselves in contrast with the leader to demonstrate that they offer the same (or better) service and quality. Motel 6 used quirky commercials to poke fun at its low budget approach but still point out that it offered the same services as more expensive hotels.

E. Market leadership is used by companies which have a leadership position in the marketplace, e.g. Amazon, Google.

If a company is not currently a leader, it should not use this method of positioning. It’s key to BE a market leader, not just aspire to becoming one.

For example, lululemon is a leader in the women’s market, it has not earned that reputation yet in the men’s market.

Positioning Steps 1. Determine consumer’s perceptions and evaluations in relation to their perceptions of competitors’ products or services.

2. Identify the market’s ideal points and size 3. Identify competitors’ positions.

4. Determine consumer preferences.

5. Select appropriate positions.

6. Monitor the positioning strategy.

These steps are necessary to develop the positioning map (or perceptual map) discussed next. Use these steps to explain the process behind perceptual mapping.

Perceptual Mapping Perceptual maps depict positioning strategies by displaying, in two or more dimensions, the position of products or brands in consumers’ minds. These maps contain ideal points that indicate where on

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Annotated Chapter Outline

Instructor’s Notes

the map a particular market segment’s ideal product would lie.

Repositioning Sometimes firms must change their positioning.

Firms reposition their brand in the marketplace in various ways, but the overriding purpose is to convey that the brand meets consumers’ changing needs. Baking soda is an excellent example of a product that has been repositioned many times in the marketplace. The periodic introduction of new uses causes consumers to redefine why they might need baking soda.

Ask students to identify a brand that might need repositioning, e.g., 7Up, or Ginger Ale. How would they reposition the brand?

Ask students how effective the new positioning of the Axe brand is.

Marketing Applications 1. What segmentation methods would you suggest for a small entrepreneur starting her own business selling gourmet chocolates? Justify why you would recommend those methods.

Instructor’s Notes: To reveal their understanding of the four key segmentation bases or methods presented in this chapter, students should be able to explain what each base is and its application.

Example answers: Students must think about the different benefits and trade-offs of the segmentation methods.

Descriptions of the different segments help firms better understand the customer profiles in each segment. With this information, marketers can distinguish customer similarities within a segment and dissimilarities across segments. The entrepreneur might consider segmentation variables such as geography, income, lifestyle, and convenience in her development of her target markets.

2. You have been asked to identify various segments in the market and then a potential targeting strategy. Describe the segments for a pet supply store. Justify the best targeting strategy to use.

Instructor’s Notes: Students must understand the bases used in segmenting markets to identify an appropriate segment and then determine the best targeting strategy.

Example answers: Using a variety of segmentation bases students can come up with one potential segment. For example, the pet supply store could consider everyone within a certain distance from the store a potential customer of its products. (geographic segmentation) This is probably not the best segmentation method for this type of store considering that even if people live near the store, not all will have pets. And so 1-88

students also need to consider demographic segmentation, e.g. do people have high enough incomes to buy the products’ behavourial segmentation, do they buy products occasionally or are they loyal, repeat customers; and psychographic segmentation which takes into consideration the lifestyle and personality of prospective customers. Specifically:  Geographic: A consumer who lives within a mile of the business.  Demographic: A middle-aged woman who earns between $65,000 and $75,000.  Psychographic: An outdoor enthusiast who seeks adventure and thrills that make him or her look cool.  Behavioural: An allergy sufferer who uses a product to alleviate symptoms such as coughing, sneezing, and itchy eyes (Benefits). A Starbucks Frappuccino drinker who will not consider getting a sweet, frozen coffee drink from any other place than Starbucks (Loyalty).  Geodemographic: A 28-year-old professional who rents an upscale apartment in an urban area surrounded by other young professionals.

Then students must apply targeting strategies.

A differentiated targeting strategy uses several market segments to obtain a bigger share of the market.

The pet supply store might consider this strategy as it sells to consumers who have dogs, cats, fish, reptiles, etc. Each customer with a different type of pet might have different needs.

A concentrated targeting strategy is used when an organization selects a single, primary target market and focuses all its energy on providing a product to fit that market’s needs. This might be an appropriate strategy for the pet supply store if the store only sold to customers with one type of pet.

Micromarketing occurs when a firm tailors a product or service to suit an individual customer’s wants or needs. This strategy would only work for the pet store if they were custom making food, clothing, or supplies for pets.

3. For what types of products would you use demographic segmentation? How about psychographic segmentation? Explain how these products differ.

Instructor’s Notes: Students should understand the difference between segmentation bases and be able to apply them correctly.

Example answers: Products where gender plays a very important role in how the firm markets are great for demographic segmentation.

Products where the different interests, attitudes, and traits of consumers play a large role in purchasing are great for psychographic segmentation.

Marketers use demographics to group consumers into segments, whereas psychographics studies how people self-select, as it were, based on the characteristics of how they choose to occupy their time (behaviour) and what underlying psychological reasons determine those choices.

4.

How and why would a retailer use micromarketing? What advantages would micromarketing have for that retailer over other targeting strategies such as differentiated or concentrated?

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Instructor’s Notes: This exercise asks students to examine one targeting strategy and correctly apply the theory to a scenario.

Example answers: Micromarketing occurs when a firm interacts on a one-on-one basis with many people to create custommade products or services. A firm could use micromarketing by standardizing aspects of the products but leaving enough room for variability to tailor the product to each customer’s needs. For example, a jeans manufacturer might pre-cut fabric, then modify the pre-cut patterns to fit each customer who orders a pair of jeans. Micromarketing increases customer satisfaction by specifically meeting the exact need or want of the customer, which in turn increases the likelihood of customer loyalty and repeat business.

5. You have been asked to evaluate the attractiveness of several potential market segments. What criteria should you use to evaluate those segments? Why are these appropriate criteria?

Instructor’s Notes: The third step in the segmentation process entails evaluating the attractiveness of market segments. To complete such an evaluation, students must employ criteria that can be used regardless of the market segment in question; in other words, the criteria must be universal enough to apply to all potential segments. In exploring the five criteria mentioned in the chapter, students gain practice and a fuller understanding of why they might be the appropriate.

Example answers: The criteria to evaluate the attractiveness of a group of identified potential market segments include identifiable, substantial, accessible, responsive, and profitable. If a firm can determine who appears in the market and thus design products or services to meet their needs, the market segment is identifiable.

If it can measure the size of the segment and determine its worth, the market segment is substantial. If the firm can reach the segment through persuasive communications and product distribution, it is reachable. If customers in a market segment react positively to the firm’s offerings, the market segment is considered responsive. Finally, if a market segment has sufficient size and the potential for high adoption rates and repeat purchases with sufficient profit margins, it is profitable. These criteria are appropriate because they apply to any market segment, regardless of the product or service offered, and represent the key issues to address to make the new product or service a lucrative opportunity.

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6. A small business owner is trying to evaluate the profitability of different segments. What are the key factors he or she must consider? For how long should the business owner conduct the evaluation?

Instructor’s Notes: At a different level than that in the previous question, students must suggest ways to determine profitability.

Example answers: The business owner should consider the following key factors: market growth (current size, expected growth rate), market competitiveness (number of competitors, entry barriers, product substitutes), and market access (ease of developing or accessing distribution channels, brand familiarity). As far as the length of evaluation, it should be a minimum of 12 months to ensure the owner knows what one year’s operations will entail.

7. Think about the various hotel brands that you know (e.g., Coke, Pepsi, 7-Up. Gatorade, Powerade). How do those brands position themselves in the market?

Instructor’s Notes: In responding to this question, students should recognize that a company can position its brand in one of four ways: value, salient attributes, symbols, and in comparison with the competition.

Example answers: Market positioning involves a process of defining the marketing mix variables so that target customers have a clear, distinctive, desirable understanding of what the product does or represents in comparison with competing products. Positioning strategies focus on either how the product or service affects the consumer or how it is better than competitors’ products or services. Companies position their products using values, salient attributes, and symbols. Students should discuss which of these tools the different energy drinks use to differentiate themselves from competitors. For example, 5-hour energy might use salient attributes, while Red Bull might use symbols.

8. Put yourself in the position of an entrepreneur developing a new product to introduce into the market. Briefly describe the product. Then, develop the segmentation, targeting, and positioning strategy for marketing the new product. Be sure to discuss (a) the overall strategy, (b) characteristics of the target market, (c) why that target market is attractive, and (d) the positioning strategy. Provide justifications for your decisions.

Instructor’s Notes: This exercise challenges students to proceed through the entire segmentation/targeting/positioning process described in the chapter. In so doing, they should gain a solid feel for the amount of thought that goes into marketing a new product.

Example answers: The new product is a self-propelled, robotic lawn mower, similar to the robotic vacuum cleaner that is on the market today.  Overall strategy: Segment the market into those consumers who own homes with lawns and those who do not. Segment those with lawns into geodemographic markets to identify the segments most likely to see value in such a new product. Focus marketing efforts—most likely, television advertising, Internet banner ads, and newspaper inserts—specifically on those segments.

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  

Characteristics of the target market: The target market includes middle- to upper-middle-class households with no children and at least 20 square feet of lawn to mow.

Why that target market is attractive: These households likely can afford the product, do not have children to mow the lawn as a chore, and possess enough lawn space to justify the purchase for the sake of ease and convenience.

Positioning strategy: The product positioning should use both value (under $200) and salient (self-propelled, does not need supervision, senses the boundaries of the lawn automatically, and saves energy because it stops when it finishes mowing) attributes.

9. Think of a specific company or organization that uses various types of promotional material to market its offerings. (The Web, magazine ads, newspaper ads, catalogs, newspaper inserts, direct mail pieces, and flyers might all be sources of promotional materials.) Locate two or three promotional pieces for the company and use them as a basis to analyze the segment(s) being targeted. Describe the basic segmentation strategy and the characteristics of the target market reflected in these materials. Be sure to include a copy of all the materials used in the analysis.

Instructor’s Notes: This exercise takes the examination of segmentation, targeting, and positioning one step further to the actual implementation of the entire process of marketing materials.

Example answers: A company like Pillsbury uses a variety of promotional materials to sell its products. Three common types are newspaper coupon inserts, magazine advertisements, and its website. According to these materials, the basic segmentation strategy Pillsbury uses focuses on salient attributes; all the material tends to highlight product attributes (flavour, quick baking time, convenient to make, enough for a family of four). As far as the target market, it appears to be predominately cost-conscious women with children who have limited time and budgets to make home-cooked meals for their family and are looking for easy recipes and convenience.

10. You have been hired recently by a large bank in its credit card marketing division. The bank has relationships with a large number of colleges and prints a wide variety of credit cards featuring college logos, images, and the like. You have been asked to oversee the implementation of a new program targeting the freshman class at the schools with which the bank has a relationship. The bank has already purchased the names and home addresses of the incoming freshman class. You have been told that no credit checks will be required for these cards as long as the student is over 18 years of age. The bank plans a first day of school marketing blitz that includes free hats, tshirts, and book promotions, as well as free pizza, if the students simply fill out an application. Do you think it is a good idea to offer this program to these new students?

Instructor’s Notes: What ethical issues might arise from the situation outlined, and to what degree do these issues violate students’ own ethical standards? Using the ethical decision-making framework discussed in Chapter Three, students should evaluate their opinion of the practice of marketing credit cards to college freshmen and thus determine an appropriate course of action.

Example answers: In applying the ethical decision-making framework:  “Have you thought broadly of any ethical issues associated with the decision to be made?” I have thought broadly about the ethical issues and have concerns about targeting a market 1-92

segment of young consumers who lack jobs and are just learning how to manage their own finances. Such targeting could breed a population of students who run up credit card bills to the point that it affects their ability to buy a car or house a few years down the line.  “Have you involved as many possible people who might have a right to offer input into or have actual involvement in making this decision and action plan?” At this point, the students have no say in whether such marketing efforts should be on campus, parents have had no chance to give input to a process that probably is occurring without their knowledge, and the school administration has not been consulted about whether this target population is appropriate.  “Does this decision respect the rights and dignity of the stakeholders?” College freshmen likely have little understanding of the potential pitfalls involved with running up credit card debt they cannot pay for, and the parents of these students might be the ones most adversely affected if they have to bail out their child, incurring costs of which they were not even aware.  “Does this decision produce the most good and the least harm to the relevant stakeholders?”

The college freshmen would be making important credit decisions without full knowledge of the potential consequences, and their credit ratings could be affected for life, ruining their chances of obtaining credit in the future for car and home purchases.  “Does this decision uphold relevant conventional moral rules?” It likely violates the community’s standard for what is appropriate, because it targets young adults with credit cards that they cannot afford.  “Can you live with this decision alternative?” If the decision is to forgo such marketing to college freshmen, then yes, I could live with that.

Therefore, I would choose not to offer the program to college freshmen but instead focus on another market segment that is better equipped to make the credit card payments that will ensue.

Marketing Digitally 1. Go to L’Oréal Canada website (http://www.lorealparis.ca/en/home.html) and try to describe the segmentation approach they use to group customers. Try to apply the vocabulary presented in this chapter to describe their segmentation strategy. Then click on “Haircare” and look for “Ever Pure Shampoo.” Who do you think is the target market is for this product? How would you describe L’Oréal’s product positioning in Canada?

Instructor’s Notes: This exercise encourages students to apply their knowledge of segmentation, targeting, and positioning in the context of a real company, which many, especially female, will be familiar with. They will see first-hand how companies form segments, pick target markets and develop marketing strategy to reach different target market.

Example answers:  Students should look for the bases of segmentation inherent in the site and who is the target market by trying to identify what are the characteristics that are common to the group in terms of how they buy and use the products as well as other demographic and psychographic information. In terms of positioning, students should look to for information about how the different products are described and promoted to the different target market – what are they appealing to or benefits they are trying to serve. (Hint: look at quality of site graphics, models, etc.). They should also tie this in with the overall perception of L’Oreal in Canada.  Segmentation: Demographic and psychographics.

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 

Target market: Middle-aged and mature women who care about beauty, self-concept and lifestyle – those who want to look young, fresh, and regenerate or protect their hair.

Products & Positioning: Ever Pure Shampoo (soothes scalp, hydrates hair, revitalizes dry hair, dry scalp, neutralizes brassiness and hydrates blonde hair), product attributes include being 100% sulfate free, paraben free, and free of harsh salts.Skin Genesis (create skin that looks younger, visibly stronger, tighter, and brighter), and Collagen Remodeller (recharges the skin natural collagen production for more defined facial features).

2. Go to the VALS website (http://www.strategicbusinessinsights.com/vals/presurvey.shtml), and click on the link to complete the VALS survey. After you submit your responses, a screen will display your primary and secondary VALS types. Click on the coloured names of each segment to get additional information about them, and print out your results. Assess the extent to which these results reflect your lifestyle, and identify which characteristics accurately reflect your interests and activities and which do not.

Instructor’s Notes: This exercise gives students insights into how companies can use psychographics to get a better understanding of what drives consumer behaviour.

Example answers: Responses will vary according to the results of each students’ VALS survey results. The main dimensions of the VALS segmentation framework are consumer motivation and consumer resources. Consumers are inspired by three motivations: (1) ideal, (2) achievement, and (2) self-expression. Students should touch upon the basic framework of the VALS survey in their response and address the validity of the survey.

End-of-Chapter Case: P&G Segments Its Market Along Multiple Dimensions  In addition to the list of options presented in this case, how else might a multinational, multibrand conglomerate like P&G segment its customers? Use other ideas from the chapter to suggest other segmentation methods that could be used.

Example answers: Answers will vary by the company chosen and the type of segmentation chosen. Students should reference other types of segmentation. Geographic segmentation organizes customers based on where they live. Benefit segmentation groups consumers based on the benefits they derive from products or services. Behavioural segmentation divides customers into groups based on how they use the product or service.  What other emerging segments of consumers would be attractive for P&G for which it could develop appealing new product lines for them?

Example answers: Answers will vary. Some current growing segments include the following: The Health Curious Millennial, The New Independent, The Cross-Cultural Millennial, The Gen Z Screenager, The Millennial Parents, and

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The Free Bird.11 As the Health-Curious Millennial transitions into adulthood, diet, exercise, and lifestyle choices are becoming increasingly important. Cross-Cultural Millennials identify as both North American and with the ethnic roots of the heritage of their parents or grandparents, who are immigrants to the country. Gen Z Screenagers are among today's youngest consumers, but they are gaining financial independence, and now is the right time to establish loyalty with this segment. Also, Free Birds are part of the changing face of retirement. They are Baby Boomers who are using their freedom as a way to engage with family and friends, travel, and make purchase decisions that focus solely on themselves.

Video Activities Video: Thermos: Effective Market Segmentation Core Concepts Covered: The Segmentation: demographics, psychographics, Targeting, Positioning Video Summary: Founded in 1904, Thermos is the global market leader in insulated food and beverage containers. Over the years, the company has developed thousands of products. With so many different products, it's important for Thermos to be able to segment these products to different consumer groups. Before launching its new website in 2010, Thermos underwent an extensive process to redefine its market. As a result, the company developed seven unique customer segments based on both demographic and psychographic characteristics. By clearly defining its consumer segments, Thermos has been able to expand its offering not only in its existing markets, but also to grow into new markets.

Discussion Question: Why did Thermos decide to segment its consumer market and how did it accomplish this task?

Brief Answer: In 2010, Thermos decided to redesign its website to appeal more directly to its customer segments. In order to do so, it needed to clearly define what those segments were. Thermos began by talking to retailers to find out what sort of products consumers were interested in. The company also conducted online surveys to gather both demographic and psychographic data. In the end, the company defined seven unique consumer segments: purposeful moms, super commuters, outdoor enthusiasts, fashionistas, active achievers, epicureans, and tradesmen.

Discussion Question: Why is it important for Thermos to communicate its various market segments with its retailers?

Brief Answer: Retailers are concerned with shelf space. They may not understand why they should carry so many different Thermos products. By clearly communicating its consumer segments, Thermos can help retailers understand the need for carrying its various product lines and helping retailers develop strategies to sell the product.

Video: Zipcar: Segmentation Core Concepts Covered: Segmentation (demographics),Targeting, Positioning

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Brenda Hurley, “Six Consumer Segments Your Brand Should Be Marketing To,” C+R Research, https://www.crresearch.com/blog/six-consumer-segments-your-brand-should-be-marketing-to

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Video Summary: Zipcar has identified three distinct target markets for its car sharing service: urbanites, college students, and urban boomers, each with different needs and lifestyles. For urbanites, Zipcar focuses on living a smarter city life (including the use of car sharing). For college students (Zipcar’s largest segment), the company locates its vehicles on many college campuses, and promotes its services with a variety of stunt promotions. Urban boomers are baby boomers living in urban areas. For this target market, Zipcar has teamed up with AARP to offer membership discounts and has produced videos focusing on urban boomers.

Discussion Question #1: What segmentation variables has Zipcar used to form its segments?

Brief Answer: Demographics (age groups), geographic (urban living), and to some extent, psychographics (urbanites are assumed to care about the environment, for example, and the urban boomer lifestyle is emphasized).

Discussion Question #2: How do the urbanite and urban boomer segments differ?

Brief Answer: Urban boomers are older; however, that alone is not enough to create meaningful segments. They must be different in some way that requires a different marketing strategy. Zipcar assumes that urbanites are interested in “smart urban living,” including helping the environment. Urban boomers are assumed to be focused on an active life.

Additional Teaching Tips This chapter addresses segmentation strategy– undifferentiated, differentiated, concentrated, and micromarketing. The student will learn critical thinking skills to determine the best method of segmenting a market. Segment attractiveness is explored and well as positioning One of the most difficult concepts for students to understand is that of product positioning.

Instructors should emphasize that product position is based primarily on competing brands in the marketplace and the consumer’s perception of the brand. The perceptual map from the text should be thoroughly reviewed with students.

Students can learn this in a classroom setting where the instructor delegates one person in the class to be the facilitator and then assigns the classroom with creating a class perceptual map (food franchises can be used as an example). This can also take place in groups with each group presenting their perceptual map to the class.

Online Tip: This exercise can be transferred to the online platform where groups are given the same tasks then asked to post the groups’ results. An ensuing discussion board can then compare/contrast the various perceptual maps.

The four strategies of undifferentiated, differentiated, concentrated, and micromarketing should be further explored with critical thinking exercises. Emphasize that it is the approach to the marketing message in relation to its target market(s) NOT the type of product it is.

Students confuse this. Consequently providing additional exercises such as having students research advertisement campaigns on the Web, then determining if it’s a differentiated, undifferentiated,

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concentrated, or micromarketing segmentation strategy will help them to better understand that the strategy is based on the target market characteristics not the product.

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Newsletter Teaching Aid Remember to subscribe to “Grewal Levy Marketing News” at https://grewallevymarketing.com/.

Published regularly, each newsletter contains a feature article on current topics, for example Lime Rental Scooters, with discussion questions that can be used in class. Each article is tagged so instructors can quickly identify relevant chapters for the newsletter content. The site also features a selection of related articles, links to current videos that can be used in class, as well as links to archived articles sorted by chapter for ease of use in your class.

Chapter Seven: Marketing Research TOOLS FOR INSTRUCTORS       

Learning Objectives Annotated Chapter Outline with Instructor’s Notes/Teaching Tips Answers to End of Chapter Learning Aids Marketing Application Questions Marketing Digitally Chapter Case Study Video Activities Additional Teaching Tips Newsletter Teaching Aid

Learning Objectives 1.

2.

3.

Identify the five steps in the marketing research process Describe the various secondary data sources Describe primary data collection techniques and summarize the differences between secondary data and primary data

4.

Outline ethical issues firms encounter when conducting marketing research Annotated Chapter Outline

Instructor’s Notes

Opening Vignette: Neftlix Netflix analyzes and interprets big data collected from the information their customer provide through their use of the service. Netflix knows when subscribers watch (day of the week, time of day), how they found their choice, what devices they use for viewing, and even if they watch from home or elsewhere.

Per chapter introduction: the case study focuses on how Netflix uses the information it gathers to enable it to attract and retain customers as well as to develop award winning content.

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Annotated Chapter Outline

Instructor’s Notes

Marketing Research Improves Decision Making All types of organizations use marketing research, e.g. consumer packaged goods, non-profit organizations, governments, etc.

The marketing research function links firms and organizations to their customers through data. By collecting data from customers, firms can better deliver products and services designed to meet their needs.

LO1: The Marketing Research Process Two Questions Help Determine the Appropriate Marketing Research Process.

A. Will the research be useful, provide insights beyond what managers already know, and reduce uncertainty associated with the project?

B. Is top management committed to the project and willing to abide by the results of the research?

C. Research is very expensive and must be clearly beneficial to justify the cost.

Exhibit 7.1 can be used to introduce the marketing research process. More in depth information follows for each step.

The Steps of the Marketing Research Process.

Step One: Define the Research Problem and Objectives  Establish exactly what information is required to answer the specific research questions and how that information should be obtained.  Clearly defined objectives ensure that research efforts and resources are not wasted.

To determine whether to conduct research, two questions must be addressed: What? How? Clearly defining the problem and research objectives helps to keep the scope of the project in check.

Exhibit 7.2 Research Objectives This exhibit was designed to give students a better understanding of what real world research objectives entail.

Ask students if any of them have been involved in research projects. Then ask what the objectives of the research were and how they were determined.

Step 2: Design the Research Plan Researchers identify the type of data needed and determine the type of research necessary to collect it.

In this step, researchers identify the type of data needed and determine the type of research necessary to collect it.

Step Three: Data Collection Data collection begins only after the research design process ends. Depending on the nature of the research problem, data may be collected from primary or secondary sources.

After answering why and how, researchers must determine a plan that involves where they can find the data. Both secondary and primary data are used depending on timing of research needs and budgets.

Answers to some research questions are readily accessible, as a simple data search would show, while others require a more in-depth search and process.

Group activity: Have the students choose a research question. To get everyone on the same page, it is useful to choose a question concerning the university, such as, “What do students think about the food in the cafeteria?” Use this question throughout the class.

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Annotated Chapter Outline

Instructor’s Notes Students should fully understand the differences between secondary and primary data. Sometimes they find these concepts confusing and as such some extra time/emphasis should be spent here.

Group activity: As a group, tackle a problem for a company (e.g., local retailer who appears to be losing customers), For this problem, list several research questions that secondary data can answer. Then list several questions that require primary data.

Step Four: Analyze Data and Develop Insights  Methodical analysis and interpretation generates meaningful information.  Data are raw numbers or other factual information that, on their own, have limited value for marketers.  Information results from the organization, analysis, and interpretation of data, which puts the data into a form that is useful to decision makers.  Converting data to information allows marketers to describe, explain, predict, and/or evaluate a particular situation

The problem today is not too little data but, in many instances, too much. Firms are drowning in data, and their challenge is to convert that data into information.

Step 5: Present Action Plan  The analyst prepares the results and presents them to the appropriate decision makers.  A typical marketing research report includes an executive summary, the body of the report, conclusions, limitations, and appropriate supplemental tables, figures, and appendixes.

A typical marketing research report would start with an executive summary. This would highlight the objectives of the study, methodology and key insights. The body of the report would go through the objectives of the study, issues examined, methodology, analysis and results, insights and managerial implications. We would end with conclusions and any limitations or caveats. Many consultants today, provide an executive summary, power point presentation of the report, questionnaire and tabulated study results.

LO2: Secondary Data Secondary data are information collected from other sources, which usually are readily available.  Internal secondary data comes from the company’s own sales and other records.  External secondary data comes from a wide variety of sources and ranges from free to

After answering why and how, researchers must determine where they can find the data. Discuss how the types of data required determine the methods used to collect them.

It would be important for the students to realize that the data helps marketing managers make decisions – in this case – creating and cultivating that the brand is important.

Secondary data are plentiful and often free. Some examples include internal sources (sales records),

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Annotated Chapter Outline

Instructor’s Notes

fairly inexpensive since the data has already been collected.  Syndicated data are available for a fee from commercial research firms.

government sources (StatsCan), books, periodicals, trade associations, commercial data services (Nielsen), on-line databases and the internet.

Syndicated data generally are more detailed but can be very costly.

Ask students: Why might firms subscribe to a data service and collect their own secondary data at the same time?

Group activity: As a group, tackle a problem for a company (e.g., local retailer who appears to be losing customers.) For this problem, list several research questions that secondary data can answer.

 Scanner data uses data obtained from scanner readings of UPC codes at checkout counters.

Students may not remember a time before grocery stores used scanners, but the example highlights how the installation of scanners created a huge new data source for marketers.

Ask students: What can researchers take from scanner data?

Students might note that researchers can discover which consumers purchase what products together and how often. They also can immediately track the impact of any price or promotional adjustments.

 Panel data involves collecting information from a group of consumers (the panel) over time, whether with a survey or from a record of their purchases.

LO3: Primary Data Collection Techniques Primary data address specific research needs and can be collected through observations of consumer behaviour, focus groups, or customer surveys. a. The major advantage of primary data is that they can be tailored to fit the pertinent research questions. b. Their major disadvantage is cost. c. Primary data collection also requires trained researchers.

In recent years, response rates to marketing research surveys have declined, which has increased usage of research panels.

Group activity: As a group, tackle a problem for a company (e.g., local retailer who appears to be losing customers.) For this problem, list several research questions that primary data can answer that secondary data cannot.

Ask students: Should you use primary or secondary data to collect information for your research? Why?

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Annotated Chapter Outline

Instructor’s Notes

Qualitative and Quantitative Research Depending on the nature of the research problem, collection might entail either qualitative (exploratory) or quantitative (conclusive) research.  Qualitative research attempts to understand the phenomenon of interest and provides initial information when the problem lacks any clear definition.  Quantitative research provides the information needed to confirm insights and suggest appropriate courses of action.  Many research projects use qualitative research as a first phase, followed by quantitative research.

Research often begins with simpler processes and then evolves into more elaborate and costly techniques. Qualitative research tends to be more exploratory, whereas quantitative research often relies on more conclusive methods.

Qualitative research methods a. Observation involves examining purchase and consumption behaviours through personal or video camera surveillance. The observation can be very brief or last for a long time. b. During in-depth interviews, trained researchers ask questions, listen to and record the answers, and then pose additional question to clarify or expand on a particular issue. c. In focus group interviews, several persons (usually 8–12) engage in an intense discussion about a particular topic. Using an unstructured inquiry method, a trained moderator guides the conversation according to a predetermined general outline of the topics of interest.

Virtual focus groups use large groups of individuals and conduct similar research online. d. Social media can provide a wealth of research data from polls, Facebook surveys, blog comments, etc.

Example of observation: When a museum wanted to know which exhibits people visited most often, it conducted a unique study to determine the wear patterns in the floor. This “human trace” evidence allowed the museum to study flow patterns.

Interviews provide extremely valuable information, because researchers can probe respondents to elicit more information about interesting topics.

Focus groups similarly provide a snapshot of customers’ opinions and allow some follow-up but also are relatively fast and inexpensive to conduct.

Quantitative research methods Can be either descriptive or experimental in nature.

Research can describe a phenomenon or determine a causal relationship.

Can be collected through  Surveys

Group activity: Each group represents a hypothetical firm that needs marketing research.

Describe the information needed and when qualitative or quantitative research would be more appropriate.

Group activity: In groups, one person serves as the moderator and another as the note taker. Each moderator determines a product/service to discuss with the rest of the group, which represents the focus group. The note taker keeps track of the discussion. At the end of class, each group reports on its findings. Potential focus group topics include any current campus situation. For example, should drinking be allowed on campus? Alternatively, the moderators could choose a common product, such as: What makes the best chocolate chip cookie?

Provide two research questions: How do you feel about the Audi S4?

Describe a situation in which researchers

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Annotated Chapter Outline

Instructor’s Notes

 Panel of consumers  Experiments

manipulate some variables. For instance, they can have the Audi S4 priced at different prices in different, yet similar markets.

Then describe how 1 is descriptive and 2 is experimental.

A survey systematically collects information from people, usually with a questionnaire.

Marketing research relies heavily on questionnaires, and questionnaire design is virtually an art form.

A questionnaire includes questions designed to gather information from respondents.

Unstructured questions are open-ended and allow respondents to answer in their own words.

Group activity: Create a questionnaire. First determine the form of the questions (i.e., structured versus unstructured). On the basis of these questions, what types of analysis will you be able to perform on your collected data?

Structured questions are closed-ended and provide a discrete set of response alternatives or specific This line of questioning can be as simple or answers for respondents to evaluate. advanced as you like. You can illustrate that it is difficult to tabulate open-ended questions, compared to more structured questions. Or, you can go into the types of analyses that are possible with ordinal and interval data.

A good survey must avoid certain practices and elements.

Ask students: Why is each question good or bad?

Web surveys have steadily grown as a percentage of all quantitative surveys because  Response rates are relatively high.  Respondents tend to lie less.  They are inexpensive.  Results can be processed and received quickly.  The Internet also provides a means to collect other forms of data.

Ask students: Have you received any Internet surveys? For example, Amazon.com sometimes asks customers to report on their satisfaction with a recent transaction. Did you complete the survey?

If so, were you honest in your responses?

Marketers are increasingly turning to the Internet to collect data for market research. This approach offers marketers many advantages including convenience, speed of collection and analysis (faster), better targeting of respondents, flexibility in administering data collection instruments, and it is relatively inexpensive. However, there are many drawbacks that marketers need to be aware of.

These include (1) it does not always allow marketers to get a deep understanding of their customers, (2) it is not always representative, and (3) it may contain severe bias as it is difficult to control on the Internet. Marketers need to be aware of both the strengths and limitations of

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Annotated Chapter Outline

Instructor’s Notes market research on the Internet.

Experimental research, a type of quantitative research, systematically manipulates one or more variables to determine which have causal effects on others.

An example of an experiment could involve two groups of subjects. One tastes cookies with a national brand and the other with a store brand.

Each group rates the cookie on a seven point scale from poor to great taste. The group with the branded name tends to rate the cookie as better tasting, demonstrating the power of a brand name.

Group Activity: Ask students to design a taste test experiment for Coke vs. Pepsi.

Entrepreneurial Marketing 7.1: Marketing Research on a Shoestring Budget

Although market research is normally quite expensive, it is still possible to do proper marketing research on a small budget. This box lists many ways in which effective marketing research can be done on a limited budget by making use of publicly.

LO4: Emerging Technology and The Ethics of Using Customer Information Marketing Research Makes Ethical Abuses Possible.

A. Because they can link data sets and build enormous databases, firms must be careful not to abuse their access to customer data.

B. Firms must provide assurances to customers that they have control over their data and how it is used.

C. Government regulations now cover data access.

D. Firms must adhere to ethical practices when conducting marketing research.

E. Research should produce only unbiased, factual information.

As Chapter 17 will highlight, marketing research is susceptible to ethical dilemmas. Researchers who do not follow ethical practices destroy their credibility.

Visit the Code of Ethics Web site (click on the link in the slide) and review the criteria for ethical research.

Marketing Applications 1. A large hardware store collects data about what its customers buy and then stores these data in a data warehouse. If you were the store’s buyer for lawn equipment, what would you want to know from the data warehouse that will help you become a more successful buyer?

Instructor’s Notes: In answering this question, students must not only express their understanding of data warehouses and data mining but also consider what information might be important in this 1-104

scenario. By taking the perspective of a children’s clothing buyer, students should gain a better understanding of the types of data available and their potential uses.

Example answers: Students should be able to demonstrate their knowledge of data warehouses and data mining and be able to consider what information might be important in this scenario. A buyer for lawn equipment might want to look at sales transaction data to see if customers have previously purchased lawn equipment. Buyers might also be interested in whether or not customers have recently begun purchasing home maintenance merchandise, indicating new homeownership. Buyers might also be interested in when customers shop, what time of year, and their annual spending patterns.

2. Identify a nonprofit organization that might use marketing research, and describe one example of a meaningful research project that it might conduct. Discuss the steps it should undertake in this project.

Instructor’s Notes: By focusing on a scenario involving a nonprofit organization, this question asks students to consider how to use research for purposes other than selling products.

Example answers: Research is beneficial for both for-profit businesses as well as nonprofit businesses. Student answers will vary. An example of a meaningful research project for a nonprofit organization might involve researching potential donors and how they prefer to donate, e.g., one-time, monthly, anonymously, etc.

The steps in the research process for nonprofit organizations are similar to the research process that forprofit organizations use.

3. Marketing researchers do not always go through the steps in the marketing research process in sequential order. Provide an example of a research project that might not follow this sequence.

Instructor’s Notes: This exercise is designed to test students’ knowledge of the marketing research process and their understanding of how and why that process is not necessarily linear.

Example answers: An exploratory/qualitative study focused on observing a group of target consumers using a company’s product might find that the target group does not actually use the product at all, in which case the research project would not follow a traditional sequence. Instead, the company would need to go from the observation stage back to a previous stage to determine if its research addresses the right question, let alone the right target group.

4. A sunglasses retailer is trying to determine if there is a significant market for its merchandise in a specific mall location where it is considering opening a store. It has an active Facebook page where customers routinely visit to get coupons and comment on the latest sunglasses offered.

How can this retailer use Facebook and Facebook Insights to decide if it should open the new store?

Instructor’s Notes: In considering this question, students must consider what data might already be available, how to leverage those data to answer specific questions, and in what areas data might be lacking.

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Example answers: The sunglasses retailer could use Facebook analytics such as Impressions, Reach, Engaged Users, Talking about This, New Likes, and Consumption/Consumers to help increase customer engagement and learn more about its customers. Customer data such as check-ins could give the sunglasses retailer an idea of where users who have “liked” the company’s page are located, and if they visit this particular mall.

Based on this data, the retailer could determine if a new store has the potential for success.

5. A consumer packaged-goods company (e.g., Pepsi) has just developed a new beverage. The company needs to estimate the demand for such a new product. What sources of syndicated data could it explore?

Instructor’s Notes: This question prompts students to understand the difference between primary and secondary research and where they might find syndicated data to address demand.

Example answers: Syndicated data is a type of secondary data that is available for a fee from commercial research firms. If a firm like Pepsi introduces a new beverage, it might use data from companies like Nielsen, which tracks the sales of consumer packaged goods gathered at the point of sale in retail stores. Other syndicated data sources that might be valuable could include Simmons Market Research Bureau data which reports on the products consumers buy, the brands that they prefer, and their lifestyle preferences.

6. A bank manager notices that by the time customers get to the teller, they seem irritated and impatient. She wants to investigate the problem further, so she hires you to design a research project to figure out what is bothering the customers. The bank wants two studies: (a) several focus groups of their customers and (b) an online survey of 500 customers. Which study is of qualitative and which is quantitative?

Instructor’s Notes: Students must recall what the definitions and appropriate uses of qualitative versus quantitative research to develop their answers.

Example answers: Because the bank manager does not yet know or have a hypothesis about why customers are irritated and impatient, the research should be qualitative in nature; that is, it should explore the potential reasons for this behaviour. Quantitative research would be inappropriate, because it requires preliminary insights or hypotheses that it can validate or disprove.

7. Grocery chains such as Loblaws track consumers’ purchasing habits through store loyalty cards.

These cards collect purchasing data and build consumer profiles. How can grocers such as Loblaws use these data to create value for the firm and consumers?

Instructor’s Notes: Most students will have enough experience with loyalty cards and the type of quantitative data collected by companies that offer them to be able to provide first hand examples of how Loblaws can use this data.

Example answers: Answers will vary, but students should include at least one example of how Loblaws can use such data to create value for itself and its consumers. For example, Loblaws can use these consumer profiles to offer loyalty card members coupons on products they use at the time intervals when consumers may need

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them. This creates value for the consumer because it saves them money. It also creates value for the firm because offering personalized coupons could promote consumer loyalty and stimulate sales.

Furthermore, when consumers are in the store buying the items with their coupons, they are also more likely to make other purchases.

8. Suppose Domino’s wants to open a new restaurant. What are some secondary sources of information that might be used to conduct research on potential new locations? Describe how these sources might be used. Describe a method Domino’s could use to gather primary research on prospective locations. Do you think Domino’s should conduct the primary or secondary source research first? Why? Instructor’s Notes: Students should understand that secondary data should be used first and then followed by primary data.

Example answers: Domino’s should use secondary data as a starting point to answer the question. It could use secondary research, such as Census results, to access population and demographic information. Census data could be used to identify regions where there are large populations of Domino’s target demographic based on occupation, income, age, etc. Furthermore, Domino’s could gather information on whether consumers in a particular area consume take-out or delivery pizza. It could also look for data about the amount of traffic that passes the location every day, to determine market size and exposure to passersby. It probably needs primary research to find more up-to-date or unavailable information, such as new food trends for the targeted demographic. Domino’s could conduct surveys or panel groups to collect this information.

9. Suppose your university wants to modify its course scheduling procedures to better serve students. What are some secondary sources of information that might be used to conduct research into this topic? Describe how these sources might be used. Describe a method you could use to gather primary research data about the topic. Would you recommend a specific order in obtaining each of theses types of data? Explain your answer.

Instructor’s Notes: Every undergraduate student can relate to the scenario of registering for academic courses. Students need to put the various research concepts together to structure a research project that might improve this often frustrating, time-consuming process.

Example answers: The university could use secondary sources of information such as how the process has been done in the past, the length of time it takes for the average student to register, the number of complaints received, the number of students waitlisted for courses, the amount of drop/add activity after registration, ages, academic class (freshman/sophomore/junior/senior), and gender. This information could indicate how long and arduous the process is; whether students can get the classes they want in the first round of registration, how much class-swapping occurs because of the poor registration process, and whether particular types of students have more trouble than others. In terms of primary research, the school could conduct direct observations of registration, in-depth interviews with students who have gone or are going through the process, focus groups with students who have been through registration and surveys of all registered students immediately after they complete registration. However, because of the limited time and patience that many college undergraduates have, as well as the limited budgets of many schools, the school might consider an initial Web survey to gather more responses for less money.

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In order, the other methods it should use are direct observation (which is inexpensive and involves students in the process), focus groups (because students could be lured by pizza, for example, to participate actively), and in-depth interviews (with a few randomly selected students to delve deeper into potential issues in the registration process using more open-ended questions).

10. Identify a nonprofit organization that might use marketing research, and describe one example of a meaningful research project that it might conduct. Discuss the steps it should undertake in this project.

Instructor’s Notes: Students may have to stretch to answer this question. Instructors should point out that not only for-profit organizations conduct research.

Example answers: Research is beneficial for both for-profit businesses as well as nonprofit businesses. Student answers will vary. An example of a meaningful research project for a nonprofit organization might involve researching potential donors. The steps in the research process for nonprofit organizations are similar to the research process that for-profit organizations use.

One nonprofit organization that might use marketing research is the United Way, which might conduct in-depth interviews with a random sample of people who have donated in the previous year to determine their motivations for donating. By conducting such research, the United Way could better focus its marketing efforts to highlight those motivations and perhaps increase the number of donations it receives.

Marketing Digitally 9. Go to the website of either Decima Research (http://www.decima.com) or Ipsos Canada (www.ipsos.ca) that administers public opinion polls. Search the site for results from any recent survey that is available for free. Print out the results. Identify the objective(s) of the survey.

Discuss one of the major findings and provide an interpretation of the data.

Instructor’s Notes: This exercise provides students with access to the immense breadth and variety of research that a company like Decima or Ipsos conduct on a regular basis. The sites’ topics range from politics to entertainment, so there should be something to pique each student’s interest.

Example answers:

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Ipsos Canada reported the results of one of a survey of prospective home buyers in Ontario. (Condos Rank as Second Most Popular Real Estate Choice for Prospective Ontarian Homebuyers http://www.ipsos-na.com/news-polls/pressrelease.aspx?id=6559) One of its major findings is that the detached home is still the standard choice with 59% of buyers looking for such a home. However, 28% of buyers now list condos as their second choice. The survey also tracked views of the housing market in terms of positive sentiments (35% felt the market was stronger than a year ago, with 28% saying the market is very favourable.) The survey also asked people how likely they were to buy in the next two years. This finding may help home sellers and realtors maximize their effectiveness, gain an understanding of how Ontario residents view the housing market, and understand some of the reasons for purchasing a home (e.g. sense of pride, investment).

2. Select two online survey tools (e.g., SurveyMonkey, Qualtrics, Zoomerang, SurveyGizmo) and compare and contrast them in terms of their features, capabilities, ease of use, support service, pricing models, clientele, and any other characteristics you think would be useful for a market researcher to know.

Instructor’s Notes: Online consumer surveys are becoming increasingly popular and so are the number of tools and vendors available to fulfill this need. Students could develop a better appreciation of the capabilities, costs, limitations and services of the available tools through this exercise.

Example answers: Unlimited surveys Templates Branching or skipping Language Support Closing page Duplicate survey Customization Upload email contacts Publish by URL Publish by email Export to CSV Free plan Starting plan (monthly)

Zoomerang yes yes yes yes yes yes yes yes yes yes yes yes $19

MySurveyLab yes no yes no yes yes no yes yes yes yes yes currently free

FluidSurveys yes no yes no yes yes no no yes no no yes $14.95

SurveyMonkey yes yes yes yes yes yes yes yes yes yes yes yes $19.95

Survey tools change often. PC Magazine recommends these tools. https://www.pcmag.com/roundup/339397/the-best-online-survey-tools

End-of-Chapter Case: Marketing Research Helps Redefine the YMCA 1. What kinds of marketing research has the YMCA conducted?

Example answers:

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The Y conducts quantitative research to gather data to investigate what people perceive when they think of the Y. The goal is to show, with data, facts, figures, and graphics, how programs run by the Y and sponsored by charitable donations change lives and improve communities. The organization conducted a vast amount of primary survey research. In addition, the Y conducted secondary research by citing national statistics.

2. Which questions has the Y sought to answer with each different type of marketing

research?

Example answers: A national survey assessed the Y’s program awareness, why it offered the programs, and customer favorability. Research was conducted to determine which price points will attract the most members. In addition, the Y has used research to determine which initiatives the Y should focus on for the near future.

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3. Who are the main stakeholders that the Y is attempting to reach with the information it

has gained through its marketing research?

Example answers: The main stakeholders include: families who utilize the facilities and programs, potential donors to the organization, and local branches of the organization.

4. Are there other types of marketing research the Y could conduce in the future to answer

other important questions? Give some examples of both the questions it still faces and the research methods it could use to answer them.

Example answers: The Y can utilize various secondary and primary research methods: Secondary data might come from free or very inexpensive external sources such as census data, information from trade associations, and reports published in magazines. Firms also can purchase more specific or applicable secondary data from specialized research firms. Finally, secondary sources can be accessed through internal sources, including the organization’s membership invoices, membership lists, and other reports generated by the Y itself.

Primary data collection can employ qualitative or quantitative research methods. The Y can employ qualitative research by using broad, open-ended questions to understand the perceptions of the public.

The Y can employ qualitative research methods like observation, following social media sites, in-depth interviews, and focus groups.

Video Activities Video: Dunkin’ Donuts: Marketing Research and Bakery Sandwiches Core Concepts Covered: market research process; primary data collection, product development process from Chapter 8 (so this video could also be used there) Video Summary: Dunkin’ Donuts saw an opportunity to expand its product mix beyond traditional breakfast foods by offering bakery sandwiches with fillings such as ham, turkey, and chicken and tuna salad. The company used marketing research techniques at every step of the development process in order to ensure that the sandwiches they introduced would meet customers’ needs and could be made and sold profitably in its locations. Research began with understanding customers’ preferences for sandwich varieties, timeof-day availability, and pricing. The next stage was sensory testing to aid in development of specific sandwich options. Finally, in-store market testing sought to ensure that consumers would purchase and enjoy the sandwiches, that they were easy to eat, and that the stores could successfully manufacture them at a profit.

Discussion Question: The first phase of marketing research for Dunkin’ Donuts was to learn about when people wanted to eat, what proteins and bakery items they preferred, and what prices they wanted to pay. What marketing research techniques could have been used to learn these things?

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Brief Answer: First, it is possible that some of this information might have been available from industry surveys, which would be an example of external secondary data. If not, Dunkin’ Donuts may have designed a questionnaire asking about these things and conducted a survey. (As a follow-up activity, the class could be divided into groups and asked to write some questions for such a questionnaire). In-depth interviews and/or focus groups might also have been used prior to (or instead of) a survey to obtain deeper insights from a smaller number of consumers.

Discussion Question: Why did Dunkin’ Donuts have to collect primary data, instead of using secondary data, during product development of its bakery sandwiches?

Brief Answer: The company was testing specific recipes for sandwiches and seeking customer feedback about these products. Primary data collection allowed Dunkin’ Donuts to tailor its data collection so that it received the specific answers it needed to evaluate the proposed new products.

Additional Teaching Tips This chapter explores how information systems create greater value for the customer. The research process is one of the main concepts in this chapter as well as introducing the student to research vocabulary and concepts.

This chapter is one that quite often students don’t like. They have difficulty in applying the research vocabulary and understanding the research process. Students can often regurgitate the process but when asked how it applies, they are often confused. A teaching tip on understanding how information systems can create value is to have students write down a product Web site they often visit and why they visit it (the value they find in the Web site). Have them partner up in class and exchange papers.

The partner will then think of ways (using the book as an aid) that information systems can add value to that Web site. A discussion between the partners after this exercise often leads to clarity of how information systems create greater value to the customer and the instructor can write some of these on the board during classroom discussion.

Online Tip: This exercise can be easily transferred to a discussion posting in the online forum where students are partnered up in the same way (or perhaps they can answer anyone’s post that hasn’t had a reply yet) resulting in a short summary paper addressing how information systems create value.

The second concept is the research process. Again, students can often regurgitate the process but can’t apply the concepts or the research terminology. After a discussion on vocabulary and concepts led by the instructor, students can learn this process by applying critical thinking. This can be done either in groups or as a class (for the online forum it can be a virtual team exercise). Assign either the class or the teams a problem to solve (usually one that is widely understood by students) that is marketing based and haves students use their critical thinking to apply each step of the research process and 3-5 terms (such as exploratory, causal, descriptive). Some examples of assigned research topics: (1) Will moving the pizza from the back to the front of the college cafeteria result in more pizza sales? (2) Will offering an additional incentive to students to return used book to the books store (instead of selling them on Amazon.com) provide more buy-back opportunity for the college? The important aspect of this

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exercise is to keep the problem market related and have students use the vocabulary words correctly and understand how the process can lead to problem solving of marketing related issues.

Newsletter Teaching Aid Remember to subscribe to “Grewal Levy Marketing News” at https://grewallevymarketing.com/.

Published regularly, each newsletter contains a feature article on current topics, for example Lime Rental Scooters, with discussion questions that can be used in class. Each article is tagged so instructors can quickly identify relevant chapters for the newsletter content. The site also features a selection of related articles, links to current videos that can be used in class, as well as links to archived articles sorted by chapter for ease of use in your class.

Chapter Eight: Developing New Products TOOLS FOR INSTRUCTORS       

Learning Objectives Annotated Chapter Outline with Instructor’s Notes/Teaching Tips Answers to End of Chapter Learning Aids Marketing Application Questions Marketing Digitally Chapter Case Study Video Activities Additional Teaching Tips Newsletter Teaching Aid

Learning Objectives 1. Identify the reasons firms create new products 2. Describe the diffusion of innovation theory and how managers can use it to make product line decisions 3. List the stages involved in developing new products and services 4. Describe the product life cycle and summarize how it is used to make product line decisions

Annotated Chapter Outline

Instructor’s Notes

Opening Vignette: Bartesian Bartesian is a story of an innovative new product, a Keurig-like machine for making high end cocktails.

It covers many aspects of new product development from idea generation, refining the product, test marketing, prototyping and finally

Ask students how many of them have heard about Bartesian? Would they consider using a specialize cocktail maker?

Ask students if they feel Bartesian can succeed in a post-pandemic market.

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Annotated Chapter Outline

Instructor’s Notes

commercializing. It also deals with identifying the right target market (Chapter 6), licensing, and distribution which students will learn more about in Chapter 12.

LO1: Why Do Firms Create New Products?

Changing Customer Needs  As they add new products, firms can satisfy the changing needs of current and new customers.  Customers get bored with products  Companies find opportunities to extend a brand into new categories

Product is the first ‘P’ of the marketing mix.

Market Saturation  The longer a product exists in the marketplace, the more likely the market becomes saturated.

Without new products, the value of the firm ultimately declines.

Ask students: Think of a new product that interested you as a consumer. Did this new product alter your opinion of the firm that offered it?

Managing Risk though Diversity  An innovative product portfolio helps firms diversify risk and therefore enhances firm value better than a single product plan.

After revolutionizing the home computer industry, Microsoft set out to be a leader in the information technology home entertainment field. But one area in which Microsoft has been less successful is the search engine market.

Fashion Cycles  Clothing, books, and computer games all have short life cycles and so businesses must constantly innovate.

Ask students how they choose which search engine to use.

Improving Business Relationships  Some new products are introduced to satisfy vendors.

For example, P&G changed its formula for Tide to make it more concentrated in order to satisfy Walmart’s desire to have it take up less shelf space.

A new product can be anything from a slight redesign to new-to-the-world offerings.

Ask students: What is an example of a slightly redesigned product? What about a new-to-theworld product?

Innovation and Value  Some products are considered new to the world or pioneers. Others are seen as first movers.

Innovation and Value  Pioneer or breakthrough products establish a completely new market or radically change the rules of competition and consumer preferences.  First movers are the first to create the market or product category.

Despite first-mover advantages, pioneers often lose out to superior competitors. For example, Walkmans were taken over by iPods.

First movers must staunchly defend their territory.

After establishing the market, they generally must switch to a defender mode to fend off newcomers.

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Annotated Chapter Outline

Instructor’s Notes

LO2: Adoption/Diffusion of Innovation Innovations diffuse throughout a market, over time, across categories and across adopters.  Innovators want to be the first to have the new product or service.  Early adopters wait to purchase until after a careful review.  The early majority, approximately 34% of the population, usually determines the success of new products.  The late majority, approximately 34% of the market, enters a new product market last, after the product has achieved its full market potential.  Laggards, roughly 16% of the market, avoid change and rely on traditional products until they are no longer available.

Group activity: Have groups pick one product. Ask them; what group of innovative consumers are they in? Why?

Using Diffusion of Innovation Theory  Relative advantage: If a product is perceived as better than substitutes, its diffusion will be relatively quick.  Compatibility: If a product is similar to something currently on the market, it will diffuse more rapidly.  Observability: Easily observed products communicate their benefits or uses efficiently.  Complexity and trialability: Less complex products are relatively easier to try.

Exhibit 8.3 can be used to introduce the topic.

More detailed information follows.

Example answer: people could buy music from iTunes for decades. It is probably in the late majority stage. Streaming music on platforms like Spotify, on the other hand, is at a much earlier stage. And music on CDs and cassette tapes may only appeal to now to laggards.

Disruptive products/services such as the Internet required a higher level of learning from consumers and offered much more benefits than predecessor products. Sony’s Walkman and Apple’s iPod are classic examples of pioneers or first movers. The Apple Watch is also an example of a pioneer product.

Different products diffuse at different rates.

Various factors increase the speed of diffusion of a new product.

Group activity: Continue with the previous group activity. Assess why some of the products chosen by the groups diffused more quickly than others by applying the four criteria in the boxes.

The phone replaced the telegraph because it offered a clear benefit; it did not rely on just dots and dashes but could transmit voices.

Visual demonstrations often clearly communicate product benefits and clarify complex products for which consumers require significant information before they will purchase and use them.

New cell phones have become sufficiently complex so that some potential consumers, particularly older consumers, may be put off. Complicated contracts also make trialability difficult. Purse ‘n Boots was a new product that let women store

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Annotated Chapter Outline

Instructor’s Notes their credit cards, keys and cell phones in their boots instead of having to carry a purse. However, because the valuables were hidden away, the benefits were not very observable. Furthermore, trialability was currently low as retailers had not yet embraced them and so the boots were sold only online.

LO3: How Firms Develop New Products

Exhibit 8.4 introduces the new product development process and the steps to follow.

Group activity: Have each student group think of a new product. It need not be a “new-to-the-world” product. Then have them follow the steps in the New Product Development Process and describe what they would do at each step. This exercise might take an hour or so, so it may be used as an out of class assignment. Have students present their process to the rest of the group.

1. Idea Generation

Firms must constantly scan the environment looking for new product ideas. Depending on the company strategy, they use different sources.

 Can come from internal research and development. Sometimes R&D consortia help firms explore new ides or obtain new product solutions.

Larger firms often maintain their own R&D department and rely on it to generate new products that will lead the market.

 With licensing, firms buy the rights to technology or ideas from research-intensive firms.

Firms license the use of new products, technology and processes. Small biotech firms frequently license their inventions to larger pharmaceutical firms.

 Brainstorming involves group efforts to generate ideas, during which no idea can be immediately accepted or rejected.  Outsourcing  Competitors’ Products - Reverse engineering takes apart a product, analyzes it, and recreates an improved product that does not infringe on competitors’ patents.  Customer input, especially from lead users, suggests product modifications that better suit consumers’ needs.

Many firms, such as 3M, foster a culture of creativity and give employees both the time and the freedom to develop new products and new ideas.

Companies like IDEO help generate product ideas.

Products with patents or other proprietary protections cannot be copied, so reverse engineered products must be substantively different from their source product.

Fashion-based product lines often identify trend

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Annotated Chapter Outline

Instructor’s Notes leaders and watch them to gather new ideas.

Ask students: Have you ever modified a product, e.g., apparel, a car? Why did you do it?

2. Concept Testing Presents a Concept to Potential Buyers to Obtain their Reactions.

Concepts are presented to potential buyers or users to gauge their reactions. Marketing research techniques discussed in chapter 7 are used to test these concepts.

3. Product Development Requires a Balance of Various Considerations.  During alpha testing, the firm attempts to determine whether the product will perform according to its design and satisfy the need for which it was intended.  Beta testing uses potential consumers, who examine the product prototype in “real use” settings to rate its functionality and performance, as well as potential problems.

A prototype allows consumers to interact physically with the product. Some prototypes, such as the concept cars revealed at auto shows, never actually go into production.

4. Market Testing Must Come Next.  Premarket tests determine how many customers will try and continue to use the product, according to small groups of potential consumers.  Test marketing introduces the offering to a limited geographical area, which means it may provide an advantage to competitors.

Premarket tests are conducted by research firms, such as Nielsen (BASES). Because test marketing reveals a new product to competitors, it might be inappropriate to expose some new products this way.

Refer back to the Opening Vignette which talks about the many iterations and prototypes Bartesian went through before finalizing their product.

Ask students: Think of some products that you think should not be subjected to test marketing.

Why not?

Answer: incremental improvements on existing products (e.g., new flavour of soda), small niche products because they only appeal to small market, products easily be copied by competition, etc.

5.

Product Launch Is the Most Crucial step of the new product development process because it requires a large financial investment and all aspects of the marketing mix must be coordinated.

Launching a new product is part art and part science. Each of these products offered unique benefits.

Ask the students if they feel the products in Exhibit 8.5 will continue to be successful?

E.g., KitchenAid Cordless Hand Blender, Maxwell House 100% Compostable Single Serve Coffee Pods, and so on

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Annotated Chapter Outline

Instructor’s Notes

Product Launch Marketing Mix  Promotion: Determine an appropriate integrated marketing communication strategy.  Place: Ensure an adequate quantity of the product is available.  Price: Get the price right.  Timing: Find the right moment for the launch.

The right product must hit the market at the right time and for the right price. It matters little how good a product is if the launch lacks sufficient resources.

6. Evaluate the Results.

Companies must conduct a postlaunch review to determine if the product is doing well or what, if any, changes are needed to the marketing mix.  Does it satisfy technical requirements, such as performance?  Do customers accept it?  Does it satisfy the firm’s financial requirements, such as sales and profits?

Marketers cannot only celebrate success but also must understand failure. The question of why a product fails is just as important as why another succeeded. An underperforming product may require further development.

LO4: The Product Life Cycle The Product Life Cycle Consists of Four Stages: Introduction, Growth, Maturity, and Decline.

The PLC represents an important tool managers use to plan their marketing activities.

Group activity: Continue with the same products the students have been working with. Design the marketing mix required to launch it. How will you communicate its benefits? What types of distribution will you use? How will you determine the price? When will you launch?

Introduction: Discuss the difficulties associated with the introduction stage, especially if the product is totally new to the world.

Ask students: What challenges do firms face in this stage?

Growth: Discuss the concept of the “tipping point”—the transition between introduction and growth when the product either gains market acceptance or must exit the market. The majority of new products fail at this point.

Maturity: Many consumer packaged goods products are in the maturity stage, which means companies must engage in defending their market share.

Ask students: What marketing activities should firms engage in at this stage?

In the battle for soft drinks, a very mature market, a 1% market share switch between Coke and Pepsi

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Annotated Chapter Outline

Instructor’s Notes can account for millions of dollars in revenue.

Introduction stage 1. Innovators start buying.

2. The firm suffers initial losses because of high start-up costs and low levels of sales revenue.

3. If the product is successful, firms may start seeing profits toward the end of the stage.

At each stage of the lifecycle, the marketing mix elements change in response to the marketplace.

Introduction stage: in this stage innovators will start to buy the product or to try the service. In its early days an example of a product in the introduction stage could have been the iPod. Group activity: List products that currently exist in each of the stages. What marketing mix would you design for each of these products?

Growth stage 1.

The product gains acceptance as more people adopt it.

2.

It experiences rapid sales growth.

3.

More competitors and competitive product versions enter the market.

4.

The market grows segmented; consumer preferences vary more.

5.

Innovators continue buying, and early majority consumers enter.

6.

Economies of scale increase.

Growth stage: in this stage firms attempt to reach new consumers by studying their preferences & producing different product variations which enables them to segment the market more precisely.

Maturity stage 1.

Sales reach their peak.

2.

The late majority adopts the product, provoking intense competition for market share.

3.

Marketing costs increase as firms vigorously defend their market shares.

4.

Price competition intensifies.

5.

Profit margins begin to erode.

6.

Firms enter new markets or pursue new market segments that may be less saturated.

7.

Firms start to develop new products.

Maturity stage: See exhibit 8.7 for additional strategies to extend the maturity stage of the PLC.

Decline stage 1.

Sales slow.

2.

Firms might position themselves for a

Decline stage: some laggards may enter the market at this stage to try the product or service.

An example of a product in the Growth stage are Clorox wipes. They compete in a market that is attracting many new offerings every year. They must continue to fight for customer acceptance and market share. There was a huge demand for wipes during the COVID-19 pandemic which prompted even more competitors to enter the market.

Many CPG products are in the maturity stage, which means firms must defend their market share. In the battle for soft drinks, a very mature market, a 1% market share switch between Coke and Pepsi can account for millions of dollars in revenue.

The market for mattresses is very mature. Brands like Sealy continue to innovate to prolong the maturity phase.

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Annotated Chapter Outline

Instructor’s Notes

niche segment of diehard consumers or those with special needs 3.

Alternatively, firms exit the market.

An example of a product in the decline stage are LP records (although in recent years there has been growth and renewed interest in vinyl).

Ask students: If your company’s product were in its decline stage, how would you determine whether to update the product, continue offering it for a small segment, or exit the market completely?

Strategies for Extending the Product Life Cycle

Develop new uses – Arm & Hammer promotes its baking soda in many rooms in the house.

Bounce fabric sheets are promoted as a way to keep closets, laundry hampers and gym bags smelling fresh. Procter & Gamble pushed its Bounce fabric-softener with a contest offering the chance for the winning entry to appear in a print ad.

Modify product - Change quality, performance, packaging, e.g., Apple is continually coming out with smaller models or offering more colours of iPhones.

Increase frequency of use – Campbells Soups publishes recipes that use soup as an ingredient in an entrée. You can also show how P&G encourages users to share their stories about how to use Bounce dryer sheets beyond the laundry room.

Increase # of users – Swiss Army Knife now comes with an LED light, USB key.

Find new users – as Roller Blade sales levelled off in the teen/young adult market, the company looked to market to elementary school children and older adults Reposition product – Vitamin D is now being marketed as a way to ward off cancer.

Tweak marketing strategy – applies to all the 4Ps

Shape of the Product Life Cycle Curve The PLC curve theoretically is bell shaped but can take many shapes, depending on market conditions.

Theoretically the shape of the product life cycle curve is bell shaped. In reality, markets evolve in a variety of ways and the curve can take many shapes.

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Annotated Chapter Outline

Instructor’s Notes Group activity: Propose different products whose PLCs might match those shown in this slide.

Caveats for strategies based on the PLC 1. Managers are often unaware of where their product is located on the PLC. 2. Misdiagnosing what stage the product is in can lead to a self-fulfilling prophecy.

Understanding where your product is on the PLC is difficult. If a firm misdiagnoses the stage, it can mean trouble for the firm.

Ask students: What happens to a product that is misdiagnosed as being in the decline stage?

Answer: It will surely decline!

Marketing Applications 33. Some people think that a product should be considered “new” only if it is completely new to the market and has never existed before. Describe or give examples of other types of new products.

Instructor’s Notes: Students must challenge the mindset of “new means completely new” and think about how marketers perceive the concept of product newness. Therefore, they might consider introducing an existing product to a new market, positioning a product using a new purpose, or repositioning a product to capture an existing or new market segment’s attention.

Example answers: In addition to new breakthrough products that create new markets, other “new” products include existing products introduced to a new market or for a new purpose, such as a portable DVD player geared toward consumers who travel on planes extensively. With product repositioning, an existing product’s attributes (e.g., size, packaging) get modified to capture a new market segment’s attention.

For example, Oscar Meyer repackaged its lunch meats into ready-to-eat meals that kids could take to school.

34. What are some advantages and disadvantages for companies that are the first to introduce products that create new markets?

Instructor’s Notes: This question focuses on the idea of the first-mover advantage and asks students to consider whether it truly is an advantage to be first in the market with a new product or service.

Example answers: There are many potential advantages for a firm that is the first to introduce a new product to a market; for example, the product becomes readily recognizable to consumers, so the company establishes a commanding and early market share lead, which can mean a greater market share over a longer period.

Despite these advantages however, many new products fail because they do not successfully meet the consumer need, meet a need that consumers have not realized yet, or get imitated by competitors who can produce cheaper alternatives.

35. If you answered that you see advantages for question 2, explain why some new products fail.

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Instructor’s Notes: In exploring the introduction of a new product that fails, students should consider a wide variety of reasons that companies can introduce products that fail, many of which revolve around the marketing mix.

Example answers: Students should give examples of products they consider failures. They should link examples to some of the theory from the textbook, that is, that products fail because they offer too few benefits, are too complex, or require substantial learning and effort. Bad timing is another reason some products fail. For example, Google Glass may have failed because it was introduced at a time when consumers were not ready for this innovation. Products can also fail because companies misjudge their competencies and introduce products or services that are inconsistent with their brand image and/or value proposition.

36. Identify and describe the ways that companies generate new product ideas. Which of these ways involve the customer? How can firms assess the value of the ideas that customers generate?

Instructor’s Notes: Rather than considering the idea-generation process solely from an internal company perspective, students should understand that good ideas can come from many sources. After an idea gets generated, the company must determine its potential value by progressing to the next stage of the product development process: concept testing.

Example answers: A company can generate new product ideas by maintaining an internal R&D department, collaborating in a research consortium that groups R&D investments, licensing new technology or ideas from other firms, conducting brainstorming sessions, reverse engineering competitors’ products, or gathering input from customers. Only the last of these options actually involves the customer directly in the ideageneration process. To assess the value of customers’ ideas, the firm could use concept testing and present a concept statement to potential buyers or users to obtain their reactions. If the reactions are positive, the idea might have high value; if not, the firm should consider other ideas.

37. Describe an example of a new product or service that is targeted at the college student market.

Using the concept testing discussion in the chapter, describe how you would conduct a concept test for this product or service.

Instructor’s Notes: Picking up where the previous question left off, this exercise challenges students to consider how they might perform concept testing of a product aimed at them. In particular, they will need to examine how to formulate the concept statement, conduct exploratory and conclusive research about the concept, and determine whether college-aged consumers might purchase the concept product if it were available.

Example answers: Due to the popularity of cars like the Scion with college-aged consumers, Toyota is marketing its new car, the Yaris, to the same market segment. Assuming that the car is only in the form of an unrealized idea, Toyota should put together a concept statement that includes a short description of the car, its proposed attributes, and its suggested price. Using the concept statement, Toyota could conduct exploratory research through in-depth interviews and focus groups with college students, in which it asks students to give their reactions to the concept statement. After completing the exploratory research and refining the concept statement the basis of the students’ feedback, Toyota could conduct

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more conclusive research, in the form of Internet and mall-intercept surveys, and ask college students to respond to another series of questions about the concept statement. During this conclusive research, Toyota should ask whether students would consider purchasing the car if it were available. If respondents reacted unfavourably to the concept and/or indicated they would not purchase such a vehicle, even if the concept sounded good, the carmaker should consider another idea for the college student market.

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38. How does the Internet help companies gain customer input on their existing and new products?

Instructor’s Notes: this question asks students to consider the internet as a research course for soliciting new product ideas from customers.

Example answers: Listening to the customer in both B2B and B2C markets is essential for successful idea generation. The Internet provides another channel for customers to use. Companies realize that their customers are on the Web writing customer reviews on retailers’ websites, and talking about their experiences on sites like http://www.Yelp.com, or on Twitter. Companies are reaching out to their customers by monitoring their feedback through these online communities in order to develop new products and change existing ones.

39. Nature’s Path is about to introduce a type of granola and is in the market testing phase of the new product development process. Describe two ways that Nature’s Path might conduct initial market testing prior to launching this new product.

Instructor’s Notes: Market testing helps determine the marketability of a new offering, so students must demonstrate an understanding of the two predominant methods, namely, premarket testing and test marketing, to answer this question.

Example answers: Firms conduct premarket tests before they actually bring a product or service to market to determine how many customers will try and then continue to use the product or service according to a small group of potential consumers. One popular proprietary premarket test version is called Nielsen BASES. Another method of determining the success potential of a new product is test marketing. Test marketing introduces the offering to a limited geographical area (usually a few cities) prior to a national launch.

40. What type of shampoo do you use? What stage of the product life cycle is it in? Is the shampoo manufacturer’s marketing strategy—its 4Ps—consistent with the product’s stage in its life cycle?

Explain.

Instructor’s Notes: Because students must consider their own shampoo, they should think about ways to determine the product’s life cycle based on the manufacturer’s behaviour.

Example answers: I use Head & Shoulders dandruff shampoo, and the product is probably in the maturity stage of the PLC because it is past its peak profits, most consumers are late majority buyers, and many competitive products challenge it for market share. The manufacturer’s marketing strategy is consistent with this stage; it heavily advertises the product to maintain market share, offers price discounts, attempts to create new market opportunities by offering different formulations of the product, and markets the product in multiple geographic markets to maintain or increase sales.

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41. Samsung’s Sero is a TV that be changed from horizontal to vertical. How quickly do you think this product will diffuse among the Canadian population? Describe the types of people that you expect will be in each of the diffusion of innovation stages Instructor’s Notes: Students must consider how consumers perceive the company, the relative newness of the technology, and current marketing efforts, including the existing product’s price, promotion, and distribution. After gathering this information, students must decide how innovators, early adopters, early majority, late majority, and laggard consumers will respond.

Example answers: The new television has some impediments to overcome to be successful. Some experts do not see them as “radical” innovations. They may be seen as “incremental” innovations that only improve current technologies.

Innovators – These customers will either pre-order or wait overnight inline to get the Samsung Sero TV. Early Adopters – These customers will wait until the latest consumer reviews and blogs give their opinions about the value of Samsung Sero.

Early Majority – These customers will wait until after the early versions are introduced and all the “customary” updates are implemented.

Late Majority – These customers will wait until the Sero is a commonly acceptable device. New technology may be on the horizon.

Laggards – There customers will only purchase the Sero if required to accommodate limited spacing of to fit a specific place in their homes.

10. You have recently been hired by a cosmetics company for its product development group. The firm’s brand is a top-selling, high-end line of cosmetics. The head of the development team has just presented research that shows that tween girls, aged 9 to 12, are very interested in cosmetics and have money to spend on them. The decision is made to create a line of tween cosmetics based on the existing adult line. As the product moves through development, you begin to notice that the team seems to lean toward a very edgy and sexual theme for the line, including naming the various lines “Envy,” “Desire,” “Prowl,” and “Fatal Attraction.” You begin to wonder if this concept is too much for girls in the targeted age group. Explain your thoughts.

Instructor’s Notes: This scenario forces student to determine whether sexual themes marketed to young teenagers violate their own ethical standards. Using the ethical decision-making framework, students should evaluate this practice and thereby determine an appropriate course of action.

Example answers: Students should ask, will this message drive sales or will it alienate customers, especially parents? They should also consider how this brand extension might impact the existing adult make-up brand.

Students could apply the ethical decision-making framework (from Chapter 17) as follows:  “Have you thought broadly of any ethical issues associated with the decision to be made?” I have thought broadly about the ethical issues. In this case, I have concerns about whether product names with sexual implications are appropriate for young teenage girls and about reactions to such marketing among the target market, the girls’ parents, and the general public.  “Have you involved as many possible people who might have a right to offer input into or have actual involvement in making this decision and action plan?” At this point, the teenage girls have had no input into the marketing decision, and the parents definitely have not been consulted.

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 “Does this decision respect the rights and dignity of the stakeholders?” Parents may believe the company is trying to sexualize their female children too early, even if the girls themselves think the products are acceptable because they want to rebel and be seen as more adult.  “Does this decision produce the most good and the least harm to the relevant stakeholders?”

Such marketing might foster an unhealthy attitude among the girls and lead to greater conflict with parents and even school administrators.  “Does this decision uphold relevant conventional moral rules?” It likely violates the community’s standard for what is appropriate regarding marketing to children and eroticizing young girls for the purpose of increasing sales.  “Can you live with this decision alternative?” If the decision alternative is to tone down the sexy names and images and use something more age-appropriate, I can live with that decision.

Based on my answers to the framework questions, I will advocate that my company consider using fun, quirky, maybe even rebellious names and images for the product marketing that are less sexual in nature.

Marketing Digitally 1. Visit Tesla’s website (www.tesla.com) and explore the range of products it produces. What do its product groups have in common? Which factors have influenced Tesla’s creation of its newest products?

Instructor’s Notes: To deepen students’ understanding of how new products can foster value—and subsequently sales—this exercise asks them to evaluate new products.

Example answers: Students should select at least one of Tesla’s new products and explain how the factors discussed in the chapter influenced the development of the product. For example, Tesla introduced the Model 3 and energy solutions including the Solar Roof and Powerwall. One of the factors that influenced the design of the Model 3 was changing customer needs. Although consumers are becoming more environmentally conscious, meaning that they may be interested in Tesla’s all-electric cars, many of Tesla’s existing products were not affordable for this segment. Therefore, Tesla introduced the Model 3 as a low-priced option for consumers.

Consumer needs also impacted the development of Tesla’s energy product line. As consumers are becoming aware of their environmental impact, they may be interested in installing solar panels to power their homes. Furthermore, introducing energy solutions may also have helped Tesla managed risk through diversification because Tesla initially only manufactured and sold vehicles. By expanding into other areas, if some products don’t do well and others do, Tesla can withstand those changes and experience more consistent financial performance.

Another example is Tesla’s commercial truck, Tesla Semi. One factor that may have influenced this new product is improving business relationships. These trucks are designed to haul commercial trailers, and they could save owners $200,000 in fuel costs throughout the vehicle’s useful life. This product’s competitive base pricing and dramatic savings on fuel costs may improve Tesla’s relationships with businesses that purchase these trucks.

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2. The automotive industry is constantly adding new and different products into car and truck markets. Conduct an Internet or library database search for and discuss two innovative new automotive technologies that are changing the industry.

Instructor’s Notes: Students must fit innovations developed for the automobile industry to the introduction and growth stage of the product life cycle.

Example answers: o Introduction: Mustang convertible rooftop, which very few vehicles even offer. o Growth: Hybrid engines for better fuel economy; the demand for cars with this technology has skyrocketed in the past few years. o Maturity: Greater payload capacity in trucks and SUVs, because most vehicles now have some provision for this capacity. o Decline: CD players for cars because most vehicles come with satellite radio, USB ports and/or iPod docking stations.

End-of-Chapter Case Study: Dyson Aims to Make Products that Solve Problems in New Ways 6. What kind of innovation do Dyson vacuums represent?

Example answers: Dyson vacuums are the type of innovation that is different from previously available products but does not strikingly change the buying or usage patterns of consumers. Dyson remains in the same product and markets but continues to improve its vacuums. The company needs to do this to save time and increase effectiveness and deal with the effect of the product life cycle.

7. Assign each of the new products described in this case to the product life cycle. What does this assessment predict about Dyson’s future success?

Example answers: Vacuums, hand dryers, and personal fans are in the maturity stage of the product life cycle: sales have peaked, profits have peaked and/or are declining, and there are many competitors in the market. For vacuums firms, the maturity stage is a time to consider entering new markets, developing new products, increasing marketing to defend their share of the market, and controlling costs to maintain profits and outlast the competition. In comparison, electric vehicles are in the early adopter stage of the product life cycle. This group spreads the word about the product and is critical to future success. If the early adopter group is relatively small, the number of people who ultimately adopt the innovation likely will also be small.

8. Choose two Dyson products and assess the company’s probability of long-term success using the diffusion of innovation theory.

Example answers: Answers will vary depending on the products chosen. Students should discuss the relative importance of the first three types of adopters. Innovators are crucial to the success of any new product because they

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help the product gain market acceptance by talking about and spreading positive word of mouth about the new product. Early adopters also spread the word and are crucial for bringing the other three buyer categories to the market. If the early adopter group is relatively small, the number of people who ultimately adopt the innovation likely will also be small. Finally, the early majority is crucial because few new products and services can be profitable until this large group buys them. If the group never becomes large enough, the product or service typically fails.

9. Why might consumers be willing to pay high prices for a household appliance because it works better but seemingly might not be willing to do so for an electric vehicle?

Example answers: Price is critical to a consumer’s perceived value for a product. In order to justify a higher price, products have to demonstrate a relatively higher perceived benefit. In the case of an electric vehicle, the increased price does not balance with the benefits of lower energy costs, lower maintenance costs, and better for the environment.

Video Activities Video: Innovation at Wham-O Core Concepts Covered: innovation, product prototype, market testing Video Summary: Innovation leads to new products and services that provide value for both the firm and its customers. Wham-O’s responsibility is to pursue a new-product development process to identify opportunities and convert them into profitable products and services such as the Square Frisbee.

Customers’ needs are constantly changing and leading to different desires in the marketplace. Firms must implement a process that typically follows a series of stages to remain successful. New product development has been at Wham-O’s core from its inception. While it has a new product development team, it continually works with inventors and entrepreneurs to develop fun, whacky toys to keep consumers involved with the brand. This video highlights some of the new products the company has introduced over the years. These range from the original Frisbee, Hula Hoop, and Slip ‘N Slide from the 1970s, to one of its most recent products, a hovering, square Frisbee.

Discussion Question #1: What are the advantages of Wham-O working with inventors and entrepreneurs to develop new products rather than relying solely on its internal product development team?

Brief Answer: Entrepreneurs and inventors come up with unique ideas that enable Wham-O to introduce more products, more quickly into the market. This keeps its product line fresh and keeps customers coming back to see more.

Discussion Question #2: How does Wham-O introduce its new products into the market?

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Brief Answer: The primary method that Wham-O uses to introduce new products is through trade shows in the United States and internationally. These shows help it reach the B2B market to create interest within the resale market. With the hovering, square frisbee, Wham-O went directly to consumers through KickStarter.com, where people go to find new unique products.

Video: New Product Development at Anki Core Concepts Covered: product development process: idea generation, concept testing, product development, market testing, product launch Video Summary: This video takes the viewer through the product development process at Anki in its development of Vector, a small, in-home, interactive robot with a personality. New can be a complicated idea. Some innovative products can add additional feature(s) to an existing product or introduce something never seen before. The customer experience is endlessly being changed with different products through technological breakthroughs and fresh features to existing products. To remain competitive, companies are under constant pressure to develop new products. Anki is no exception as demonstrated in this video which takes a look at the things Anki had to consider and processes it followed for each stage of the product development process.

Discussion Question #1: What are the stages of the product development process?

Brief Answer:

1.

2.

3.

4.

5.

Idea generation Concept testing Product development Market testing Product launch

Discussion Question #2: Why is new product development the life blood of any prosperous company?

Brief Answer: Without new product development, a company’s product offerings become stale resulting in a loss of customers and sales. New products allow the company to gain new customers, sustain or overcome competitors, and potentially add value to society.

Video: New Product Development: Red Mango Core Concepts Covered: the new product development process Video Summary: Founded in 2007 by Dan Kim, Red Mango originally sold only frozen yogurt at its first shop in Los Angeles; however, success resulted in rapid expansion, in terms of both locations and product offerings. Red Mango has developed many successful new products, including parfaits, fruit smoothies, hot chocolate, and, more recently, blended iced coffee. The video describes the new product development process used by Red Mango to launch its blended iced coffee drink

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Discussion Question #1: Which of the idea generation methods discussed in the text did Red Mango use to come up with the idea to introduce a blended iced coffee drink?

Brief Answer The new product idea started with observation of trends in the marketing environment, specifically the growing popularity of coffee drinks. Beyond that, Red Mango considered competitors’ products: not necessarily direct competitors (i.e., other frozen yogurt companies), but indirect competitors selling coffee drinks, such as the Starbucks Frappucino. Red Mango saw an opportunity to improve on these existing coffee drinks in a way that was consistent with its core values and its other product offerings.

Discussion Question #2: Outline the steps of the new product development process for the frozen coffee drink at Red Mango as described in the video.

Brief Answer 1. The first priority was flavour, in other words, creating the best tasting product possible.

2. Red Mango next considered the practical aspects of creating the product in the store environment: What equipment would be needed, and what ingredients were required?

3. Next, the company considered whether or not the product could be reproduced in the store with consistent quality on a daily basis.

4. Once these issues were addressed, Red Mango launched the new product. Although the video does not address the details, this launch would have involved a full marketing mix, and possibly a market test in limited locations before launching across the entire company.

5. Finally, performance was measured against goals set before the launch.

Additional Teaching Tips This chapter focuses on the ways that a firm can create value through innovation. Students learn about the product life cycle, the importance of product differentiation, as well as concepts unique to new product development and launch.

The way to truly understand new product development is to have students actually work in teams to create a new product. Students can work in teams of 5 to brainstorm and come up with ideas of new products. Instructors need to put some boundaries on the assignment such as it can’t be too farfetched (such as self-driving automobiles) and the product has to have enough differentiation (not just an added ingredient to an energy bar). If students get stumped, suggest to students that they think of current products and then to think of a way to make it better or to solve a problem (such as unbreakable holiday lights or lights where the bulb never burns out). Then have students make an illustration of the product and address the phases of the new product development. Students can then present their findings to the class.

Another way to get students involved is to have them research organizations to discover how new products were made. 3M Post Its were made by mistake when a glue did not bond. An employee used it to mark pages in a hymnal so he wouldn’t lose the page and it could be easily removed without damage. Have students share their findings with the class. Online tip: This same assignment can take

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the form of a posting in which students present their findings via the discussion board in the online forum. Students can then respond to other learners by commenting on their “new product” and making suggestions.

The key to student comprehension of new product design is to actually involve the student in new product development to use their critical thinking skills to think about each of the phases of new product development as well as the elements of the marketing mix to bring the product to market.

Instructors may want to assign new product development as part of a Marketing Plan where students need to develop a new product and incorporate all elements of the marketing plan for a cumulative course project. Of course, new product development phases would be addressed as part of the plan.

Newsletter Teaching Aid Remember to subscribe to “Grewal Levy Marketing News” at https://grewallevymarketing.com/.

Published regularly, each newsletter contains a feature article on current topics, for example Lime Rental Scooters, with discussion questions that can be used in class. Each article is tagged so instructors can quickly identify relevant chapters for the newsletter content. The site also features a selection of related articles, links to current videos that can be used in class, as well as links to archived articles sorted by chapter for ease of use in your class.

Chapter Nine: Product Branding and Packaging Decisions TOOLS FOR INSTRUCTORS       

Learning Objectives Annotated Chapter Outline with Instructor’s Notes/Teaching Tips Answers to End of Chapter Learning Aids Marketing Application Questions Marketing Digitally Chapter Case Study Video Activities Additional Teaching Tips Newsletter Teaching Aid

Learning Objectives 1.

2.

3.

4.

5.

6.

Describe the components of a product Identify the types of consumer products Explain the difference between a product mix’s breadth and a product line’s depth Identify the advantages that brands provide firms and consumers Summarize the components of brand equity Describe the types of branding strategies used by firms

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7. State how a product’s packaging and label contribute to a firm’s overall strategy

Annotated Chapter Outline

Instructor’s Notes

Opening Vignette: Patagonia Patagonia has built a strong brand making quality products for hikers and outdoor enthusiasts that stand up to the elements and are long lasting. This example illustrates brand image, brand promise, and brand equity as well as how respect for the environment and social issues can be woven into a business model.

Ask students: How has Patagnia developed its brand reputation and earned the trust of consumers?

LO1: Complexity and Types of Products Products are interrelated and include the problem solving benefits consumers are looking for.

Products are made up of 3 components:  Core customer value  Actual product  Associated services (augmented product)

Marketers involved with the development, design, and sale of products think of them in an interrelated fashion. At the centre is the core customer value, next is the actual product, followed by associated services.

Types of Products There are 4 types of consumer product:  Specialty Products/Services  Shopping Products/Services  Convenience Products/Services  Unsought Products/Services

Consumer products are products and services used by people for their personal use. Marketers further classify these products by the way they are used and purchased.

 Specialty goods/services are those toward which the customer shows a strong preference and for which he or she expends considerable effort to find the best options.  Shopping goods/services include those for which consumers spend time comparing alternatives, such as apparel, fragrances, and appliances.  Convenience goods/services require little or no evaluation effort prior to purchase.  Unsought Products/Services are those that people don’t yet know about (e.g., a Polar Pen made of magnets), don’t think about buying, (insurance, pre-planned funerals), or don’t want (e.g., duct-cleaning)

The same product can represent different goods categories for different consumers. For example, some consumers consider jewellery a shopping good and therefore visit their local department store or warehouse store (e.g., The Bay or Costco) to find products, whereas others view it as a specialty good that should be purchased from a jewellery store. Few people would consider it a convenience good. Even fewer people would consider jewellery an unsought good.

LO3: Product Mix and Product Line Decisions  The Product Mix Is the Complete Set of Products Offered by a Firm.

This chapter uses many brands, such as ColgatePalmolive, Starbucks, S.C. Johnson, and Taco Bell, as examples. Students may not be familiar with all

Answer: it has focused on the environment above sales, refused to sell its “logo” to corporations who are only looking for the cool factor, and become more mission driven as a company.

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Annotated Chapter Outline

Instructor’s Notes

 The Product Category Is an Assortment of Items that Customers View as Reasonable Substitutes.  Stock Keeping Units (SKU) Are the Smallest Units Available for Inventory Control.  Product Lines Are Groups of Associated Items that Consumers Use Together.  Product Mix Breadth Represents the Number of Product Lines a Firm Offers.  Product Line Depth Is the Number of Categories within a Product Line.

the companies but they likely know the brands.

All companies need to manage their brand portfolios to meet the needs of current customers.

One of Colgate Palmolive’s best known and most successful brands is Colgate Toothpaste. With its distinctive red and white packaging, Colgate products appear throughout the oral care aisle in supermarkets.

Group activity: List as many ConAgra Healthy Choice products as you can think of. How many product lines do they represent?

Healthy choices (http://www.healthychoice.com/products/news.jsp ) has four types of meals, soups (bowls and cans), frozen novelties, bread and pasta sauces. Thus, they have five product lines.

Students should understand that each item is called a stock keeping unit (SKU) and the category depth is the number of SKUs within a category. In the canned pasta category, ConAgra offers a wide range of products, or SKUs, under its Chef Boyardee brand.

Changing product mix breadth 1.

Increase breadth by adding new product lines to capture new or evolving markets, increase sales, and compete in new ventures.

2.

Decrease breadth by deleting entire product lines to address changing marketing conditions or meet internal strategic priorities.

Ask students: Why would a company want to increase its product mix breadth? Why would it want to decrease it? Students should comment that they would increase to capture new or evolving markets and increase sales. Decreasing might be due to changing market conditions or internal strategic priorities.

Changing product line depth 1.

Increase depth by adding new categories within product lines to address changing consumer preferences or pre-empt competitors to boost sales.

2.

Decrease depth by deleting product categories to realign resources.

Ask students: What are the pros and cons of offering competing products in the same category?

The primary advantage is to increase overall sales and profits. But at the same time, adding competing products can cannibalize sales of current brands. Firms must determine the net effect on sales and the overall impact on competitive products.

To meet the needs of different market segments for the same product category, firms often offer competing brands. ConAgra offers two of the most

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Annotated Chapter Outline

Instructor’s Notes popular popcorn brands - Orville Redenbacher’s and ACT II - which are positioned slightly differently in the marketplace. Each has its own unique marketing mix.

Changing the number of SKUs

Many stores add SKUs to provide a deeper assortment. They might add, for instance, more colors or sizes in a category.

To stimulate sales or react to consumer demand, some companies add or delete SKUs.

Ask students: What effect does this have on consumer behaviour? On financial performance?

What is the effect of reducing the number of SKUs? By providing consumers with a deeper assortment, it is more likely that the store will satisfy their demand, which should result in increased sales.

But adding SKUs is expensive. The effect of reducing SKUs is just the opposite.

Branding Branding provides a way for a firm to differentiate its product offerings from those of its competitors.

Brand identification takes many forms.

Ask students: How many of you can sing the Oscar Meyer jingle? It is the one of the original 1965 Oscar Meyer ads.

Group activity: Compare the positioning of two Chevrolet brands (e.g., Corvette, Impala, and Malibu). Why does Chevrolet have so many competing brands in the same category? Each brand is aimed at a different target market. Malibu starts around $22,000 while a Corvette starts at $67,000.

Group activity: Identify a brand that you recognize primarily by each of these elements.

Brand Name: Most brands.

Jingles: Be all you can be – Army URLs: www.eBay.com Logos & Symbols: Nike Swoosh Slogans Nike- Just Do It. Characters: Quaker, KFC, McDonalds.

LO4: The Value of Branding for Customers and Marketers A. Brands facilitate purchasing because consumer recognition facilitates quick decisions.

Group activity: Have students pick a wellestablished brand. Have them provide examples of how the brand provides value.

For example, consider eBay. The brand facilitates

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Annotated Chapter Outline

Instructor’s Notes

B. Brands can establish loyalty over time and with continued use.

C. Brands minimize competition because of their loyal customers.

D. Brands reduce marketing costs; wellknown brands can largely sell themselves.

E. Brands are assets that firms must protect through trademarks and copyrights.

F. Brands influence market value and the firm’s bottom line.

Branding Overview & Brand Equity Branding Includes Brand Equity, Brand Ownership Strategies and Brand Name Strategies.

Brand Equity Consists of Four Concepts: Awareness, Perceived Value, Associations and Loyalty.

Assets and liabilities linked to a brand can add to or subtract from the value provided by the product or service.

instant recognition, consumers are avidly loyal, which reduces competition from other online auctions and reduces expensive marketing ads.

The brand is a valuable asset that they protect through copyrights, and directly affects their profits.

Brand equity is an important concept that can both help and hinder. For example, customers dislike some brands because of the firm’s actions or their negative perceptions. Nike has been the target of many labour activists, which causes some consumers to refuse to purchase or wear Nike products. Mattel’s brand equity was hurt when it recalled over 19 million toys because of lethal magnets and lead paint.

Additional content follows to further elaborate on brand equity, brand ownership strategies and brand naming strategies.

LO5: Brand Equity A. Brand awareness measures how many consumers in a market are familiar with the brand and have an opinion about it.

Remind students what they have learned about consumer behaviour. When consumers recognize a need, they begin with an internal search, during which they consider any brand they already know.

If consumers are not aware of the brand, they simply will not purchase it.

B. Perceived value represents the relationship between a product’s or service’s benefits and its cost.

Consumers report looking for and purchasing more organic products for a variety of reasons, such as concerns about health, the environment, and safety. Organic products often cost more but are perceived as more valuable by some because they mitigate these concerns. Discount retailers such as T.J. Maxx or H&M offer designer products at reduced prices.

C. Brand associations reflect the mental links consumers make between a brand and its key product attributes, such as its  Logo.  Slogan.

Brand associations reflect the mental links that consumers make between a brand and its key product attributes, such as a logo, slogan or famous personality. These brand associations often result from a firm’s advertising & promotion

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Annotated Chapter Outline  Brand personality, which refers to human characteristics people associate with the brand’s symbolic or self-expressive meaning.

Instructor’s Notes efforts.

Firms sometimes develop a personality for the brand as if it were human.

Ask students what brands have personalities? They might mention McDonald’s and Pepsi (young).

Consumers develop links between brands and their own identity. Some brands are just “not for them.”

Ask students: How many of you wear Abercrombie & Fitch clothing? How many choose never to wear this brand? How do you perceive this brand’s message?

D. Brand loyalty occurs when a consumer buys the same brand’s product or service repeatedly rather than buying from multiple suppliers.

Brand loyalty provides the firm with high value.

Starbucks has built their brand equity by having loyal customers.

Ask students: Once you have chosen an insurance company or a bank, how likely is it that you will switch? How likely is it that you will switch due to an increase in price? Is it important for the firm to spend a lot of money marketing to you, a loyal customer? Do you pay much attention to ads or direct mail pieces from competition?

To further illustrate brand loyalty, ask students: would you leave a store if your favourite brand were not in stock? When you order a Sprite and the server asks, “Is 7-Up okay?” do you say no?

LO6: Branding Strategies Brand Ownership Takes Several Forms.

A. Manufacturer brands are owned and managed by the manufacturer; most brands are manufacturer brands.

B. Private label or store brands are owned and managed by retailers.

C. Generic products are sold without brand names, typically in commodities markets.

Unlike Europe, where store brands such as Tesco (U.K. grocery chain) were extremely popular, in the United States, few store brands had achieved such status and were often considered inferior to manufacturer or national brands. In Canada, many store brands are well established, such as Kenmore, Mastercraft and Presidents’ Choice.

Private-label brands, also called store brands, are products developed by retailers. Some manufacturers prefer to make only private-label merchandise because the costs of developing and marketing a manufacturer’s brand are prohibitive.

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Annotated Chapter Outline

Instructor’s Notes President’s Choice is a popular store brand in Canada that has also found acceptance in the U.S.

Naming Brands and Product Lines  Family brands use a combination of the corporate and product brand names.  Individual brands identify each product individually.

Brands can be marketed using a common/family name or as individual brands. Family brands include Heinz and Del Monte. Detergents are good examples of firms using individual brands: Tide, Bold, Gain and Surf. Marriott gives its individual brands unique names, all tied together by the phrase “by Marriott,” like Fairfield Inns by Marriott.

Ask students: What is the benefit of this type of naming strategy?

Choosing a Name Four desirable qualities should be considered:  The brand name should be descriptive and suggestive of benefits and qualities  The brand name should be easy to pronounce, recognize, and remember  The brand name should be able to be registered as a trademark and legally protected.  The brand name should be easy to translate into other languages.

Backwoods Brewery in Vancouver sold its beer to local restaurants and bars for decades. Taking note of whacky wine names like Fat Bastard and Cat’s Pee on a Gooseberry Bush, the company rebranded its beer as Dead Frog. The goal was to create a fun name in a category that has been very conservative. “Dead Frog”, while irreverent, was memorable and appealed to a younger demographic.

Brand Extension An extension uses the same brand name for new products introduced in the same or new markets and can benefit the brand in several ways.

1.

The brand name is already well established and possibly known for its high quality.

2.

Marketing costs are lower because consumers already know and understand the brand.

3.

The resulting synergy between the two products can increase overall sales.

The extension may boost sales of the parent brand because new adopters may now try the parent brand.

Extending the equity of a brand to new products makes sense sometimes. For example, the firm can spend less on brand awareness, positive consumer acceptance can spread to the new product, and a synergy exists between the two products.

However, potential risks of expansions exist too.

Brand dilution can adversely affect consumer perceptions of the core brand’s perceived attributes.

Group activity: Think further about the Healthy Choice brand. How has ConAgra been able to extend this brand? What other extensions might it consider?

A brand is only as good as its last extension. Many firms try to take their brands just one more step,

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Annotated Chapter Outline

Instructor’s Notes

1.

Marketers must carefully evaluate the fit between the product class of the core brand and the extension.

2.

Firms should evaluate consumer perceptions of the core brand’s attributes and seek extensions with similar attributes.

3.

Firm should refrain from extending the brand name to too many products.

4.

Firms should consider whether the brand extension can achieve sufficient distance from the core brand.

only to find the extension hurts rather than helps the parent brand. For example, McDonald’s agreed to license a McKids line of clothing, but the line was not as successful as it had hoped it would be.

Cobranding Markets two or more brands together with the same package or promotion.

Cobranding benefits the participating brands by attracting the consumers of one brand to the others. Remind students of FedEx/Kinkos. The synergy between these two brands helped ensure a successful cobranding effort.

Brand Licensing involves a contractual arrangement.

A. One firm allows another to use its brand name, logo, symbols, and/or characters.

B. The user provides the brand owner with a negotiated fee in exchange.

Think about the products that feature the Lacoste alligator or the Harley-Davidson logo.

Ask students: In terms of this example, what do you think McDonald’s did wrong?

Ask students: Why can these brands be extended in so many directions?

Answer: These brands have a strong mystique and a loyal following and are therefore likely to buy their brand extensions.

LO7: Packaging Consumers See the Exterior Packaging A. Packaging provides consumers convenience in terms of storage, use, and consumption.

B. Packaging helps consumers identify the brand they prefer.

Packaging Contains: A. The UPC label used by retail scanners appears on secondary packaging.

B. Consumers can use the package itself to find additional information that may not be available on the exterior package.

Product Labelling The Purpose of Labels:

Although often overlooked as a marketing tool, packaging helps determine the success of a product. In some instances, such as Coca-Cola or Aunt Jemima Maple Syrup, the package has become synonymous with the brand. Even small firms benefit from good packaging and labelling.

Ask students: What packages are so distinct that they help make the brand successful? Possible answers are: some bottled waters such as Perrier, Altoids, and Tiffany’s turquoise box

Label information is determined by regulations, and rules vary from country to country. Certain

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Annotated Chapter Outline

Instructor’s Notes

A. Labels provide information the consumer needs for decision and consumption.

B. More than just a sticker, the product label provides a communication tool.

terms convey specific meanings, such as “natural,” “organic,” “made in Canada,” and products must meet specific tests before placing such terms on their label. The government introduced new labelling requirements to show added sugar recently, not just those that are naturally occurring.

Legal Restrictions on Labels.

A. Many labelling requirements stem from various laws.

B. Federal agencies, industry groups, and consumer watchdogs carefully monitor product labels.

Group activity: Look at the label of a snack or drink you may have brought to class. What information does it provide? How does it support the marketing of this item? Ask students to check out the labelling of sugar and added sugar.

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Marketing Applications 42. Study the following two product mixes. For Product Mix 1: A, B, C, and D are the lines; and for Product Mix 2: X, Y, and Z are the lines. Which mix has more breadth and why? Which mix is deeper and why?

Instructor’s Notes: This exercise prompts students to explore the difference between product line breadth and product line depth.

Example answers: A firm’s product mix breadth represents a count of the number of product lines offered by the firm.

Product Mix 1 has greater breadth because it offers four product lines versus three in product Mix 2.

Product line depth equals the number of products in a product line. Product Mix 2 has greater depth because two of its product lines have four products in them versus three in Product Mix 1.

43. Visit a grocery store and look for Colgate Total toothpaste on the shelves. How many different SKUs (include all sizes and flavour variations) are sold at the store? What are the advantages and disadvantages of having so many different variations?

Instructor’s Notes: SKUs represent the smallest units available for inventory control. This exercise shows students how many different variations of one product may be available for sale.

Example answer: The answer to this question will vary considerably depending on the city students live in and the size/type of store they visit. Colgate Total* is available in a variety of flavours and forms: 50 ml to 150 ml in size, including Colgate Total Advanced Health, Clean Mint Paste, Whitening Gel, Advanced Fresh Gel, and Fresh Stripe Gel. 44. Suppose you have just been hired by a jewellery manufacturer as a marketing consultant. The manufacturer has been making private-label jewellery for 75 years but is thinking about developing its own brand of jewellery. Discuss the advantages and disadvantages of such a strategy.

Instructor’s Notes: Private-label, or store, brands are owned and managed by retailers. Students must consider the positives and negatives of such brands and therefore address such factors as market risk, promotional costs, cannibalization, and the competitive landscape (e.g., how will private-label clients react when they find out their manufacturer is now their competitor?).

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Example answers: The jewellery manufacturer could reap significant profits from making a product for itself rather than another company and possibly build a strong, lucrative brand that would command status and premium prices. However, it will face higher promotional costs for its new brand, and it runs the risk that the brand will not do well compared with the existing private-label business.

45. Identify a specific brand that has developed a high level of brand equity. What specific aspects of that brand establish its brand equity?

Instructor’s Notes: In picking a brand that they think has high equity value; students should explore why they believe it has high value and what determines that value.

Example answers: IBM has developed a high level of brand equity through its longevity, its global reach, its reputation for innovation and Nobel Prize–winning work, the quality of its products, its sponsorship of sporting and cultural events, and the high level of customer service it provides to its customers.

46. Are you loyal to any brands? If so, pick one and explain why you believe you are loyal, rather than that you simply like the brand. If not, pick a brand that you like and explain how you would feel and act differently toward the brand if you were loyal to it.

Instructor’s Notes: This question challenges students to consider exactly why they may be brand loyal toward one product but not another, which may be because of product characteristics, the students’ experience, or their opinion of the company that provides the product. Therefore, they might mention that they only purchase that brand to the exclusion of all others, they purchase the product frequently, and they often visit the store that sells it.

Example answers: I am loyal to Starbucks in that I generally do not get coffee from any other retailer unless there is absolutely no Starbucks within reasonable walking or driving distance. However, though I prefer Pepsi, I sometimes drink Coke; if I were truly brand loyal, I would only patronize restaurants that served Pepsi.

47. Ford Motor Company owns several brands: Ford, Lincoln, Mercury, and Aston Martin. Within each brand are many models, each of which has a unique identifying name. Wouldn’t it be easier to just identify them all as Fords? Justify your answer.

Instructor’s Notes: Why does a company like Ford break its product offerings into different brands?

Students might mention such factors as promotional costs, product differentiation, brand image, and target market focus.

Example answers: Although it might be easier to identify all makes and models as Fords for the sake of promotions and costs, the company would not be able to differentiate its product offerings as it does. Each brand has its own product characteristics, appeals to different market segments, and evokes different feelings and emotions in consumers. It would be much more difficult for Ford to try to do all of this under the single brand umbrella of Ford.

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48. Unlike Ford, BMW has only one brand and gives each car it makes a number instead of a name, for example, the BMW Series 3, Series 5 or Series 7. What are the advantages to BMW of this approach?

Instructor’s Notes: This question highlights a very different approach to branding which is linked directly to the company name.

Example answers: BMW is a more upscale brand than Ford. The main advantages to BMW’s branding approach include factors such as ease of establishing a brand image, savings on promotional costs, and maintaining target market focus.

49. Consumers have become increasingly aware of the amount of packaging that is used for certain products and the possible environmental impact of disposing of packaging materials into the natural environment. Choose a product that you believe should change its packaging. How would you change the packaging? Do you feel these changes would make the product more desirable for consumers?

Instructor’s Notes: To expand students’ understanding of the roles and responsibilities of the different parties, this question challenges them to consider the benefits and costs of changing product packaging.

Example answers: Students will consider the environmental elements that are affected by the packaging. In some cases, the students may focus on the landfills, amount of the earth consumed by waste, and whether the packaging is biodegradable, for example, coffee pods. With other packaging, they may focus on the harm that comes to animals by the plastic packaging, for example, plastic straws. Their opinion of whether the products using more environmentally friendly packaging will make a product more desirable will be grounded in the importance the individual student places on saving the environment.

50. Do you think all food sold in a grocery store should have ingredient and nutrition labels? Consider the perspectives of consumers, the manufacturer, and the store.

Instructor’s Notes: To expand students’ understanding of the roles and responsibilities of the different parties, this question challenges them to consider the benefits and costs of labels for each group Example answers: Most food in a grocery store should have an ingredient and nutrition label, with the exception of, say, unpackaged produce. Consumers can make more informed purchase decisions, and the store might improve its customer satisfaction, because its shoppers know that all the information they need appears on every product package. From the perspective of the manufacturers, however, broader labelling might seem intrusive and could make sales of cheaper quality, high fat, and high sugar foods more difficult; thus, rather than seeing it as an opportunity to connect positively with consumers, manufacturers might object to comprehensive labelling.

51. You are hired by a small bakery that wants to distribute its products through supermarkets. The market for the bakery’s products has been steadily growing, so the bakery needs to expand its distribution capabilities to match its production capacity. You set an appointment with the manager of a local grocery chain that is familiar with the bakery’s products and excited about the

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possibility of selling them in the store. The contract he offers includes a $10,000 fee for stocking the product, which he claims is simply the cost of doing business, noting that bigger bakeries object to adding your product line to the chain’s offerings. The bakery cannot afford this fee.

What should you do now?

Instructor’s Notes: This scenario asks students to consider the common business practices at play in this particular industry and whether such practices meet their ethical standards. If such stocking fees are common within the retail grocery industry, the ethical factor is fairly low; it is more a matter of contract negotiation than an ethical violation. If students determine that such stocking fees are not common practice and that the grocery chain is attempting to exploit the small bakery, they should address the ethical considerations and decide to what degree they should challenge the grocery manager.

Example answers: I would first determine whether such stocking fees are common practice in the grocery industry. If they are common, I would try to negotiate the fee down to a more reasonable level that my bakery could afford. If they are not, I would question whether we want to go into business with a firm that allows such unethical business practices. Perhaps we could broker a better deal with another grocery chain; otherwise, I would look for other ways to market and distribute the bakery’s products.

Marketing Digitally 10. Visit the Proctor & Gamble website (www.pg.ca). Identify and briefly describe its different product lines. Now identify one of its product categories and discuss the product line depth of that particular category.

Instructor’s Notes: To help confirm students’ understanding of the difference between product lines, product categories, and product line breadth, this exercise asks them to explore P&G’s product offerings, as represented on its website.

Example answers: Proctor & Gamble’s product lines include personal and beauty (e.g., hair care, skin products), house and home (e.g., detergents, fabric softeners, air fresheners), health and wellness (e.g., nutrition, oral care), baby and family (e.g., children’s soaps, shampoos, disposable diapers), and pet nutrition and care (e.g., pet food, pet grooming products). The oral care product category contains significant product line breadth and depth; it includes seven different product lines (Crest, Crest Whitestrips, Oral-B, Glide, Scope, Gleem, and Fixodent).

11. Visit the Sephora website (www.sephora.com). Explore the Sephora Collection, which is their private-label brand. How does Sephora position this brand in the market vis-à-vis the national brands?

Instructor’s Notes: Students should realize that the four of the many companies today sell their own private label brands and compete very well against some of the strongest national brands.

Example answers: Student answers will vary. The Sephora Collections offers a variety of product lines including product lines for lips, eyes, nail colour, and beauty tools. These product lines make up the depth of Sephora

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Collection’s product mix. Within each line, Sephora has several products. The nail color and lip colour line have numerous products of varying colors and benefits. These lines have significant product depth.

It positions itself as Beauty Uncomplicated based on the company’s expertise that makes their options less overwhelming. Some of Sephora’s other product lines might contain fewer products.

End-of-Chapter Case: Yogurt Lovers Say, “It’s All Greek to Me” 10. Generally speaking, what type of product is yogurt? Does your answer change for the different product categories that Chobani has defined for its offerings?

Example answers: While students' answers may vary, for most consumers, yogurt would be considered a shopping good.

Shopping products/services are products or services for which consumers will spend a fair amount of time comparing alternatives. In its effort to differentiate, Chobani could offer a product that could be seen by some consumers as a specialty good. Specialty products are those for which customers express such a strong preference that they will expend considerable effort to search for the best suppliers.

11. Is Chobani’s introduction of nondairy, coconut-based yogurts a brand extension or a line extension?

Example answers: Chobani is offering a product line extension with the introduction of its non-dairy coconut-based yogurts. This decision increases the product mix's depth. A brand extension refers to the use of the same brand name in a different product line, whereas a line extension is the use of the same brand name within the same product line and represents an increase in a product line's depth.

12. How is Chobani positioning its various product categories currently? How is it communicating its current positioning strategy?

Example answers: Chobani has rebranded itself as a "food-focused wellness company," and its advertising focused more specifically on promoting the nutritional benefits of yogurt. Through redesigned packaging and branding, it differentiates its products to highlight their suitability for different consumption experiences. Each product category got its packaging revamped, and the new packaging designs closely reflected the essence of each category. To maintain some continuity across the brand, all of the new packaging features hand-drawn artwork, natural colors, consistent typography, and a sense of nostalgia.

Chobani introduced a new watermark typeface that signifies a sense of warmth and the naturalness of the brand—with the added bonus that it stands out from other yogurt brands' typefaces when viewed from about 10 feet away.

Video Activities Video: Three Stripes: Branding at adidas Core Concepts Covered: Branding Strategy, Brand Equity: logo, brand image

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Video Summary: The “three stripe” logo on all adidas products is an important element of the brand, designed to help consumers to identify that the product comes from adidas. Originally, all of the company’s products were branded under the adidas name; however, over time the company has developed some sub-brands to serve specific target markets. The Performance sub-brand targets younger consumers interested in sports performance. The Sports Style brand targets the “kid in the hall” who is more interested in fashion and aesthetics, and the Neo division targets the consumer interested in the very latest fashion trends.

Discussion Question: How does the “three stripe” logo help to increase brand equity for adidas?

Brief Answer: Since the three stripes adorn all adidas products in some form, consumers have come to associate this logo with the adidas brand. In this way, consumers can recognize adidas products easily, which is particularly valuable when worn by athletes, celebrities, and opinion leaders.

Discussion Question: Why has adidas developed the Performance, Sports Style, and Neo sub-brands?

Brief Answer: These sub-brands help adidas to position its products for specific target markets, depending on the consumer’s interest in performance, style, or trendy fashion.

Additional Teaching Tips This chapter examines product lines, mix, and breadth. Different branding strategies are addressed.

Students use critical thinking skills to discover why brands are valuable to a firm. Product packaging and labeling also contribute to the firm’s overall strategy and those concepts are also reviewed in this chapter.

This is a fun exercise to get students excited about brands. To demonstrate the value of a brand, instructors may want to start the topics discussion by gathering brand symbols (such as below) and brand character icons such as the ones below without any identifying writing on it. These can be obtained through a Web search of the character for instance type “Tony the Tiger” in your search engine and download the graphic. Place the symbols on a transparency in color. Start the class by dividing the class into four or five groups. The instructions: The leader is to write down the brand name from input of group members. Time the exercise. It usually doesn’t take long depending how many characters you use. At the conclusion declare a winner and then ask the students “Why are brands valuable?”

Students realize the importance of brand recognition through the brand character or icon.

Online tip: The same exercise can be used in an online forum in synchronous connection with the class where each of the brand characters are shown. The first student that types in the correct brand name would ‘win’ and the instructor shows the next image. A synchronous course discussion can then occur about the importance of the brand character/logo.

Product packaging is known as the last five seconds of marketing. Instructors can bring in an empty Pringle’s can as well as other interesting examples of packing. Pringles is one of the first package

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designs to protect from breakage of food items such as potato chips. The class can address how packaging becomes the last five seconds of marketing. Package label requirements by the FDA and package design for shelf space should also be addressed.

Newsletter Teaching Aid Remember to subscribe to “Grewal Levy Marketing News” at https://grewallevymarketing.com/.

Published regularly, each newsletter contains a feature article on current topics, for example Lime Rental Scooters, with discussion questions that can be used in class. Each article is tagged so instructors can quickly identify relevant chapters for the newsletter content. The site also features a selection of related articles, links to current videos that can be used in class, as well as links to archived articles sorted by chapter for ease of use in your class.

Chapter Ten: Services: The Intangible Product TOOLS FOR INSTRUCTORS       

Learning Objectives Annotated Chapter Outline with Instructor’s Notes/Teaching Tips Answers to End of Chapter Learning Aids Marketing Application Questions Marketing Digitally Chapter Case Study Video Activities Additional Teaching Tips Newsletter Teaching Aid

Learning Objectives 1. Describe how marketing a service differs from marketing a product and apply the principles of intangibility, inseparability, inconsistency and inventory 2. Outline the four gaps in the Service Gap Model used to understand and manage customer expectations 3. Describe strategies that firms can use to help employees provide better service 4. Identify three service recovery strategies

Annotated Chapter Outline

Instructor’s Notes

Opening Vignette: Cowbell Brewing The intangible nature of services means consumers can’t always see what they are getting before they buy it. By focusing on a well-designed,

Per chapter introduction: the case study focuses on the success story of Cowbell Brewing – a unique brewery located in a small town with sustainability at the heart of its business.

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Annotated Chapter Outline

Instructor’s Notes

beautiful building, Cowbell Brewing immediately sets the tone for its products and services and adds tangibility to their business. You can’t store a service in inventory so the company designed its venue to be used for conferences, meetings, weddings, and so on. Accommodating bus tours also deals with the perishable nature of their space. Staff are well-trained and video kiosks ensure a consistently great customer service experience to address inconsistency. All these elements helped build a strong reputation for Cowbell Brewing.

Service is any intangible offering that involves a deed, performance, or effort that cannot be physically possessed.

In a service economy, firms compete on how well they provide service to their customers.

Ask students: Describe your last outstanding and horrible customer service experiences. How did it affect your attitude toward the firm? How did it affect your purchase behaviour?

Customer service refers to the human or mechanical activities firms undertake to help satisfy their customers’ needs and wants.

The Service Product Continuum Companies run a continuum from a pure service to a pure product.

Importance of Services Increasing service orientations in developed economies, and the decline of manufacturing, has occurred because 1. Production is cheaper elsewhere.

2. Household maintenance activities are more specialized.

3. People place a high value on convenience and leisure.

According to Theodore Levitt, all products are services. Ask students: What does this statement mean? When you purchase products, do you also purchase the services associated with the product?

Like what?

Remind students about how environments influence marketing. As economic, technological, and sociocultural environments change, so do demands for services.

Group activity: Examine some key changes in each of these environments that have led to greater demands for service. Some potential responses include automation, women in the workplace, new trade realities, or shipping and transportation improvements.

LO1: Services Marketing Differs from Product Marketing Unlike marketing a product, services are intangible, inseparable from their providers, inconsistent and cannot be held in inventory.

If you wish to shorten this presentation, simply review the differences between product and service marketing as noted in Exhibit 10.2. The content that follows sets up the longer discussion.

Intangibility: Services Marketing Is Intangible.

Consumers use cues to judge the service quality of

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Annotated Chapter Outline

Instructor’s Notes

 Services cannot be touched, tasted, or seen like a product.  Marketers must offer cues to help customers experience and perceive the service more positively, such as 1. A good atmosphere in which to experience the service.

2. Symbols and images to promote and sell services.

3. Images that reinforce the benefit or value that a service provides.

dentists, including the quality of the furnishings, whether magazines are current, and diplomas on the wall.

Inseparability: Production and Consumption Are Inseparable.  Unlike products, services are consumed at the moment they are produced.  Consumers cannot test a service; so many providers offer warranties or guarantees to reduce their risk.

When staying at a hotel, you can’t test it out before you stay. Some hotels offer satisfaction guarantees to lower risk.

Inconsistency: Services Are Variable.  Humans provide services, so variability is inevitable.  To reduce inconsistency, firms can 1. Conduct extensive training of employees.

2. Micromarket.

3. Automate services.

4. Employ the Internet to reduce both online and in-store sale variability.

Many students work in service professions.

Inventory: Services Are Perishable.  They cannot be stored for future use.  This aspect poses significant challenges for marketers.

The services offered by airlines, restaurants and hotels are perishable, because as soon as the plane/ship departs, the meal is eaten, or the guest leaves the hotel, there is no possibility of changing.

Services can’t be stored in inventory for future use.

Unsold seats or rooms are lost revenue.

LO2: Providing Great Service: The Gaps Model

Exhibit 10.3 sets up the discussion that follows and can be used as the basis for a shorter discussion.

Group activity: Think about the cues you use to assess the quality of a service. Choose a particular service (e.g., haircut, auto repair, medical care, insurance) and list several cues the provider could use to indicate quality.

Ask students what other kinds of services can they not test before? Some of them might say delivery while others might say having a root canal at the dentist.

Ask students: How have your employers attempted to reduce service variability? Do these programs work? What else could your employer do to reduce inconsistency?

In many industries, consumers have taken roles in the final production process; ATMs, self-service gas stations, and self-service restaurants all shift labour to the consumer, and yet many consumers consider these technologies actually improve customer service. Technology can reduce inconsistency of service delivery.

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Annotated Chapter Outline

Instructor’s Notes

Define the Knowledge Gap.  The knowledge gap reflects the difference between customers’ expectations and the firm’s perceptions of those expectations.  To understand consumer expectations, firms must recognize that expectations 1. Are based on knowledge and experience.

2. Vary according to the type of service.

3. Vary depending on the situation.

Many doctors believe they should be evaluated on the basis of their credentials and find consumers’ interest in wait times, friendliness of staff, and waiting room décor frustrating.

Evaluate Service Quality  Customers often have trouble determining how well a service meets or exceed their expectations.  The building blocks of service quality are 1. Reliability 2. Responsiveness 3. Assurance 4. Empathy 5. Tangibles

Ask students: What are your expectations of the service provided by these two businesses. Will there be price differences? In what circumstances would you stay at each property?

Use Marketing Research to Understand Customers.  Research provides a means to understand consumers’ service expectations and service quality perceptions

Consumers often have a range of acceptable outcomes. Discuss the example of a hotel room: You prefer a king bed but will accept two queen beds; you will not, however, accept a room without towels or a lumpy mattress. Therefore, you have defined your zone of tolerance for hotels.

Ask students: What can doctors do to close this knowledge gap?

Higher education often gets accused of being customer unfriendly. How can a university close the knowledge gap to improve service quality?

 Research can take several forms: 1. Voice of the customer (VCO) programs collect customer inputs and integrates them into managerial decisions.

2. The zone of tolerance defines the area between customers’ desired service and the

Class activity. Tell students: Assume you are expecting an important package from UPS. A delivery attempt was made, but you didn't hear the doorbell, and missed it. You call the customer service line and they tell you not to worry, and that one of your options is to pick up the package at the terminal that evening. You tell them that you need the package before noon. So, they arrange for you to meet the delivery truck close to your house. You are delighted when you spot the clean brown UPS truck exactly where it is supposed to be. The friendly driver greets you by name, gets your package and you are on your way.

Ask the students: Which of the service building blocks of customer service applies to each aspect of this scenario?

Class exercise: Have students evaluate the zone of tolerance for the food service options on campus.

This exercise forces students to think about the five service quality dimensions. It will also reinforce the idea that if a firm is above the zone, particularly on

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Instructor’s Notes

minimum level of acceptable service.

an unimportant dimension, they are probably spending too much. At the same time, if it is below the zone, its service is substandard. Being substandard on an important dimension is potentially a devastating problem.

Apple’s Genius Bar

Ask students – what are your expectations when you buy a computer? How can they be exceeded?

Students will mention their basic expectations in terms of fast performance and reliability. It might be challenging for them to figure out how to make it better.

LO3: The Standards Gap: Setting Service Standards Strategies for Providing Better Service The Standards Gap dictates service standards.

To achieve their service goals through training, firms must set specific, measurable goals based on customers’ expectations and involve employees in setting goals. If managers display a commitment to service quality, they can demand the same attitudes from everyone in the organization.

Quality service requires constant investments in training and monitoring. Similar to any other strategic element, service quality flows from the top down. Rewards and incentives must be in place to support service quality commitments.

The Delivery Gap Indicates How to Deliver Service Quality.

Empowerment means allowing service employees to make decisions about service provision.

Frontline employees must be able to solve customer problems.

Provide support and incentives 1. Managers and coworkers should provide emotional support to service providers.

2. Service providers require instrumental support, the systems and equipment necessary to deliver service properly.

3. Managers must be consistent throughout the organization.

4. Reward employees for excellent service.

If the firm has just a paper commitment to service quality, it will not happen. Systems must support the service providers and allow them to do their job and exceed customer expectations.

Technology has changed the way firms do business with other businesses and customers.

Ask students: What types of incentives work best to make service employees buy in to their firm’s service standards?

Ask students: The last time you returned something to a store, did the person waiting on you process the return, or did he or she need to get a manager’s approval? Which do you prefer?

Ask students: What types of incentives do you believe would best motivate UPS delivery drivers?

Of course they will say money. This could lead to an interesting discussion about how intrinsic rewards like recognition plaques can mean as much or more than money.

Technology has become an increasingly important method for facilitating the delivery of services.

RFIDs (radio frequency identification devices) are

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Annotated Chapter Outline

Instructor’s Notes tiny computer chips that automatically transmit to a special scanner all the information about a container’s contents or individual products.

Another way to use technology in the service delivery process is with a retail store assistant (RSA). An RSA can be a kiosk or a device attached to the customer’s shopping cart. Instead of bringing a shopping list to the store, a customer can swipe a loyalty card or enter a phone number at an RSA. Any information the customer has entered online from home will show up on the customer’s profile.

Ask Students what new technologies they have seen at retailers?

The Communication Gap Suggests Ways to Communicate the Service Promise.  To manage the communications gap, firms must manage customer expectations.  That means promising only what they can deliver, or perhaps even a little less.

Many people have never stayed in a five-star hotel, but they know what level of service quality they expect. Often, such expectations develop in response to the promises made in promotional materials provided by the firm.

Many firms over promise and under deliver; WestJet Airlines attributes its success to under promising and over delivering instead.

LO4: Service Recovery There are three elements of service recovery: 1. Listen to the Customer 2. Find a Fair Solution 3. Resolve Problems Quickly

This section sets up a more detailed discussion that follows.

1.

Group activity: Think about the last time you called a firm about a service issue. How were you treated? What determined your level of satisfaction with the result?

Listen to the Customer

Sometimes, just having someone who listens and tries to understand the issue is sufficient. According to a recent airline study, if the airline provides a reason for delays, travelers are less annoyed by the service interruption.

2. Find a Fair Solution A. Distributive fairness refers to customers’ perceptions of the benefits they receive

Even if they eventually receive a solution that seems fair, when consumers must work hard to achieve it, their low procedural fairness

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compared with the costs they must expend.

B. Procedural fairness refers to their perceptions of the fairness of the process used to resolve complaints.

perceptions may cause them to believe that they are being punished for receiving bad service.

3. Resolve Problems Quickly A. The longer a resolution takes, the more irritated customers become.

B. With more time, they have more opportunities to tell others about the problem.

Ask students: How can service firms enhance both distributive and procedural fairness simultaneously? By establishing firm policies, such as the “Customer Bill of Rights” adopted by Jet Blue.(http://www.jetblue.com/about/ourcompany /promise/index.html) This statement details what type of service the firm should provide as well as the remedies that will be offered in case of service failure. This statement allows consumers to understand how and when they will be compensated for service failures.

By compounding a service failure with long delays in correcting it, the firm creates a hostile customer.

Remind students about the strong influence of negative word of mouth.

Marketing Applications 1. Those companies from which you purchase products and services are not pure sellers of services, nor are they pure sellers of products. What services does a department store provide? What goods does a dentist provide?

Instructor’s Notes: The service–product continuum concept discussed in this chapter notes that a company can be service dominant, product dominant, or somewhere in between. In addressing where department stores and dentists fall on the continuum, students enhance their understanding of how businesses provide both elements.

Example answers: A department store provides services such as offering many different products from different manufacturers together in one store, which enhances the shopping convenience for the consumer, and providing customer assistance in response to questions about sizes, return policies, stock levels, and the location of particular products. A dentist provides products such as fillings for cavities and free toothbrushes and floss.

2. You have been sitting in the waiting room of your doctor’s office for an hour. With the knowledge that products are different than services, develop a list of things the office manager could do to improve the overall service delivery. Consider how the office might overcome problems

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associated with the tangibility, separability, consistency, and inventory issues associated with services.

Instructor’s Notes: Providing great service is not easy, so companies must make diligent efforts to analyze their service process closely to ensure all aspects work together to provide a positive customer experience.

Example answers: The office manager could provide a television for patients to watch while waiting; offer refreshments such as water, juice, coffee, or tea; have a nurse practitioner meet with waiting patients to get preliminary information; and make the waiting room comfortable and inviting by providing soft reclining chairs and decorating it with nice pictures, plants, and perhaps an aquarium. Specifically, the office might overcome some of the problems associated with marketing a service as follows:  Intangibility: Communicate service quality, which cannot be touched, tasted, or seen, by posting the doctor’s qualifications or diplomas.  Inseparability: Involve patients in determining their own course of treatment.  Inconsistency/Variability: Train receptionists, nurses, and doctors to greet each patient and establish a high level of standardized care protocols.  Inventory/Perishability: Match patients’ demands for convenient office hours and appointments with a sufficient supply of personnel on staff during those times.

3. You have conducted a zone of tolerance analysis for your local pizza restaurant. You find that the length and width of the reliability and responsiveness boxes are much greater than those of the other three service quality dimensions. You also find that the dry cleaner is positioned above the zone box on reliability but below the box on responsiveness. What should you tell the manager of the dry cleaner to do?

Instructor’s Notes: Determining customers’ perceptions of a service’s ability to meet or exceed their expectations is difficult, but the zone of tolerance offers an effective method. For the pizza restaurant, students should examine the company’s performance relative to customers’ expectations regarding the five service quality factors.

Example answers: The greater length of the reliability and responsiveness factors means that customers expect more of these factors but will accept a fairly low level. Their greater width also suggests customers consider reliability and responsiveness more important. In terms of reliability, the pizza restaurant is surpassing customers’ expectations by performing its service dependably and accurately—perhaps too much so.

However, it is not meeting customers’ responsiveness expectations, such as prompt service or willingness to help. Therefore, the pizza restaurant should spend more energy on prompt, friendly, helpful customer service.

4. Assume you were hired by Paradise Hotel to assess their service quality. How would you go about undertaking this project?

Instructor’s Notes: How might this hotel get customer feedback about its service quality? A welldesigned system prompts a high customer response rate without making customers feel uncomfortable about giving the feedback.

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Example answers: Service quality is the customers’ perceptions of how well a service meets or exceeds their expectations.

It is often difficult for customers to evaluate service quality. There are five service dimensions to determine overall service quality: reliability, responsiveness, assurance, empathy, and tangibles.

Many firms use voice-of-customer programs and employ ongoing market research to assess how well they are meeting their customers’ expectations. Firms also evaluate the zone of tolerance which refers to the area between customers’ expectations regarding their desired service and the minimum level of acceptable service.

Assessing a hotel’s service quality would involve, market research, including: focus groups, surveys, and observations to measure the five service dimensions. A zone of tolerance analysis could also be conducted with customers to determine if customers’ service quality needs are being met.

5. What should a restaurant server do who is faced with an irate customer who has received undercooked food after a long wait? How can they avoid a service failure by being empowered?

What should they do?

Instructor’s Notes: To deliver consistently high-quality service, firms must set specific, measurable goals based on customers’ expectations. To ensure these goals are met, they must train their employees to execute properly. This question prompts students to consider the need for employees to understand the restaurant’s service standards and receive proper training to help them deal with situations like this one.

Example answers: Despite a firm’s best efforts, sometimes service providers don’t meet customer expectations. When this happens, the firm must make amends with the customer and learn from the experience. Service recovery can help increase satisfaction, purchase intentions and word of mouth. Employees who are empowered can make decisions about how service is provided to customers.

If the server in this situation is empowered by his/her manager, he could do a variety of things to recover from this service failure. Examples include: offering the customer the meal for free or at a discount, offer complementary dessert, or offer a discount on future meals at the restaurant.

6. Describe a specific situation in which a service provider could have avoided a service failure if he or she had been empowered by an employer to do so. What should that person have done?

Instructor’s Notes: Empowerment in this case means allowing employees to decide how to provide service to customers. Students must consider what types of situations might warrant empowerment and what actions could result.

Example answers: A customer in a health club complains about how crowded the last yoga class was, to the point that she did not receive the benefit she expected from the exercise. If the health club empowered its employees, the person at the front desk who receives the complaint could apologize for the crowded class and offer the customer a free yoga session in which her spot is guaranteed.

7. What types of support and incentives could your university provide advisors to help make them more attentive to students’ needs?

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Instructor’s Notes: This question prompts students to recall that universities provide services too and that advisors, as service providers, often face the difficult task of dealing with unhappy students.

Therefore, they must empathize with advisors and consider what possible supports and incentives could make their lives easier.

Example answers: First, the university could provide emotional support to advisors who have to deal with difficult and sometimes unruly students. Second, the university should provide appropriate computer systems and an atmosphere that makes advisors feel well-equipped in comfortable settings. Third, the university could limit the number of students assigned to each advisor, so that the advisor does not feel overwhelmed.

Fourth, it should provide a mechanism to reward advisors when students provide positive feedback about their performance.

8. What mobile apps do you use that help facilitate your transactions with a specific retailer or service provider? Would you rather use the apps or engage in a face-to-face relationship with a person? How, if at all, would your parents’ answers to these two questions differ?

Instructor’s Notes: Apps have become an increasingly important means of service delivery. Most students probably rely more heavily on apps, whereas their parents might consider face-to-face interactions important for key personal transactions. Student’s answers will vary. Many students probably use the Internet, smart phones, and mobile applications to facilitate their transactions with a service provider. Some students might prefer face-to-face interactions. Ask students if the product category matters to them when using technology.

Example answers: I use the Internet and telephone to facilitate my transactions with my bank. I access my bank account and make simple requests of the customer service department via an app provided by my bank. When I need to deal with a more complex transaction, I use the telephone and the bank’s automated phone routing system to find the right customer service agent who can address my need. I prefer to use these technologies rather interact face-to-face, primarily because I don’t want to take time out of my busy schedule to go to the bank and see someone in person. However, my parents probably would be more inclined to use the telephone or face-to-face interactions and use the Internet only to a very limited extent, because of their lack of trust in its security and privacy.

9. A local health club is running a promotional campaign that promises you can lose an inch a month off your waist if you join the club and follow its program. How might this claim cause a communications gap? What should the club do to avoid a service failure?

Instructor’s Notes: In examining how a health club’s promotional claim creates a difference between the service promised and the actual service delivered, students should recognize the difficultly of conveying a single message that encompasses all customers’ expectations.

Example answers: This claim might create unrealistic expectations in the minds of consumers. Take, for example, a woman who only needs to lose 5–10 lbs to reach her ideal weight. There is no way the club can guarantee this woman will continue to lose an inch around her waist after the first month or so—at least not without causing health problems! In addition, much of the success of the claim depends not on the health club but on the customer’s dedication to the exercise program. In either case, customers’ expectations

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become unrealistic, and a communication gap occurs. The club could avoid such a service failure by changing the wording of the promotion to set more realistic expectations, perhaps by focusing on helping customers reach their ideal body weight rather than some arbitrary waistline measurement.

10. You are hired by a career consulting firm for new college graduates that promises to market them to high-paying employers. Job seekers pay a fee for the service, plus a finder’s fee if the consultant places them in a position. The firm aggressively markets its services and has achieved a large client base. However, you soon learn that the consultant takes submitted resumes and posts them to a variety of online job search engines, without ever contacting employers on its clients’ behalf. The CEO, a recent college graduate, tells you that the firm never actually promises it will contact potential employers but only that it has access to them. What do you think of the career consulting firm’s practices?

Instructor’s Notes: This scenario forces student to question to what degree the career consulting firm’s practices might violate their ethical standards. Using the ethical decision-making framework, students should evaluate these practices to determine an appropriate course of action.

Example answers: In applying the ethical decision-making framework:  “Have you thought broadly of any ethical issues associated with the decision in question?” I have thought broadly about the ethical issues, and I have concerns because the consulting firm is less than forthcoming with clients about the amount of effort expended on their behalf and gives the false impression that it actively markets each client to prospective employers.  “Have you involved as many possible people who might have a right to offer input into or have actual involvement in making this decision and action plan?” The clients themselves have not been involved at all, and they are likely the most important stakeholders to keep in mind, because without them the firm would have no business.  “Does this decision respect the rights and dignity of the stakeholders?” The clients believe that the firm is being honest and aboveboard about the amount of effort being put forth on their behalf, and they are not aware that the consulting firm is merely doing what they could do themselves—without any of the fees charged by the firm!  “Does this decision produce the most good and the least harm to the relevant stakeholders?” The clients are not getting the type of service they think they are. They could be relying on the consulting firm to find them employment, which may never happen because of the lack of marketing actually being done on the clients’ behalf.  “Does this decision uphold relevant conventional moral rules?” It likely violates the community’s standard for business disclosures and transparency. If the consulting firm portrays itself as marketing each client and then doesn’t, the community likely would feel outrage toward the firm and its practices.  “Can you live with this decision alternative?” If the decision is to have the firm change its practices and actively market clients, as it implies in its marketing communications, then it is a decision I could live with as a client and an employee.

Based on my answers, I believe the practices of the career consulting firm are unethical and dishonest.

To charge fees for something that the clients can do themselves is disgraceful. The consulting firm should come clean about its practices and rectify the situation for clients who might have been harmed by either refunding their money or actually providing the service it said it would for free. I would give up

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my job, because I do not want to be associated with such unethical practices and contact the Better Business Bureau to report the firm.

Marketing Digitally 1. What services does WestJet (www.westjet.com) offer? Compare its services to those offered by Air Canada (www.aircanada.ca) using the five service quality dimensions (tangibility, responsiveness, reliability, assurance, and empathy).

Instructor’s Notes: This exercise reinforces the concept of evaluating service providers on the basis of the five service quality dimensions.

Example answers: WestJet offers services that allow consumers to book their air travel online, track flight status, observe which cities the company operates in, change reservations, reserve a hotel or car, establish their expectations about what will happen at the airport, and consider vacation packages. Air Canada offers the same services but also provides a wide range of additional services that a small, low-cost carrier like WestJet cannot, such as a private airport club in which some passengers may wait between flights, a more comprehensive rewards program that offers travel on affiliated airlines, and cargo and business services.

Tangibility

WestJet Modern, streamlined design is intuitive and pleasing to the eye.

Responsiveness Few customer service agents to respond to customer issues and slow response time on customer requests sent through the website.

Reliability Offers basic travel service for costconscious travelers.

Assurance Empathy

Informal staff who is more relaxed in their approach.

More focused on individual customers.

Air Canada Same basic color scheme that AC has always used, with a lot of design clutter leading to confusion for the customer.

Many customer service agents available to talk to customers as the need arise.

Offers more features and options for travelers to tailor their travel experience to suit their needs.

Professional staff who maintain consistent service standards.

Less concerned about individual customers and more interested in following established protocols.

2. Evaluate the ease with which you can make hotel reservations using Fairmont’s (www.fairmont.com) Internet reservation system. Check out the hotel’s privacy policy. Are you comfortable with their use of “cookies” to identify visitors when they return to the site?

Instructor’s Notes: Students must consider why Fairmont would want to use “cookies” on its website. In exploring possible reasons, students should address who visits the site, what fears those consumers might have.

Example answers: 1-157

The online hotel reservation system seems very intuitive and easy to use, with multiple options for hotel locations near common points of interest.

The hotel’s privacy policy stresses the importance of privacy and its commitment to adopting high standards to protect personal information. The privacy policy clearly states that “cookies” are used to help customize the online experience. For example, they can help to recognize clients when they log on, welcome a returning visitor back to the site and provide a high level of service by remembering visitor preferences by preloading information stored in the guest’s profile.

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End-of-Chapter Case: Change or Die – A Reset for Food Service Providers 1. Apply the Gaps Model to show how these food service providers can address the Service Standards Gap. The Gaps Model has four gaps: knowledge, standards, delivery, and communications. Food service providers use the standards gap by providing the information needed to set appropriate service standards. For example, how many times should the phone be allowed to ring before being answered, how long should a customer wait to be seated, what is an appropriate amount of time to hold a reservation before cancelling it and giving the table to customers who are waiting. Training of all new staff and memory joggers for exiting staff can help to ensure that everyone is aware of the level of service expected by the provider and its customers.

2. With what service quality dimensions would be the most important for these companies?

Food service providers touch on virtually all service quality dimensions: reliability, responsiveness, assurance, empathy, and tangibles. Reliability and responsiveness may be the most important for many consumers. Tangibles, or the appearance of the physical location, equipment used, and even “uniforms” or dress standards for personnel will likely be an important factor as well. Empathy and assurance are key once customers are dealing with the food service providers, especially in the situation where service recovery becomes an issue.

Video Activities Video: FedEx: Excellence in Customer Service Core Concepts Covered: Gaps Model (several core issues addressed, not explicitly mentioned), customer service Video Summary: Delivering high-quality service is a top priority at FedEx. The company seeks to offer excellent, consistent service across all communication channels and through the entire customer experience. This philosophy permeates the entire organization. Attention to service quality helps to generate customer loyalty and repeat business, which is one key to FedEx’s success.

Discussion Question: The video states that FedEx knows how important it is to understand customers’ expectations. Which gap in the Gaps Model is FedEx addressing by learning about customer expectations, and what are some key customer expectations FedEx has designed its service to address?

Brief Answer: Understanding customer expectations helps to close the Knowledge gap. The video mentions that customers expect packages to arrive on time in good condition, and that they also want to have control over their order.

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Discussion Question: What are some steps FedEx takes to close the Delivery gap in the Gaps model?

Brief Answer: FedEx trains its employees well, provides technology to aid customers, and empowers its employees to take action to solve customers’ problems.

Additional Teaching Tips In this chapter, students learn the difference between marketing a product vs. marketing a service.

Students find that since a service can’t be “seen” or measured with a quantifiable outcome, that the marketing strategy must be different in marketing services. The building blocks of service quality is the foundation of the chapter which then dovetails into how to improve customer service through the methods to reduce delivery gaps.

The Ritz Carlton case study is an excellent exercise for this chapter and is strongly recommended to allow students to apply the five service quality areas. A good way to do this is to divide the class into 4 or 5 groups and have them tackle the case. Then open classroom discussion by dialogue in comparing/contrasting the responses from each of the groups. Of course, a good understanding of the five service qualities is needed before assigning the case. One good way to do this after discussion/lecture on the topic is to divide the class into groups. Have each group develop a role play skit on (1) good customer service incorporating the five service quality areas and also to prepare an alternate skit on (2) bad customer service.

Students have fun with the skit exercise and it often brings out some humorous acting moments.

Instructors will want to assign different topics (popular food chain, hotel, college book store, retail chain, etc.) to each group to get them focused on the skit and not thinking up “what” to complete the skit on. Each group presents the “good” skit first in which the audience (the rest of the class) takes notes and discussion takes place on how the five service qualities were present. The group then performs their “bad service skit” in which discussion follows on how to incorporate good service techniques and improve the service gaps.

On-line teaching tip: Instructors can have students complete this same exercise by having students record individual skits/scenarios and uploading them to the online platform. Other learners in the online environment can then either post their analysis on the five service qualities and their suggestions on improving the delivery gaps or write a paper outlining the same concepts (meanwhile the other learners are also preparing their own skits). Instructors may want to pair students on the responses in the online forum. For fun, instructors may want to have the class use online voting to vote on the best “performance.”

Newsletter Teaching Aid Remember to subscribe to “Grewal Levy Marketing News” at https://grewallevymarketing.com/.

Published regularly, each newsletter contains a feature article on current topics, for example Lime Rental Scooters, with discussion questions that can be used in class. Each article is tagged so instructors can quickly identify relevant chapters for the newsletter content. The site also features a selection of

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related articles, links to current videos that can be used in class, as well as links to archived articles sorted by chapter for ease of use in your class.

Chapter Eleven: Pricing Concepts and Strategies: Establishing Value TOOLS FOR INSTRUCTORS       

Learning Objectives Annotated Chapter Outline with Instructor’s Notes/Teaching Tips Answers to End of Chapter Learning Aids Marketing Application Questions Marketing Digitally Chapter Case Study Video Activities Additional Teaching Tips Newsletter Teaching Aid

Learning Objectives 1. Explain what price is and its importance in establishing value in marketing 2. Illustrate how the 5Cs – company objectives, customers, costs, competition, and channel members – influence pricing decisions 3. Understand the considerations for setting prices: three pricing methods (e.g. cost-based pricing, competition-based pricing, value-based pricing); and various strategies (e.g. EDLP, high/low, and new product pricing) used in marketing 4. Identify pricing tactics target to channel members and consumers 5. Summarize the legal and ethical issues involved in pricing

Annotated Chapter Outlines

Instructor’s Notes

Opening Vignette: Walt Disney Walt Disney is renowned for the experiences consumers have at its theme parks. Its prices are high but send a message of quality to consumers.

It uses a combination of pricing strategies and tactics including price skimming, dynamic pricing, and coupons. Its newest attraction, Star Wars: Galactic Starcruiser hotel uses a skimming approach with prices at $749 per person per night.

Ask students Have you been to Disneyland? Were you willing to pay full price? Did you consider planning your trip around off peak times?

LO1: The Importance of Pricing Price refers to the overall sacrifice a consumer will

Consumers recognize price as a signal. If a marketer sets a price too high or too low, the

Ask students why they will pay the prices they mention? It really comes down to the benefits and value they place on a theme park experience.

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Instructor’s Notes

make to acquire a specific product or service. It is the only marketing mix element that directly generates revenue. Because it is the most challenging of the 4Ps to manage, price rarely gets emphasized. In addition, many managers maintain an overly simplistic view of price.

wrong message gets sent to the market.

Remind students that price refers not just to money but also other costs such as time.

Ask students to provide an example of a purchase where they did not consider price. They will probably be hard-pressed to come up with anything, thus making the point.

LO2: The Five Cs of Pricing Company Objectives Customers Costs Competition Channel Members

Exhibit 11.1 introduces the 5Cs. The discussion that follows examines each C in detail.

1st C: Company Objectives A profit orientation means the firm focuses on target profit pricing, maximizing profits, or target return pricing.  Target profit pricing applies when the firm has a particular profit goal.  Profit maximizing relies primarily on a mathematical model from economic theory to predict sales and profits.  Target return pricing is designed to produce a specific return on investment, usually expressed as a percentage of sales.

Each firm has a specific orientation in the marketplace that dominates its pricing strategy.

A sales-oriented firm believes increasing sales helps the firm more than increasing profits.  These firms believe overall market share better reflects their success than dollar sales.  Adopting this orientation does not necessarily mean setting low prices.

Sales: Focus on increasing sales. More concerned with overall market share. Does not always imply low setting low prices

With a competitor orientation, firms measure themselves primarily in comparison with the competition.  Competitive parity means setting prices that

Competitor: This strategy is particularly common among smaller firms that lack knowledge or experience in setting prices. Non-market leader firms also use it to signal they are similar to the

Profit: firms do not use value as a consideration but rather focus on generating a set level of profit from each sale.

Ask students: What are the issues with a profit orientation?

Answer: The key issue is that it does not take into consideration the value customers have for the product. This may lead to prices being set below and optimal level.

Ask Students: Why would firms adopt this orientation? Many first adopt this orientation to establish a position in the market by getting the most price sensitive consumers to change brands.

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Annotated Chapter Outlines

Instructor’s Notes

are similar to those of major competitors.  Status quo prices change only to meet changes in the prices of the competition.

market leader.

A customer orientation explicitly invokes the concept of value.  Perhaps the most difficult pricing strategy.  Also the most potentially rewarding.

Customer: Focus on customer expectations by matching prices to customer expectations A recent study indicates that a variety of retailers sell one-carat diamonds, but consumers pay vastly different prices at Costco versus Tiffany’s. The diamonds are a commodity; they must meet the same standards and are rated the same.

Ask students: What are the benefits of a competitor strategy? For example, can a new hotel chain indicate its level of service through price?

The answer is yes. In many instances new brands will set price equal to the competitors they wish to be compared with knowing that consumers use reference prices to indicate quality.

Ask students: Why would a consumer spend thousands more to buy a gem at Tiffany’s?

2nd C: Customers

For pricing, elasticity is a crucial concept.

Ask students: In what circumstances will raising the price NOT result in an increase in revenue? In what circumstances will raising the price result in an increase in revenue?

In elastic markets, depending on the level of elasticity, a price increase can increase revenues, but if the increase drives consumers out of the market, demand falls, and a loss of revenue may result.

In contrast, in inelastic markets, a price increase almost always increases revenues, because the relationship between price and demand is weak.

Pharmaceuticals provide a good example; even if the price of a cancer drug increases, consumers still demand it, so the firm generates more revenue.

Demand curves and pricing 1. Demand curves show how many units consumers will demand during a specific period of time at different prices.

2. The horizontal axis measures the quantity demanded at a specific price.

3. The vertical axis displays the price options.

This information should be a review from students’ micro-economics coursework, so they should be familiar with the concept, but this discussion applies it in a slightly different way. Knowing demand curve enables to see relationship between price and demand.

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Annotated Chapter Outlines

Instructor’s Notes

4. A demand curve enables firms to examine different prices relative to demand and its overall objectives.

5. Although they usually appear downward sloping, demand curves may take many different shapes.

6. Consumers purchase prestige items for their status rather than their functionality, so demand increases while price increases to a point.

Ask students to name a prestige product. Why do they think people are willing to pay a higher price?

The price elasticity of demand refers to how changes in price affect the quantity of the product demanded.

1. In general, consumers are less sensitive to changes in price for necessary items.

2. A market is elastic (price sensitive) when the price elasticity is <1; that is, a 1% decrease in price produces more than a 1% increase in the quantity sold.

3. A market is inelastic (price insensitive) when a 1% decrease in price results in less than a 1% increase in quantity sold.

4. Consumers tend to be more sensitive to price increases than price decreases.

5. Price elasticity changes at different points on the demand curve.

Ask students: In what circumstances will raising the price NOT result in an increase in revenue? In what circumstances will raising the price result in an increase in revenue?

Various factors influence the price elasticity of demand 1. As people’s income increases, their spending behaviour changes, known as the income effect.

2. When consumers can substitute other products for the focal brand, elasticity increases because of the substitution effect.

3. Cross-price elasticity represents the percentage change in the demand for Product A compared with the percentage price change for Product B.

Discuss the case of Pete and how the income and substitution effects alter his buying behaviour. As a college student, he prefers a less expensive substitute deodorant, because it demands less of his total income.

3rd C: Costs  Variable costs, primarily labour and materials, vary with product volume. For services, variable

No discussion of price would be complete without a discussion of cost. The price must at least cover the cost of the item. However, as students may have

For example, why will someone pay a higher price for a BMW than a Kia? They will mention product quality but also branding issues including the esteem offered to the owner from the BMW.

In elastic markets, depending on the level of elasticity, a price increase can increase revenues, but if the increase drives consumers out of the market, demand falls, and a loss of revenue may result.

In contrast, in inelastic markets, a price increase almost always increases revenues, because the relationship between price and demand is weak.

Pharmaceuticals provide a good example; even if the price of a cancer drug increases, consumers still demand it, so the firm generates more revenue.

Ask students: When Pete graduates and gets a high-paying job, will he worry as much about the cost of deodorant? Do you expect him to switch back to Old Spice? Why or why not?

Group activity: Brainstorm a list of other products that exhibit cross-price elasticity.

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costs are more complex.  Fixed costs remain essentially the same, regardless of any changes in volume.  Total costs are the sum of the variable and fixed costs.

learned in their finance courses, understanding costs is rarely easy.

Break-even analyses and decision making o Central to a break-even analysis is the determination of the break-even point, at which the units sold generate just enough revenue to equal total costs, and profits are zero. o The contribution per unit refers to the price less the variable cost per unit. o The break-even point equals the fixed costs divided by the contribution per unit. o The target profit point provides an alternative to the break-even point.

Although profit, which represents the difference between the total cost and the total revenue (total revenue or sales = selling price of each unit sold number of units sold), can indicate how much money the firm is making or losing at a single period of time, it cannot tell managers how many units a firm must produce and sell before it stops losing money and at least breaks even. Any point above the break-even point is profit. Some firms also use a target profit point to identify when sales create a specified target profit rather than zero profit.

4th C: Competition  In an oligopolistic competitive market, only a few firms dominate, and they change their prices in reaction to competition to avoid upsetting an otherwise stable competitive environment.  In a monopoly, only one firm provide the product or service resulting in less price competition.  Monopolistic competition exists when many firms compete for customers in a given market but differentiate their products.  In a pure competition scenario, different companies that consumers perceive as substitutes sell commodity products, so price usually depends on the laws of supply and demand.

Group activity: List a product or service market that demonstrates each type of competition.

Monopoly: Hydroelectric power in most provinces, Microsoft operating system and Office suite.

Monopolisitic: many firms competing for customers, e.g. toys Oligopolistic: Cable TV firms such as Rogers or Shaw Pure: Steel, grain, dairy, products sold via marketing boards

Price wars occur when two or more firms compete primarily by lowering their prices.

5th C: Channel Members  Manufacturers, wholesalers, and retailers have different perspectives when it comes to pricing strategies.  Gray markets employ irregular but not necessarily illegal methods by legally

Ask students: Have you ever bought books marked “Instructor Copy: Not for Resale” or “International Student Edition”? Is the bookstore engaging in unethical behaviour? Whom does this grey market benefit? Whom does it hurt?

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circumventing authorized distribution channels to sell goods at prices lower than those intended by the manufacturer.

Answer: The purchase of grey market textbooks hurt the publisher and authors. These books do not help recover the costs of all the ancillary packages that are provided to instructors.

LO3: Pricing Methods and Strategies Pricing Methods include: Cost-Based Methods Competitor-Based Methods Value-Based Methods

Note the many factors that go into formulating a pricing strategy. Discuss why some strategies choose not to take into consideration the value that consumers place on an offering. This sets up the content that follows.

Cost-Based Methods Determine Price Through Costs.

A. Cost-based methods do not recognize the role of consumers.

B. Nor do they consider the role of competitors in the marketplace.

These simple methods add a percentage amount to the unit cost to derive the price of the good.

Competitor-Based Methods Set Prices Relative to Competitors’.

A. With this approach, firms hope to influence consumer perceptions of themselves and competitors.

B. When it uses premium pricing, a firm deliberately prices above the level of competing products to appeal to consumers who shop for the best or for whom price does not matter.

Group activity: Recall the example of diamonds of identical quality sold at different prices at Costco and Tiffany’s. List possible reasons someone would pay far more for the same item in different stores.

Would you do so? Why or why not?

Value-Based Methods Focus on Consumers’ Perceptions of Overall Value.

A. Sellers must figure out a way to determine consumers’ value perceptions.

B. The improvement value method estimates how much more (or less) consumers will pay for a product relative to comparable products.

Sellers need to determine consumer value perceptions.

1. Improvement value method – Determine the price that could be charged for a new laptop.

Suppose the key features were – weight of the laptop, processing speed, hard drive capacity, and battery life. The improvement value of the new laptop on these four features can be calculated and the benefits weighted to determine a price.

Ask students: Its simplicity is the major benefit of this method; what are some of the potential problems associated with it?

It does not consider what the value the customer places on the product or service.

2. Cost of ownership method - Installing solar panels on a home is costly, but the savings over the life of the panels make the cost much lower than traditional electric power. Governments offer incentives that lower the initial investment, in

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Instructor’s Notes hopes that more homeowners will switch to using solar power.

Ask students: What incentive would you need to do so? What method could you use to determine it?

Pricing Strategies Strategies Are Specific to the Offering and the Market and include: Everyday Low Pricing (EDLP) High Low Pricing New Product Pricing Strategies Emerging Strategies and Payment Options Everyday Low Pricing (EDLP) 1. Companies stress continuous retail prices at a level somewhere between regular, nonsales prices and deep-discount sale prices.

2. Not every product is lower priced, but on average, the total purchase price will be lower at stores featuring EDLP. High/low pricing relies on sales promotions and temporarily reduces prices to encourage purchases.

Each creates value in its own way. EDLP consumers do not have to wait for sales. Some consumers enjoy the challenge of finding the lowest price and prefer high/low pricing.

New Product Pricing Strategies Price Skimming Appeals to Consumers who Pay to Get an Innovation First.  The product or service must be perceived as breaking new ground and offering new benefits unavailable in alternative products.  Competitors cannot to enter the market easily; otherwise, competition forces lower prices.  A significant potential drawback pertains to the relatively high unit costs often associated with producing small volumes of products.  Consumer discontent can occur if those who purchase early and pay a higher price feel cheated when the prices drop.

Penetration Pricing Builds Sales, Share, and Profit

by Setting a Low Initial Price.

Group activity: Imagine you need an outfit for an upcoming party. You can visit Wal-Mart where you know you will find an EDLP pricing strategy.

However, Holt Renfrew is having its semi-annual sale, during which it drastically marks down its usually high prices. Where do you think you will find a better price? Which offers better value?

Why?

Group activity: Develop a list of products that might use price skimming versus penetration pricing. What qualities should a product possess to use a price skimming strategy? For example, Godiva introduced its hot chocolate mix at a price point that was double that of other hot cocoa mixes. How was it able to achieve success with this product?

Penetration pricing helps firms build market share for their new products quickly, but consumers must be price elastic for this strategy to work.

Ask students: What kind of hot cocoa mix retailer or manufacturer might use this strategy, rather than Godiva’s price skimming approach?

Answer: A mass-market cocoa manufacturer like

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 This strategy discourages competitors from entering the market because of the small profit margin.  Unit costs drop significantly as the accumulated volume sold increases along the experience curve, and then sales grow as costs fall and allow further price reductions.  Firms must have the capacity to satisfy a rapid demand increase.  Lower price does not signal high quality.  If some segments of the market are willing to pay more for the product, this strategy is not ideal.

Hershey’s would use a penetration strategy because it wants to be in every possible retail outlet that sells this category.

Emerging Strategies and Payment Options Instead of raising prices, companies sometimes reduce package sizes, a tactic known as shrinkflation. This was especially evident during the pandemic as food prices soared well above inflation.

Ask students: what products have you noticed have shrunk in size while keeping the price level?

Has shrinkflation had an impact on your purchase behaviour?

Buy Now Pay Later lets consumers spread the cost of a purchase over weeks or months. It was embraced by both consumers and retailers during the pandemic.

Pricing Tactics Tactics aimed at consumers include: Pricing Lining Price Bundling Leader Pricing

Ask students: Do you use Buy Now Pay Later programs? What do you like about them? Do you think they will last after the pandemic ends?

Price Lining When they use price lining, firms establish floor and ceiling prices for a line of similar products and then set price points within that range to represent distinct quality levels:

Ask students to think about a product that offers different levels of quality (e.g. cars, hotels, and clothing). How do firms use price lining to establish differences between the products? Give specific examples.

a. High. b. Medium. c. Low.

Price bundling refers to selling more than one product at a single lower price.

Exhibit 11.8 can be used as the basis for a shortened lecture or to introduce the detail that follows.

Answer: Mercedes Benz offers the C class for the lower, an E class for the medium, and the S class for the highest price lines. Ralph Lauren offers different lines at different price points as well: Chaps, Polo/Ralph Lauren, Ralph Lauren Black Label, and Purple Label.

Price bundling can be used to achieve a variety of objectives.

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Instructor’s Notes Ask students: What are some examples of commonly price bundled items?

Answer: meals at fast-food restaurants, telecommunications services, cruise vacations, grocery store items.

Leader pricing attempts to build store traffic by aggressively pricing a regularly purchased item, often at or just above the store’s costs.

Ask students: What are some examples of leader priced items?

Answer: milk, eggs, coffee, white bread.

Consumer price reductions Markdowns Quantity Discounts Coupons and Rebates

This information can be used as the basis for a shortened lecture or to introduce the content that follows.

1.

Markdowns are reductions of the initial selling price and represent an integral part of high/low pricing.

Ask students: Are markdowns used only to take care of buying mistakes?

Answer: no, sometimes retailers use markdowns to generate traffic into the store.

2.

Quantity discounts In packaging, larger quantities usually mean lower prices per ounce. This per-unit cost encourages consumers to purchase larger quantities each time they buy.

Consumers often enjoy quantity discounts. But remind students that bigger packages do not always mean lower unit prices.

3.

Coupons and rebates a. With coupons, the retailer handles the discount. b. Coupons prompt consumers to try a product, reward loyal customers, or encourage repurchase. c. Rebates return a portion of the purchase price to the buyer. d. Consumers often find rebates frustrating because they must follow specific rules and meet submission deadlines.

Ask students: When did you last use a coupon? For what type of product? How much did you save with the coupon? For what kind of products would you expect to find a coupon or rebate? How do coupons or rebates influence your purchases?

Business-to-business pricing tactics a. Seasonal discounts b. Cash discounts c. Allowances d. Quantity discounts e. Uniform delivered vs. geographic pricing

Exhibit 11.9 provides the basis for a shortened lecture or can be used to introduce the more detailed discussion that follows.

Consumers use coupons to buy cereal, but the high value (generally $.75 or more) of the coupons costs cereal firms a lot of money. When they tried to eliminate coupons and lower the everyday price, consumers wanted the coupons back.

Business-to-business pricing tactics & discount differ significantly from those used in consumer markets.

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Instructor’s Notes Among the most popular are noted in the Exhibit.

a. Seasonal discounts are offered as an additional reduction incentive to retailers to order merchandise in advance of the normal buying season.

Just as consumers do, businesses benefit from seasonal pricing, though with different timing.

Most retailers place their Christmas orders in the summer or early fall. Some vendors give them an extra discount to place orders well in advance of the selling season.

Ask students: Why would a vendor offer a seasonal discount to retailers?

Answer: Because they can plan their production and get the inventory out of their warehouses and into the hands of the retailers.

b. Cash discounts reduce the invoice cost if the buyer pays the invoice prior to the end of the discount period.

Typically, it is expressed in the form of a percentage, such as “3/10, n/30,” or “3 percent, 10 days, net 30,” all of which means the buyer can take a 3 percent discount on the total amount of the invoice if the bill is paid within 10 days of the invoice date; otherwise, the full, or net, amount is due within 30 days. c. Allowances are another pricing tactic that lowers the final cost to channel members.

This includes advertising or listing allowances, offered in return for specific behaviours. An advertising allowance offers a price reduction to channel members if they agree to feature the manufacturer’s product in their advertising and promotional efforts.

d. A quantity discount provides a reduced price according to the amount purchased. The more the buyer purchases, the higher the discount and, of course, the greater the value.

Sellers want outstanding invoices paid quickly and therefore offer discounts to encourage it.

Ask students: Would you pay your rent bill early if you received a monetary incentive to do so?

Lowers the final cost to channel members.

Allowances include advertising, listing, Listing allowances have become quite controversial.

Group activity: Split the class in half. One half represents smaller producers who believe they are being shut out of grocery markets by listing fees, which can reach $10,000 per store or more. The other half represents grocers, who consider listing fees necessary for their survival in the competitive marketplace. Debate both sides of this issue.

Reduced pricing according to the amount that is purchased (e.g. bulk buying) Cumulative discount: uses the amount purchased over a specific period of time.

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Instructor’s Notes Non-cumulative discount: based on the amount purchased in a single order.

Ask students: Why would a vendor offer a quantity discount to a retailer?

Answer: It helps them plan their production schedule. If may stimulate the retailer to buy more merchandise. It actually costs less on a per unit basis to sell more in one order than less, e.g. transportation expense.

e. Pricing tactics specific to shipping include uniform delivered pricing as well as geographic pricing. They represent a major cost for many manufacturers.

With a uniform delivered pricing tactic, the shipper charges one rate, no matter where the buyer is located, which makes things very simple for both the seller and the buyer.

Geographic pricing, however, sets different prices depending on a geographical division of the delivery areas.

LO5: Legal and Ethical Aspects of Pricing 1.

Deceptive and Illegal Price Advertising  Deceptive reference prices advertise inflated or just plain fictitious prices.  Loss leader pricing is similar to leader pricing, but it involves lowering the price below the store’s cost, which is considered to be an unfair competitive practice.  A bait and switch occurs when sellers advertise items for a very low price, then aggressively pressure customers into purchasing a higher-priced model.  Predatory pricing attempts to drive competitors out of business by offering very low prices.

2.

Price Discrimination  Selling the same products to different resellers or consumers at different prices. Not all forms are illegal, e.g. quantity discounts.

Online shoppers know that delivery can add a significant amount onto cost; the same is true for B2B transactions, in which sellers often vary their delivery charge calculations based on where the customer lives.

Uniform: shipper charges one rate no matter where the buyer is located.

Geographic: shipper charges different rates depending on where the buyer is located.

Ask students: Have you ever been involved in a bait and switch?

Ask students: How would a company prove predatory pricing?

They would need records which show intent or have interviews of those who can verify the intent to drive competition out of business. In addition, they must show that the company charged prices lower than its average costs. To date, no one has been able to prove that Wal-Mart engages in predatory pricing.

Price Discrimination - Price discrimination in a B2B setting isn’t always illegal. It is legal to give quantity discounts, to meet competition, and in barter situations. Why are quantity discounts legal? Because it costs less on a per unit basis to sell to customers that buy larger quantities

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Instructor’s Notes

3.

Price Fixing  Horizontal price fixing occurs among competitors that produce and sell competing products but collude to establish a price.  Vertical price fixing occurs among parties at different levels of the same marketing channel.  Whereas horizontal price fixing is clearly illegal under the Sherman Antitrust Act, vertical price fixing falls into a gray area and is not always considered illegal.

Price Fixing - Ask students: How many products list a manufacturer’s suggested retail price? How many indicate a retail price instead?

Note that MSRPs are a form of vertical price fixing; the manufacturer sets the price, and wherever the consumer shops, the price will be the same.

However, some retailers argue that this form of price fixing prevents them from passing lower costs on to consumers.

Marketing Applications 1. You and your two roommates are starting a pet grooming service to help put yourself through college. There are two other well-established pet services in your area. Should you set your price higher or lower than that of the competition? Justify your answer.

Instructor’s Notes: In formulating their responses, students could consider two key factors: value provided and perceptions of quality.

Example answers: Whether we establish a price that is higher or lower than our competition depends on several factors, including the type of services offered, the breadth of that service, our experience, and the perceived value we provide. Because we are simply college students with limited experience in pet grooming, it might be wise to set a price that is just less than that of our competition but not so low that it signals our service quality is poor. Because people look for bargains and college students often can provide value at a lower cost (e.g., house-painting services by college students), consumers should appreciate our efforts to put ourselves through college and be willing to pay a price slightly lower than that of the competition but still sufficient for us to make a reasonable profit.

2. One roommate believes the most important objective in setting prices for the new pet grooming business is to generate a large profit, while keeping an eye on your competitors’ prices; the other roommate believes it is important to maximize sales and set prices according to what your customers expect to pay. Who is right and why?

Instructor’s Notes: This question focuses on pricing strategies with particular objectives, so for the petgrooming business, students must determine whether a profit-oriented or a sales-oriented strategy is more appropriate. To make this determination, students need to decide which orientation allows them to meet their overall objective of helping put themselves through college.

Example answers: Both roommates could be right, depending on how we hope to meet our overall objective. If we chose a profit orientation, we would need to set a particular profit goal, use advanced economic theory to

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create a mathematical model to capture all the factors required to explain and predict sales, and determine a target return price that will produce a specific return on our investment. With a sales orientation, we must focus on fixing prices that might mean lower profits in the beginning, in the hopes of building our reputation and providing sufficient value that customers return, increase our sales, and help us take market share away from the competition. Because we do not have a set profit goal in mind, and because of our lack of overall experience, we should set a lower price and build sales over the course of our college years.

3. Assume you have decided to buy an advertisement in the local newspaper to publicize your new pet grooming service. The cost of the ad is $1000. You have decided to charge $40 for a dog grooming, and you want to make $20 for each dog. How many dogs do you have to groom to break even on the cost of the ad? What is your break-even point if you charge $50 per dog?

Instructor’s Notes: This exercise allows students to gain experience performing break-even analyses, which require three key pieces of information: (1) the price of the service, (2) the fixed costs, and (3) the variable costs. In this scenario, the price is what the groomers charge, the fixed cost is the cost of the newspaper advertisement, and the variable cost is the price minus the profit per dog.

Example answers: According to break-even analysis, the fixed cost is $1000 for the advertisement, the variable cost is $20 per dog groomed, and the initial price is $40. These numbers translate to a contribution per unit of dog grooming of $20. To determine the break-even point, we divide the $1000 fixed cost by the $20 contribution per unit; thus, we need to groom 50 dogs to break even. If we charge $50 per dog, the contribution per unit of dog grooming increases to $30, and when we divide that into the $1000 fixed cost, we find we need to groom 34 dogs to break even.

4. On your weekly grocery shopping trip, you notice that the price of ground beef has gone up 50 cents a kilogram. How will this price increase affect the demand for ground beef, ground turkey, and hamburger buns? Explain your answer in terms of the price elasticity of demand.

Instructor’s Notes: Students should be able to apply the concepts of substitutability, complementarity, and price elasticity to determine the demand for ground turkey and hamburger meat. However, because both hamburger and turkey may be complements of hamburger buns, students cannot state for sure whether demand for buns will change because of the price change of the hamburger meat.

Example answers: Ground beef experiences price elasticity, so consumers likely will react negatively to the price increase and display decreased demand. They should regard ground turkey as a substitute and demand more of it because of the ground beef price increase. However, the change in demand for hamburger buns is unknown, because buns complement either ground beef or ground turkey, so their demand depends on whether consumers replace ground beef with ground turkey on a one-to-one basis or simply forgo making any burgers—regardless of meat type—until the price decreases.

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5. Zinc Energy Resources Co., a new division of a major battery manufacturing company, recently patented a new battery that uses zinc-air technology. Traditional lead-acid batteries typically sold to retailers for $35 each and had set costs, such as the battery housing (the casing that holds the energy-producing elements), that equalled $6 per unit. Their additional per unit costs included $4 in materials and $4 in direct labour costs. The unit costs for the zinc-air battery are slightly higher: The battery housing is $8, materials are $6, and direct labour is $6 per unit. The contribution per unit will be similar to that of the traditional lead-acid model. Retooling the existing factory facilities to manufacture the zinc-air batteries amounts to an additional $5 million in equipment costs (the equipment is expected to last 10 years). Annual fixed costs include sales, marketing, and advertising expenses of $1 million; general and administrative expenses of $1 million; and other fixed costs totalling $2 million. The prevailing interest rate is 5.0%. Ryan Martin, the marketing manager, must first analyze his costs before beginning to develop a pricing strategy for this innovative product. By answering the following questions, Ryan believes he will be armed with the necessary cost information so he can evaluate various pricing strategies. a. What is the total per unit variable cost associated with the new battery? b. What are the total fixed costs for the new battery? c. If the price for the new battery was set to match the price of current batteries, $35, what would the break-even point be? d. Draw a break-even graph that illustrates the nature of the fixed costs, variable costs, total costs, revenue (at the current market price of $35), and break-even point. What can you conclude from this graph?

Instructor’s Notes: This extended exercise challenges students to think through a complete break-even analysis by determining total variable costs, total fixed costs, and product price and using that information to determine the break-even point.

Example answers: a. The total per unit variable cost for the new battery is $20 (= $8 battery housing + $6 materials + $6 direct labour). b. The total fixed cost for the new battery is $9 million (= $5 million facility retooling + $1 million sales/marketing/advertising expenses + $1 million general administrative expenses + $2 million other fixed costs). If the money used to fund the new battery was taken out on loan, with the prevailing 5.0% interest rate, the fixed cost could be higher. c. With a price of $35 per battery, the contribution per unit would be $15 (= $35 price – $20 variable cost). The break-even number of units would then be 600,000 batteries (= $9 million fixed cost/$15 contribution per unit). d. The graph below shows that it will take a minimum of $21 million in revenues to break even with the new battery if the price stays at $35 per unit.

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Break-Even Analysis

Revenue

Revenue & Costs $ Profit

P $21 million

Costs

Variable Costs

Break Even Point

($20/battery)

Fixed Costs Loss Fixed Costs ($9 million)

0

600,000

Units

Break-Even Quantity (600,000 units)

6. How do pricing strategies vary across markets that are characterized by monopolistic, oligopolistic, pure competition and monopoly?

Instructor’s Notes: To respond effectively, students must consider the difference between market types and the effect those differences have on pricing strategies.

Example answers: Pricing strategies vary depending on the type of market, as follows:  Monopoly: Since one firm provides the product or service, it results in less price competition.  Monopolistic: Product differentiation rather than strict pricing competition tends to exist. By successfully positioning its products as different and better, a firm can command a price premium.  Oligopolistic: Prices typically change in reaction to competition to avoid upsetting an otherwise stable competitive environment. A price war can ensue if two or more firms compete primarily by lowering their prices.  Pure competition: Consumers perceive the products from different companies as largely substitutable commodity products, so prices are usually set according to the laws of supply and demand.

7. Many firms operating over the Internet have been experimenting with charging different consumers different prices for the same product or service. Since stores in different parts of the country might have different prices, some websites require postal code information before providing prices. Why would retailers charge different prices in different markets or postal codes?

Is it ethical for retailers to do so? Is it a good business practice?

Instructor’s Notes: This ethical scenario requires students address their degree of comfort with a practice that may represent discrimination based on geography.

Example answers: Retailers might charge different prices in different markets or postal codes to make even more profit.

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However, it only makes ethical sense to charge different prices for products if there is something about the product that makes moving or shipping it to an area more costly. Even in those cases, the product should remain the same price, but the cost of shipping and handling can increase to meet the higher freight charges. Overall though, price discrimination based on location is not smart, because consumers are getting sophisticated enough to comparison shop online and discover such differences, which probably will make them unhappy – possibly so unhappy that they engage in negative word-of-mouth behaviour. After all, there is nothing to stop consumers from entering a false postal code to determine if the prices they are quoted is discriminatory.

8. Some high-fashion retailers, notably H&M and Zara, sell what some call “disposable fashion”— apparel priced so reasonably low that it can be disposed of after just a few wearings. Here is your dilemma: You have an important job interview and need a new suit. You can buy the suit at one of these stores for $129 or at Brooks Brothers for $500. Of course, the Brooks Brothers suit is of higher quality and will therefore last longer. How would you use the two value-based approaches described in this chapter to determine which suit to buy?

Instructor’s Notes: In examining the potential issues related to disposable fashion, students must consider their roles as consumers, the products they want, the price to be paid, and weigh the benefits of each option.

Example answers: The two value-based approaches are improvement value and cost of ownership method. Improvement value represents an estimate of how much more or less consumers are willing to pay for a product relative to other comparable products. If a student is buying a suit, he/she might consider the improvement value of the suit. Would buying a $500.00 suit guarantee that the student might get the job? If so, this might increase the improvement value of the Brooks Brothers suit. Cost of ownership method occurs when consumers are willing to pay more for a particular product because, over its entire lifetime, it will eventually cost less to own than a cheaper alternative. In this example, cost of ownership method might apply to the two suits. For example, the student might purchase the cheaper suit and because it is “disposable fashion” it might not last as long, and the student might have to purchase several suits. On the other hand, if the student invests in the Brooks Brothers suit to begin with, this suit might last longer and the student might save money over time.

9. Imagine you are the product manager for Neutrogena’s sun protection product line and your team developed a new type of sunscreen. Which two B2B pricing tactics would you use to promote it?

Why? Instructor’s Notes: Students must think about the differences between motivating a retailer to buy and promote a product versus what would motivate consumers.

Example answers: Students should discuss at least two of the five B2B pricing tactics covered in the chapter: seasonal discounts, cash discounts, allowances, quantity discounts, and uniform delivered versus zone pricing.

They should provide additional details by explaining why they would use the selected tactics.

For example, students might indicate that they would implement seasonal discounts for the sun protection products by offering retailers additional discounts in the early spring because sunscreen is

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seasonal, and retailers will be looking to increase inventories before summer begins. By offering a discount at this time, retailers are more likely to buy the new product.

Students may also recommend that Neutrogena should offer additional discounts to retailers who pay off their invoices before the end of the sale period. For example, Neutrogena may offer a 5% discount to retailers who pay off the invoice in 15 days. This tactic would further encourage retailers to buy Neutrogena’s sun protection products before the start of summer. It would also ensure that Neutrogena received cash from sales in a timely manner.

Students may also indicate that Neutrogena could pay listing fees to retailers, so the new sunscreen would have better placement on the shelves. For Neutrogena’s new product, it would be beneficial to pay for prominent shelf placement to increase consumer awareness and promote sales.

Students may suggest that Neutrogena offer quantity discounts to stores that purchase large amounts of the new sunscreen. Students should specify whether they would use a cumulative or noncumulative quantity discount, providing support for their selection. For example, because sunscreen is a seasonal product, retailers will try to sell their inventories before the fall. Therefore, a cumulative discount that ends after Labour Day may be appealing to retailers. On the other hand, offering a noncumulative discount may be more beneficial to Neutrogena because it encourages large, infrequent orders, which could save Neutrogena money on processing and shipping merchandise. Finally, students may discuss whether they would use uniform delivered or zone pricing. Neutrogena may use a uniform delivered price to appeal to retailers and simplify order processing. They may implement a zone pricing strategy that would allow them to charge for the actual costs of shipment.

10. Imagine that you are the newly hired brand manager for a restaurant that is about to open. Both the local newspaper and a gourmet food magazine recently ran articles about your new head chef, calling her one of the best young chefs in the country. In response to these positive reviews, the company wants to position its brand as a premium, gourmet restaurant. Your boss asks what price you should charge for the chef's signature filet mignon dish. Other restaurants in the area charge around $40 for their own filet offerings. What steps might you undertake to determine what the new price should be?

Instructor’s Notes: This question asks students to consider the importance of market research in setting prices.

Example answers: The brand manager should conduct focus groups to determine what prices consumers would be willing to pay for the signature filet mignon and what customers feel makes a restaurant a premium, gourmet restaurant. The brand manager could also use Census data to determine the income level surrounding the restaurant to see what people in the surrounding neighborhood can afford.

Marketing Digitally 1. Several different pricing models can be found on the Internet. Each model appeals to different customer groups. Go to www.eBay.com and try to buy this book. What pricing options and prices are available? Do you believe that everyone will choose the least expensive option? Why or why not? Now go to http://www.Amazon.ca. Is there more than one price available for this book? If

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so, what are those prices? If you had to buy another copy of this book, where would you buy it, and why would you buy it there?

Instructor’s Notes: Some students may have purchased this book from one of these sites, but the question asks them to examine the price differences more closely and in an analytical sense Example answers: http://www.eBay.com offers two pricing options, bid and buy now. The current bid for a copy of this book is $20.51. The “buy now” price is $39.99. Not everyone will choose the least expensive option, because some will consider the reputation of the buyer or be worried about the condition of the book (e.g., new or used). Amazon lists a wide variety of prices that refer to both new and used textbooks. The prices range from $54.70 for a new book to $19.99 for a used book sourced from another retailer. I would be more inclined to buy another copy of this textbook from Amazon, because it consistently has the product available, either through its own distribution network or from used dealers, whereas there is less of a guarantee that eBay.com will always have another copy in the condition I want.

2. Prices can vary depending on the market being served. Because Dell sells its computers directly to consumers all around the world, the Dell Web site makes it easy to compare prices for various markets. Go to www.dell.com. Begin on the Dell Canada site and determine the price of a 3000 Series All-in-One desktop computer. Next go to the Dell United Kingdom website and another more country of your choice to find the price of the same computer. (If you need to convert currency, go to www.xe.com.) How does the price of the desktop computer vary? What would account for these differences in price?

Instructor’s Notes: The All-in-One 3000 may no longer be available because, similar to many high-tech firms, Dell frequently updates its product offerings. If the All-in-One 3000 has become obsolete, tell students to use any particular model and compare its pricing across sites.

Example answers: Compared with the price of $749 in the United States, the same desktop cost the equivalent of $1515 in the United Kingdom and $727 in Canada. Some price variation is likely due to protections against exchange rate fluctuations and the price of competitors’ comparable products in the respective markets.

End-of-Chapter Case Study: JS Watch Company A Luxury Company with a Pricing Strategy That Doesn’t Take Itself TooSeriously 1. Discuss which of the 5Cs would have the most impact on how the JS Watch Co. sets prices for its products.

The 5Cs include: Company Objectives, Competition, Customers, Costs, Channel Members. Most of these could be applied but Company Objectives, Competitors, and Customers would have the most impact.

Company Objectives: Profit orientation could be used based on target profit pricing or maximizing profits. Given watches are expensive and some are custom, they are unlikely to use Sales Orientation which focuses on selling high volume. The case mentions that the prices JS Watch set are similar to competitors so students could argue for Competitor Orientation. An equally valid case could be made for

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Customer Orientation since the company is focused on small run, high quality products to satisfy its customers as opposed to mass production for a larger audience.

Competition is likely to be monopolistic competition since there are many watchmakers.

Customers – It would be important to consider customer reaction to price although this is a luxury product and so price would be based on the prestige product demand curve. When it comes to high priced, luxury watches, elasticity of demand would not be as big a factor as for low end watches.

Costs would be very important. Swiss movements and European parts are very expensive. The company needs to cover costs and allow for profit. If prices from suppliers increased, it is highly likely the company would raise their prices to cover the additional costs.

Channel Members would not be a big factor. JS Watch Co is a small company that sells directly from its shop and online only. The only channel members they would deal with are suppliers. If suppliers raise their prices, it could impact the price JS Watch sets for its products.

2.

Explain which factors influencing price elasticity of demand impact its prices.

Income effect is likely to impact prices the most. If consumer incomes dropped dramatically, sales of luxury watches may decrease.

Substitution effect – While consumers can easily buy many other brands of watches and at significantly lower prices than JS Watch charges, luxury watches are not essential products. Whereas consumers may change brands of peanut butter to save money, it is doubtful that people looking to buy an expensive watch will be as price sensitive.

Cross price elasticity – It would be difficult to apply this. There are no complementary products with a correlation to watch sales, and while there are substitute products at lower prices, the person who buys a luxury watch is looking for prestige, not the lowest cost.

Video Activities Video: Pricing: Specialized Bicycle Components (SBC) Core Concepts Covered: Company Objectives, Pricing Based on Customer Expectations Video Summary: Specialized Bicycle Components, Inc. (SBC) caters to the experienced cyclist. In this video, SBC’s brand manager explains the company’s segmentation and pricing strategy. This activity is important because pricing is one of the most challenging tasks that marketers need to perform. An understanding of the issues and options when pricing a product is crucial. The goal of this exercise is to test your understanding of pricing issues and considerations by applying chapter frameworks to the SBC example. as a result has been able to satisfy its existing customers as well as attract new customers.

Discussion Question: How would you summarize SBC’s value proposition?

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Brief Answer: SBC seeks to offer the cycling enthusiast the best possible riding experience, at a competitive price with bikes of similar quality, through innovation in design and manufacturing.

Video: U.S. Cellular: Matching Price with Perceived Value Core Concepts Covered: The 5Cs of pricing Video Summary: The cell phone market is an oligopolistic market with AT&T and Verizon as the dominant providers. As a mid-range service provider, U.S. Cellular had to find ways to deliver greater value to its customers in order to compete. In 2010, U.S. Cellular launched "The Belief Project," which featured a new pricing structure. Unfortunately, this pricing structure confused customers who perceived the overall price to be too high for the value it offered. This led to a decrease in sales from U.S. Cellular's existing customers and potential new customers. After re-thinking this strategy, U.S. Cellular revised its pricing package and as a result has been able to satisfy its existing customers as well as attract new customers.

Discussion Question: What was the ultimate problem with U.S. Cellular's pricing plan that was launched as part of the "Belief Project"?

Brief Answer: Plans set forth by market leaders AT&T and Verizon bundled the price for voice and messaging and allowed consumers to add a plan for data. U.S. Cellular bundled voice, messaging, and data into one plan. Even though the plan was competitively priced, the new pricing structure was too different from what customers were used to. Since consumers couldn't understand the pricing plan, they ultimately rejected it.

Discussion Question: What lesson did U.S. Cellular learn regarding pricing?

Brief Answer: In order to be successful, a firm must create a pricing structure that is not only competitive, but also meets customer expectations.

Additional Teaching Tips This chapter introduces students to the economic influence of setting prices. Students often find these concepts difficult to grasp. Also introduced are the 5 Cs of pricing, company objectives and strategy implications, and break-even point calculations.

The 5 Cs of pricing are critical for students to understand. Students often don’t realize that other factors other than cost factors influence the pricing strategy. Reviewing the five Cs of pricing and having students come up with examples will help to enhance understanding of these concepts.

It is important for students to also understand that there may be other objectives other than maximizing profit margin. Amazon.com in its first years purposely used a competitor–oriented approach and sacrificed profit loss. The company was ridiculed by other dot-coms until Amazon.com revealed their strategy: To have households identify with the brand name. By pricing products and shipping low, it would increase usage of the site. Thus, the strategy was to sacrifice profits to have Amazon.com become the market leader and the household brand name recognition for online purchases.

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The break-even point graph is often difficult for students to understand unless they have had an economics course. Instructors will need to weigh the importance of teaching the graph, the BEP formula, or both. Sometime will need to be spent by the instructor explaining the graph. It is wise to give students a BEP problem such as the one listed in the application problems and have them graph it if the instructor chooses to also teach the dynamics of the graph.

Should students need additional help in pricing, turn to the testing materials and select some multiple choice BEP and pricing concept (equilibrium, profit, loss, fixed cost, variable costs) types of problems and create a worksheet where students can either work on it independently or in small groups in the class. Often, students can help each other in understanding these concepts and small groups are recommended. Online Tip: Have students develop a marketing related word problem using BEP analysis. Have them post it to the discussion board. Have other learners solve the problem. Have the student that created the word problem come back and give feedback. You may want to pair students up as partners in the online environment.

Newsletter Teaching Aid Remember to subscribe to “Grewal Levy Marketing News” at https://grewallevymarketing.com/.

Published regularly, each newsletter contains a feature article on current topics, for example Lime Rental Scooters, with discussion questions that can be used in class. Each article is tagged so instructors can quickly identify relevant chapters for the newsletter content. The site also features a selection of related articles, links to current videos that can be used in class, as well as links to archived articles sorted by chapter for ease of use in your class.

Chapter Twelve: Distribution Channels TOOLS FOR INSTRUCTORS       

Learning Objectives Annotated Chapter Outline with Instructor’s Notes/Teaching Tips Answers to End of Chapter Learning Aids Marketing Application Questions Marketing Digitally Chapter Case Study Video Activities Additional Teaching Tips Newsletter Teaching Aid

Learning Objectives 1. Explain the importance of distribution and the interrelationships between distribution channels, supply chain management and logistics management 2. Identify how distribution channels add value to businesses and consumers

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3. Describe distribution channel design and management decisions and strategies 4. Explain how logistics management affects distribution strategy

Annotated Chapter Outline

Instructor’s Notes

Opening Vignette: Nestle This vignette describes supply chain implications for a global food and beverage producer. Nestle has a strategic plan which calls for the elimination of all greenhouse gas emissions. Yet the company ranks among the worst polluters of plastic. It has also faced numerous complaints about its sourcing of water from natural springs. Outlined in this vignette are the challenges of meeting the company’s goals while balancing demands from stakeholders and consumers.

Ask students: What happens when the supply chain does not always mesh with the company goals?

Nestle wants to use only recyclable plastic but can’t find suppliers to do this.

LO1: The Importance of Distribution Students of marketing often overlook or underestimate the importance of place in the marketing mix, simply because it happens behind the scenes.

Even if companies engage in research that yields indepth consumer insights used to design new products, and price them at attractive levels, it is unlikely they will succeed unless they can reach consumers. Companies need to convince retailers to distribute their products, that their products will sell, be supported by advertising, perhaps increase category sales, etc.

Relationship among Supply Chains, Distribution Channels, and Logistics Distribution Channel  Institutions transfer the ownership of goods from the point of production to the point of consumption.  The channel thus consists of all institutions and marketing activities in the marketing process.

Students may find the distinction between distribution channels and logistics management confusing because of their close relationship.

Remind them that the distribution channel consists of institutions, whereas logistics refer to activities among and within institutions. However, both are part of supply chain management.

Supply Chain Management  Manages/integrates suppliers, manufacturers, warehouses, store, and transportation intermediaries.

Logistics Management Logistics Management Concentrates on the Movement and Control of Physical Products.  Two or more activities combine to plan, integrate, and control the efficient flow of raw materials, inventory, and finished goods from the point of origin to the point of consumption.

Supply chain: focus on the sequence of firms required to create and deliver goods to the final consumer Logistics Management: focus on the flow of raw materials & finished goods from point of origin to final consumption Distribution Channels: focus on the companies that transfer the ownership of goods from the producer to consumers at the point of consumption

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Annotated Chapter Outline

Instructor’s Notes

 These activities may include, but are not limited to 1. Customer service.

2. Demand forecasting.

3. Distribution communications.

4. Inventory control.

5. Materials handling.

6. Order processing.

7. Parts and service support.

8. Plant and warehouse site selection.

9. Procurement.

10.Packaging.

11.Returned goods handling.

12.Traffic and transportation.

13.Warehousing and storage.

LO2: Designing Distribution Channels Interactions range from close working partnerships to one-time arrangements, but in all cases, the parties want something from each other.

This section introduces the topic of how companies set up distribution channels. More in-depth content follows.

Channel Structure: Direct and Indirect There are no intermediaries between the buyer and seller in a direct marketing channel.

Ask students: Why would a company choose to distribute directly versus indirectly?

Some companies choose direct distribution to cut down on the expense of middlemen while others may be forced to distribute directly because they are unable to secure shelf space. For many companies, indirect distribution makes sense, for example, appliance manufacturers know that consumers will want to compare different makes and models from a variety of companies in a retail environment when purchasing a new fridge or stove.

In indirect marketing channels, one or more intermediaries work with manufacturers to provide goods and services to customers.

Channel Structure: Multichannel

Ask students to give examples of companies that use multichannel distribution.

Some companies include Hallmark, which has company owned stores, uses catalogues and also sells through retailers such as Shoppers Drug Mart and The Bay for example.

Push versus Pull Marketing Strategy With a push strategy, manufacturers focus promotional efforts on channel members to convince them to carry their product. They push their product through distribution channels to end consumers.

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Annotated Chapter Outline

Instructor’s Notes

When companies use a pull strategy, promotional efforts are directed at consumers to build demand for products that, in turn, may convince retailers to carry them.

Influences on Channel Structure A. Firms must know from which manufacturers customers want to buy.

B. Manufacturers need to know where their target customers expect to find their products.

C. Larger, more sophisticated channel members tend not to use supply chain intermediaries.

D. Smaller firms need the help of intermediaries to sell their lines.

Ask students: How do customer expectations and the characteristics of the supply chain members dictate the complexity of the supply chain? What kind of supply chain do you expect a company like Zara (from the chapter end case) to use, and why?

Answer: If customers have expectations of receiving merchandise quickly, then the supply chain may use a just-in-time delivery system with cross-docking warehouses, or the merchandise may be delivered directly to stores without going through a distribution centre at all.

Answer: Zara uses a just-in-time system to get fashion merchandise from concept design to stores within a few weeks, rather than a few months.

Determine Distribution Intensity Distribution intensity refers to the number of supply chain members at each level.  An intensive distribution strategy attempts to get products into as many outlets as possible.  An exclusive distribution strategy uses exclusive geographic territories.

1. Mandates that only a select few retail customers may sell a particular brand in a particular territory.

2. Ensures manufacturers that the most appropriate retailers represent their products.  A selective distribution strategy sells to selected customers within a territory.

1. Helps the seller maintain a particular image.

2. Controls the flow of merchandise into an area.

Product characteristics drive supply chain structures, in that mass merchandise products use intensive distribution, whereas luxury goods employ exclusive distribution.

LO3: Distribution Channels Add Value Each participant in the supply chains adds value and reduces required transactions.

A. Fewer transactions add value.

B. Consumers can purchase merchandise more conveniently and less expensively.

Without supply chain management, firms would face significant complications in getting their goods to consumers where they want them.

Group activity: Match the following products to their likely type of distribution: Pharmaceuticals (selective) Clothing (depends on the product type) Soft drinks (Intensive)

Group activity: Each member of the group represents a supply chain link (e.g., manufacturer, retail distribution centre, retailer, transporter, end

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Annotated Chapter Outline

Instructor’s Notes customer). Remove one link and attempt to move an object like a pen from one end to the other.

Experiment with removing different links. What happens?

Supply Chain Management Streamlines Distribution.

C. It reduces inefficiencies.

D. Firms can reduce their dependence on stockpiled inventory.

Ask students: How does supply chain management reduce inventory levels? What effect does supply chain management have on sales?

Answer: An efficient supply chain can lower overall inventory in the system because merchandise is delivered when it is needed (just-in-time). By having an efficient supply chain, the retailers stay in stock, and sales increase.

Functions Performed by Intermediaries

Distribution channels perform a variety of transactional, logistical and facilitating functions.

One important role played by intermediaries is to reduce the number of marketplace contacts, resulting in more efficient systems. Intermediaries also match the requirements of individual consumers to the goods that manufacturers produce, handle physical distribution and storage of goods making them available for customers to purchase, facilitate searches by both buyers and sellers, and standardize exchange transactions. While channel functions may shift from one intermediary or channel member to another, it’s important to recognize that they cannot be eliminated.

Managing Distribution Channels Address Supply Chain or Channel Conflicts A. Conflict occurs when supply chain members do not agree about their goals, roles, or rewards.

B. Resolution occurs through negotiation.

Managing distribution channels is similar to managing your personal relationships. When conflict occurs, it is best to try to come to a resolution through negotiations.

Group exercise: Divide the class into group dyads: one a manufacturer and one a retailer. Make each group have a dominant member. So, one group would be Walmart (dominant), while the other group would be a small vendor. Another group would be P&G (dominant), while the other group would be a small grocery chain. Have groups negotiate a sale. Then have groups report what transpired. It will be interesting to see how the dominant group used its power.

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Annotated Chapter Outline

Instructor’s Notes

Managing Channel Conflict  Vertical Channel Conflict – buyers and vendors all need to understand what drives the other party’s business  Horizontal Channel Conflict – disagreement between members at the same level in the distribution channel Power in the Distribution Channel Control in a supply chain varies depending on the type of relationships. Closely aligned supply chains share common goals and therefore are less prone to conflict.

A. Independent or conventional supply chains include independent members. Each attempts to satisfy its own objectives and maximize its own profits, often at the expense of other members.

B. Franchising describes a contractual agreement between a franchisor and a franchisee, as described previously.

C. Corporate vertical marketing systems entail partial ownership of the supply chain by a firm, which dictates the priorities and objectives and thus lessens conflict.

Control in distribution channels varies depending on the type of relationships. You might compare distribution channels relationships to more personal relationships familiar to students, such as a group of their friends versus a professional networking association to which they belong.

Managing Supply Chains Through Strategic Relationships A. In strategic or partnering relationships, members are committed to maintaining the relationship in the long term and invest in mutually beneficial opportunities.

B. Mutual trust holds strategic relationships together.

1. Trust is the belief that a partner is honest and benevolent.

2. Greater trust leads to greater willingness to share relevant information.

C. With open communication, members share information, develop sales forecasts together, and coordinate deliveries.

D. Members must have common goals for a successful relationship to develop.

E. Successful relationships demand that both

Explain how, like supply chain relationships, like personal relationships are stronger when there is mutual trust, open communication, common goals, and credible commitments. Have students provide specific examples.

Ask students: Does the formality of your relationships in each group affect your influence over other members or their influence over you?

The more formal the relationship, the more control one member has over the others.

Ask Students if they were aware of the crisis Chipotle faced as a result of poor supply chain partnerships. Would the food poisoning issues affect their decision to eat at Chipotle in the future or have they lost trust in the brand and its suppliers?

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Annotated Chapter Outline

Instructor’s Notes

parties make credible commitments to or tangible investments in the relationship.

LO4: Logistics Management: Making Information Flow 1. Flow One Moves from Customer to Store.

A. The salesperson scans the UPC tag.

B. The customer receives a receipt.

2. Flow Two Moves from Store to Buyer.

A. The point-of-sale (POS) terminal records the purchase information and electronically sends it to the buyer at corporate office.

B. Sales information gets incorporated into an inventory management system to plan future purchases and promotions.

3. Flow Three Moves from Store to Manufacturer.

A. The retailer aggregates purchase information from each store, creates an order for new merchandise, and sends it to the firm.

B. The buyer may communicate directly to get information and negotiate prices, shipping dates, promotional events, or other merchandise-related issues.

4. Flow Four Moves from Store to Manufacturer.

A. Frequently reordered merchandise can use an automatic ordering process.

B. This process virtually bypasses the buyer.

5. Flow Five Moves from Store to Distribution Centre.

A. Stores may communicate with the distribution centre directly.

B. This communication functions to coordinate deliveries and check inventory status.

Each step requires the collection and dissemination of information.

Electronic Data Interchange Enhances Flow.  EDI refers to the computer-to-computer exchange of business documents from a retailer to a vendor and back.  In addition to sales data, EDI contains purchase orders, invoices, and data about returned merchandise.  A supplier can send an advanced shipping notice to a retailer before a shipment to indicate what to expect.  Intranets provide secure communication systems

EDI systems allows for advanced tracking of information. Each system can seamlessly integrate with others, creating value for customers and firms.

Group activity: List the information that each member of the supply chain hopes to gain from each flow. Now list the information each member disseminates during each flow.

How can a car company develop a system to ensure customers know exactly when their car will be delivered? If you have ever ordered a car, or any product for that matter, you know that even a short wait can feel like forever. Volvo introduced its “4D system” to coordinate across its supply chain and ensure orders get efficiently processed so it can keep its delivery promises.

Group activity: Visit the Volvo Web site. What services does the company offer to both its suppliers and its customers? http://www.volvo.com/logistics/global/en-gb

Ask students: Exactly how does EDI increase value for end customers?

Answer: Since EDI facilitates information, it makes it easier for retailers to plan their deliveries (advance shipping notice) and plan their inventories. Other information is handled through EDI as well. The

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Annotated Chapter Outline

Instructor’s Notes

within a company, such as between buyers and distribution centres.

bottom line is the retailer has the merchandise the customer wants when he/she wants it, and in the quantities that are demanded.

Logistics Management: Making Merchandise Flow

Remind students that supply chains enable the flow of not just information but also goods. Keeping goods flowing is not a simple task.

Ask students: Under what circumstances might a manufacturer deliver directly to stores (flow 2) rather than to a distribution centre (flow 1)?

Answer: 1. Because the retailer demands it.

2. Because merchandise is bulky (furniture) or needs to be delivered daily (tortillas)

Distribution Centres Versus Direct Store Delivery

This slide introduces the structure companies use to set up distribution channels.

Distribution centres are not best if the retailer has few outlets and/or the stores are consolidated.

The following list are some advantages of having a distribution centre: • more accurate sales forecasts due to many stores • lower inventory in each story therefore lower overall inventory costs • overstock and under-stock is less of a problem • it is less expensive to store in a remote warehouse then expensive retail location.

Group Project – Ask student to draw out the distribution centre for a pair of Nike shoes that are at a Footlocker distribution centre. For each stage, ask them to list 3 things that will happen to the item and 1 thing that might go wrong!

Getting Merchandise to Customers Customers can buy merchandise displayed in a store. They can buy online and pick up in stores.

They can buy online and have merchandise delivered.  Shipping Merchandise to Stores  Customer Store Pickup  Deliver Merchandise Directly to Consumer from Fulfilment Centre

Technology facilitates shipments to stores by tracking item sales and thus triggering replacement orders.

Ask students: How do automatic ordering systems benefit manufacturers, retailers, and customers?

Answer: Manufacturers can plan their production schedules. Retailers get more accurate forecasts.

Customers get the merchandise they want, when they want it.

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Annotated Chapter Outline

Instructor’s Notes

Just-in-Time Systems are used by sophisticated supply chain partners. Also known as quick response (QR) systems. These inventory management systems deliver less merchandise on a more frequent basis.

Inventory Management (JIT Systems) Because they use smaller but more frequent shipments, JIT systems reduce stock-out situations which in turn increases customer satisfaction.

A JIT System Involves Various Benefits.

A. The lead time between the recognition of a need and the arrival of the needed merchandise decreases.

B. Product availability increases, but inventory investments drop.

C. Stores can better satisfy customer demand because they keep just the right amount of merchandise in stock.

Ask students: Can you think of any potential problems with this inventory management approach?

A JIT System Also Entails Costs.

A. Firms and vendors must cooperate.

B. They must share data.

C. They require systems such as EDI.

Answer: The systems can be expensive and the supply chain partners must be committed to accurate data or they won’t work. Also, if the system isn’t working properly, out-of-stocks can occur. Inventory management systems track goods throughout stores, warehouses, and DCs. As its name implies, just-in-time inventory management ensures goods get delivered only when they are needed.

Because they use smaller but more frequent shipments, JIT systems reduce stock-out situations which in turn increase customer satisfaction.

Marketing Applications 52. Explain distribution strategy and identify the major activities that distribution channels, supply chain, and logistics management involves. Identify several ways that supply chain management adds value to a company’s offerings, with regard to both consumers and business partners.

Instructor’s Notes: Students should summarize the main focus of the chapter and focus on how supply chain management performs for consumers and business partners functions they could not easily or inexpensively perform themselves. Student might also acknowledge that supply chain management creates better relationships among business partners at different points in the value chain and helps the chain deliver more value to consumers than each company could deliver on its own.

Example answers: Supply chain management refers to a set of approaches and techniques employed by firms to efficiently and effectively integrate suppliers, manufacturers, warehouses, stores, and transportation intermediaries into a seamless value chain in which merchandise is produced and distributed in the right quantities, to the right locations, and at the right time, as well as to minimize system-wide costs while satisfying the service levels required by customers. Supply chain management adds value to a company’s offerings because it brings together products and services that consumers normally would have to arrange for themselves. It also adds value for business partners by helping create business relationships that could prove profitable to each party in the value chain.

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53. You are hired by a small bakery that wants to distribute its products through supermarkets. The market for the bakery’s products has been steadily growing, so the bakery needs to expand its distribution capabilities to match its production capacity. You set an appointment with the manager of a local grocery chain who is familiar with the bakery’s products and excited about the possibility of selling them in the store. The contract he offers includes a $10,000 fee for stocking the product, which he claims is simply the cost of doing business, noting that bigger bakeries object to adding your product line to the chain’s offerings. The bakery cannot afford this fee.

What should you do now?

Instructor’s Notes: This scenario asks students to consider the common business practices at play in this particular industry and whether such practices meet their ethical standards. If such stocking fees are common within the retail grocery industry, the ethical factor is fairly low; it is more a matter of contract negotiation than an ethical violation. If students determine that such stocking fees are not common practice and that the grocery chain is attempting to exploit the small bakery, they should address the ethical considerations and decide to what degree they should challenge the grocery manager.

Example answers: I would first determine whether such stocking fees are common practice in the grocery industry. If they are common, I would try to negotiate the fee down to a more reasonable level that my bakery could afford. If they are not, I would question whether we want to go into business with a firm that allows such unethical business practices. Perhaps we could broker a better deal with another grocery chain; otherwise, I would look for other ways to market and distribute the bakery’s products.

54. Discuss the advantages and disadvantages of Dell’s decision to change from using a direct distribution strategy to a multichannel approach to distribution.

Instructor’s Notes: This scenario asks students to consider when a company would use a direct only distribution strategy as Dell has done in the past and what the benefits to the company are of using intermediaries.

Example answers: Using a direct model, Dell maintained 100% control over all aspects of sales and distribution. This ensured quality control, brand consistency and higher margins. However, a direct model limited distribution. By moving to a multichannel approach to distribution, (e.g. sales via intermediaries such as Walmart, Staples and Best Buy) Dell is able to reach more people in its target markets and hopefully reverse sliding sales, especially to consumers. While businesses may be willing to purchase computers from a website, many consumers are increasingly likely to purchase from stores. The ability to touch and feel the computer weighs more heavily in the purchase decision for them. Of course, there is a cost associated with this model, i.e. lower profit margins, loss of control.

55. Research the “Buy Local” trend and discuss how growing consumer awareness of shipping costs and environmental concerns has led to a push for more locally produced foods.

Instructor’s Notes: Students need to recognize there are financial and environmental costs involved in getting food products to market, beyond the cost of growing them. Visit https://www.ontario.ca/foodland/page/why-buy-local for more information to supplement this exercise.

Example answers:

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The 100 mile diet was popularized by long-time vegetarians and environmentalists Alisa Smith and J.B. MacKinnon. They discovered that the food eaten by the average North American travels at least 1,500 miles from farm to grocery store. Driven by increasing interest and concern about fossil fuel use and global climate change, they decided to spend a year eating only food grown within a 100 mile radius of their downtown Vancouver apartment. Buy Local grew out of the 100 mile diet trend with many communities across Canada now actively embracing and promoting the benefits of buying locally grown fruits, vegetables, meat and other foods.

56. Give an example of a retailer that participates in an independent (conventional) supply chain and one involved in a vertical marketing system. Discuss the advantages and disadvantages of each.

Instructor’s Notes: In an independent supply chain, the independent members attempt to satisfy their own interests and maximize their own profits, often at the expense of other members, whereas in a vertical marketing system, members act as a unified system. Students may instinctively prefer one over another, but this question forces them to consider both advantages and disadvantages of each.

Example answers: A retailer that participates in an independent supply chain is a local grocery store; to get the products it needs to put on its shelves, the grocery must deal with supply chain members that act entirely independently. Such independence leaves the grocery vulnerable to bad deals that could mean less profit or, worse, less merchandise for its consumers. In contrast, Baskin-Robbins uses a vertical marketing system. The owner of a Baskin-Robbins store gets products from the manufacturer, as well as logistical and promotional support, in return for a percentage of the store’s revenue. However, if one of the key members of the supply chain goes out of business, it would adversely affect the retailer, especially compared with when supply chain members act independently. If Baskin-Robbins, as an ice cream manufacturer, went out of business, the Baskin-Robbins retail store owner would have to rebrand the store and find products from other sources.

57. In what ways can the flow of information be managed in the supply chain? How can the ready flow of information increase a firm’s operating efficiencies?

Instructor’s Notes: Students likely will focus on how technologies like UPCs and RFID tags interact with point-of-sale and other information technology systems to provide greater efficiencies, better forecasting, and less need for manual human intervention to keep the supply chain running smoothly.

Example answers: Information in the supply chain can be managed by the smart application of key technologies. Take, for example, the use of UPC and RFID tags to track merchandise and shipments. When an item is purchased, the point-of-sale system at the cash register can scan each item, then transmit that data to the company’s mainframe computer, which can communicate via electronic data interchange (EDI) to the supplier, which replaces the product that was purchased. That supplier then can communicate with its suppliers via a similar EDI transfer. When the replacement product comes to the retail outlet, the store scans its RFID tag, so the store’s computers know it is in inventory, which completes the chain of information. Data flowing automatically throughout the supply chain reduces the need for human intervention and provides better control over inventory, which in turn leads to greater operating efficiency.

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58. Describe how B2B transactions might employ EDI to process purchase information. Considering the information discussed in Chapter 5 about B2B buying situations, determine which buying situation (new task, modified rebuy, or straight rebuy) would most likely align with the use of EDI technology. Justify your answer.

Instructor’s Notes: Students must integrate their knowledge from a previous chapter to address how EDI might benefit B2B suppliers in specific buying situations.

Example answers: In B2B transactions, retailers could transmit purchase data to suppliers via EDI, which in turn can transmit their own merchandise needs—all without anyone having to pick up a telephone and talk to another business partner or supplier in the supply chain. The most appropriate situation for using EDI is a straight rebuy, in which the supplier exactly replenishes the same amount of product purchased by a consumer. Although EDI could work for new task and modified rebuys, they would require more human interaction and intervention.

59. Discuss the advantages to a retailer like SportChek of expending the time and effort to get merchandise floor-ready at either the point of manufacture or in the distribution centre rather than having retail store staff members do it in the stores. Provide the logic behind your answer.

Instructor’s Notes: Floor-ready merchandise can be placed on the sales floor immediately, which should prompt students to recognize its many benefits for retailers.

Example answers: With floor-ready merchandise, SportChek can speed up its stocking process and save time and money by allowing sales associates to focus more on selling products rather than preparing products for sale.

60. Why would a big company like Lenovo want to develop strategic partnerships with locally owned computer stores? Describe what Lenovo would have to do to maintain such relationships.

Instructor’s Notes: In a strategic relationship, the supply chain members commit to maintaining the relationship, so students must consider any benefits of such relationships for a large corporation like Lenovo.

Example answers: Lenovo might develop a strategic partnership with a locally owned computer store for several reasons.

First, with such relationships, Lenovo does not need to open its own retail outlets in every town and city.

Second, the long-term partnership gives Lenovo more say in the marketing of its products at the retail level. Third, Lenovo obtains good marketing and sales support, possibly including insights into what consumers are buying and why. To maintain such relationships, Lenovo must build mutual trust so that the retailer believes Lenovo will act honestly and benevolently, share information, establish common goals that benefit both parties, and make credible commitments to—or tangible financial investments in—the retailer.

61. You are hired as an assistant brand manager for a popular consumer product. One day in an emergency meeting, the brand manager informs the group of a serious problem with a supplier; she sends you to the manufacturing facilities to investigate the problem. When you arrive, you learn that one of the manufacturer’s key suppliers has become increasingly unreliable in terms of

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quality and delivery. When asked, the plant manager says the owner of the troubled supplier is his cousin, whose child has been very ill, and he just cannot switch suppliers right now. What course of action should you take?

Instructor’s Notes: This scenario forces students to question how they might resolve a supply chain problem without violating their own sense of ethics or fairness. Using the ethical decision-making framework, students should evaluate the situation to determine an appropriate course of action.

Example answers: In applying the ethical decision-making framework:  “Have you thought broadly of any ethical issues associated with the decision to be made?” I have thought broadly about the ethical issues. In this case, I have concerns about keeping the company’s customers happy but not punishing the supplier for falling on hard personal times.  “Have you involved as many possible people who might have a right to offer input into or have actual involvement in making this decision and action plan?” I have not discussed the situation with the supplier to find resolutions, nor have I talked to my company’s inventory management team to determine when and how this supply problem could start affecting our deliveries.  “Does this decision respect the rights and dignity of the stakeholders?” The supplier could fall on even harder times if we stop our orders, and the relationship we have built will suffer.  “Does this decision produce the most good and the least harm to the relevant stakeholders?”

The supplier could go out of business if we cut off our relationship, which might mean the owner could not pay for her child’s medical bills.  “Does this decision uphold relevant conventional moral rules?” Although some people may think it entirely appropriate to switch suppliers from a purely business perspective, doing so could hurt our reputation in the community.  “Can you live with this decision alternative?” If the decision is to work with the supplier to find a temporary workaround until the owner’s situation improves, then yes, I can live with that decision.

On the basis of these answers, I would talk to the owner directly and find out more about the situation.

In the course of that discussion, I would raise my concerns about my company getting its needed merchandise but would attempt to work with the supplier to find an equitable workaround that preserves the relationship between our companies.

Marketing Digitally 1. Go to Walmart’s corporate website (https://www.walmartcanada.ca/about-us) and read about Walmart’s operations, pricing, distribution centres, and fleet. How do Walmart’s distribution centres and supply chain support its mission and marketing strategy?

Instructor’s Notes: This exercise is relatively straightforward. Students should understand how important the distribution function is to Walmart’s success as a retailer.

Example answers: Walmart’s mission and marketing strategy are simple: to provide value to customers by offering a wide range of products at low prices. Its distribution centers support this strategy because they allow Walmart to consolidate its merchandise for its stores, thus reducing distribution costs. Walmart has also

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optimized its logistics to cut out “empty miles” for drivers, which further reduces shipping costs. By minimizing distribution costs, Walmart is able to push those savings along to customers, providing lower prices and more value. Furthermore, Walmart has designated six disaster distribution centers that can provide relief to communities during natural disasters. Therefore, Walmart’s distributions centers are able to provide value to consumers and give back to communities in times of need.

2. Zara, a division of Inditex, successfully manages its supply chain. Visit Inditex’s website (www.inditex.com) and review the company’s commitment to social responsibility, particularly the section that pertains to its code of conduct. Considering the discussion in this chapter about strategic relationships, how does Inditex address the factors necessary for mutually beneficial partnerships according to its code of conduct?

Instructor’s Notes: Students must recall the lessons they learned about social responsibility, as well as the factors necessary for beneficial partnerships—mutual trust, open communication, common goals, and credible commitments—to respond to this question.

Example answers: According to its code of conduct, Inditex addresses the factors for mutually beneficial partnerships. It facilitates mutual trust, maintains open communication about its goals and its ethical business practices, and requires that other members of its supply chain have common goals (including social responsibility) before it will enter into business relationships in the first place.

End-of-Chapter Case: Grocery Delivery Impact on Supply Chain 1. Explain the importance of getting the supply chain “right” for a successful Walmart grocery business. Can it succeed in this business without getting this right?

Example answers: Students should discuss Walmart’s efforts to efficiently and effectively integrate their suppliers, manufacturers, warehouses, stores, and transportation intermediaries into a seamless operation which merchandise is produced and distributed in the right quantities, to the right locations, and at the right time. Even if Walmart executes the other 3 Ps flawlessly, unless they can secure the placement of products in appropriate outlets in sufficient quantities exactly when customers want them, they are likely to fail.

2. How How is Walmart using third-party supply chain partners in its grocery delivery business?

Example answers: Walmart is working with third-party delivery services (e.g. Skipcart, Postmates, Door-Dash) and expanding its business-to-business relationship with FedEx. Alternatively, it is experimenting, in collaboration with the robotics company Nuro, to deliver groceries in self-driving cars that can carry up to 12 grocery bags.

Video Activities

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Video: Supply Chain: How Domino’s Gets Pizza to Plate Core Concepts Covered: Designing marketing channels, Managing the marketing channel and supply chain Video Summary: Supply chain management is essential for marketing a product and providing excellent quality, service, and profitability. Domino’s prides itself on an efficient supply chain built around a “hub and spokes” model, where regional hubs receive ingredients, make dough, and manage delivery of ingredients and supplies to Domino’s stores in the area.

Discussion Question #1: What advantages does the “hub and spokes” model offer Domino’s?

Brief Answer: Since the regional hubs obtain the needed ingredients and deliver them to stores, Domino’s maintains consistency in the ingredients going into its products, helping to create a consistent level of product quality for customers. Domino’s also saves money by purchasing and receiving ingredients in large quantities, which are broken out at the hubs to be distributed to stores. The model is also flexible in that deliveries can be adjusted as needed based on local conditions.

Discussion Question #2: What disadvantages might the “hub and spokes” model have for local Domino’s stores?

Brief Answer: This model takes away the opportunity for stores to extensively customize their menus for local tastes, or to take advantage of local fresh ingredients, since ingredients are purchased in bulk and delivered from hubs to stores. However, Domino’s might prefer to have a standardized menu across its restaurants so that customers know what to expect.

Video: Supply Chain: Icebreaker Core Concepts Covered: Designing marketing channels, Managing the marketing channel and supply chain Video Summary: Supply chain management is essential for marketing a product and providing excellent quality, service, and profitability. Often, the path from the creator to the consumer is long and complex.

For Icebreaker, a New Zealand-based company that makes high tech clothing from merino wool and other natural sources, managing its marketing channel is critical since the company operates in four continents and in more than 40 countries. Icebreaker's combination of strong partnerships and consistent quality control helps it to maintain a strong multi-national marketing channel—one in which its partners are connected all the way.

Discussion Question: Do you know where your clothing comes from? You would if you purchased it from Icebreaker. What technique does Icebreaker use to connect its consumers to its marketing channel?

Brief Answer: Each piece of Icebreaker clothing has a tag with a nine-digit "baacode." This code allows consumers to trace their garment back through the marketing channel to the ranch where the sheep were raised. By entering the code on the company's website, consumers can see the living conditions of the sheep, meet the growers, and follow the production process through to the finished product.

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Discussion Question: How has Icebreaker's long-term relationships with its farmers impacted the quality of its garments?

Brief Answer: Initially, Icebreaker bought its wool at auction like other manufacturers. However, this strategy didn't let the company control the quality of the wool fiber and the quality of its garments suffered. It was only through the establishment of long-term relationships with the farmers that grow the wool for them that they were able to distinguish the attribute of the fiber that impacts the quality of the fabric. It is because of these long-term relationships that Icebreaker has been able to have consistency in the quality of its garments.

Additional Teaching Tips This chapter introduces the student to supply chain management. Instructors should tie in the role of the supply chain to value creation and its contribution to the marketing effort. Students can understand how a product gets from point A to the end delivery point but may not understand the role of the intermediaries in transport and the responsibility to the marketing effort that the intermediaries contribute to. These factors should be addressed in teaching the chapter.

Students can find this chapter difficult to fully understand. Showing the videos for this chapter titled “Supply Chain: Icebreaker” and “Supply Chain: How Domino’s Gets Pizza to Plate” may clarify the role of supply chain management in the marketing effort.

Instructors may want to assign students to roles in the distribution channel (manufacturer, warehouse distributor, truck driver or transport person, wholesale, retailer) and various intermediaries with the assignment given to them as follows: How does your role add to the marketing effort? This exercise gets students to think about the connection to “Place,” one of the elements of the Marketing Mix to the overall marketing strategy.

Similar to the last chapter, the instructor may want to review the vocabulary of the chapter by having complete story problems surrounding the vocabulary words presented in this chapter.

Newsletter Teaching Aid Remember to subscribe to “Grewal Levy Marketing News” at https://grewallevymarketing.com/.

Published regularly, each newsletter contains a feature article on current topics, for example Lime Rental Scooters, with discussion questions that can be used in class. Each article is tagged so instructors can quickly identify relevant chapters for the newsletter content. The site also features a selection of related articles, links to current videos that can be used in class, as well as links to archived articles sorted by chapter for ease of use in your class.

Chapter Thirteen: Retailing and Omnichannel Marketing TOOLS FOR INSTRUCTORS 1-196

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Learning Objectives Annotated Chapter Outline with Instructor’s Notes/Teaching Tips Answers to End of Chapter Learning Aids Marketing Application Questions Marketing Digitally Chapter Case Study Video Activities Additional Teaching Tips Newsletter Teaching Aid

Learning Objectives 1. Outline the considerations associated with choosing retail partners 2. Identify what types of retailers are available to distribute products 3. Describe the components of a retail strategy building on the four Ps to create value for consumers 4. Identify the benefits and challenges of omnichannel retailing

Annotated Chapter Outline

Instructor’s Notes

Opening Vignette: MEC

Ask students: why has MEC been so successful in the past? Will the changes it has made be enough to help it succeed in the future?

The opening vignette shows how MEC, an icon in Canadian retailing, survived for 50 years only to face extreme hardship during the pandemic. The company was sold to an American private equity company in late 2020 and is showing signs of turnaround. The vignette illustrates the struggles for retailers to stay true to their roots while navigating in an uncertain environment. MEC’s understanding of its changing external environment while leveraging its internal capabilities will be key to its future success.

Group activity: List your favourite retailers. How do these retailers create value for you? Students should provide diverse lists that you can use as a basis for the remaining retail discussions.

LO1: Choosing Retail Partners Retailing refers to business activities that add value to products and services sold to consumers for their personal or family use, including products bought in stores, through catalogues, or over the Internet, as well as services.

Wholesalers buy, take title to, often store goods in large quantities, and then resell the goods (usually in smaller quantities) to retailers or industrial or business users.

This is an overview and each stage is presented on the following slides.

Group activity: List your favourite retailers. How do these retailers create value for you?

Students should provide diverse lists that you can use as a basis for the remaining retail discussions.

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Annotated Chapter Outline

Instructor’s Notes

Choosing Retail Partners 1. Channel Structure: degree of vertical integration, manufacturer’s brand, power of manufacturer and retailer 2. Customer Expectations: how manufacturers determine which retailers would be best for consumers and where consumers expect to find certain products 3. Channel Member Characteristics: Larger firms often find that by performing the channel functions themselves, they can gain more control, be more efficient, and save money.

4. Distribution Intensity

Ask students to describe what is meant by “degree of vertical integration”. It refers to a supply chain where the members act as a unified system.

LO2: Identifying Types of Retailers  Food Retailers  General Merchandise Retailers

This can be used as an introduction to a detailed discussion of this topic or as a shortened version.

Three Main Types of Food Retailers A. Conventional supermarkets offer groceries, meat, and produce, along with limited sales of nonfood items such as health and beauty aids and general merchandise, in a selfservice format.

B. Big-box food retailers include supercentres, hypermarkets, and warehouse clubs and carry both food and nonfood items in larger stores than conventional supermarkets.

C. Convenience stores provide a limited number of items at convenient locations in small stores with speedy checkout procedures.

Ask students: in what circumstances do you shop at each type of food retailer? How do the price, selection, and quality vary across each type?

Six Categories of General Merchandise Retailers A. Discount stores offer a broad variety of merchandise, limited service, and low prices.

B. Specialty stores concentrate on a few

Specialty stores must offer their target market something more than what other retailers offer, because they often charge a premium price.

Ask students how vertical integration affects a manufacturer who is introducing a new product and choosing a retail partner. Students will mention that if the manufacturer and retailer already have a relationship from previous products that the retailer will be more likely to accept the new product.

Ask Students: Why might Birkenstock choose exclusive distribution intensity?

Answer: Birkenstock’s can only be purchased through certain retailers – this helps control conflict between retailers and gives the manufacturer better control. Some might argue that for products in the later stages of the product life cycle, it implies higher quality to the end consumer.

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Annotated Chapter Outline

Instructor’s Notes

complementary merchandise categories in relatively small shops.

C. Category specialists offer a narrow variety but a deep assortment of merchandise and may become category killers, which so overwhelm the category that other retailers cannot compete.

D. Department stores carry many different types of merchandise and lots of variations, offer some customer service, and are organized into separate areas.

E. Drugstores concentrate on health and personal grooming merchandise, though pharmaceuticals often represent more than 60% of their sales.

F. Off-price retailers offer inconsistent assortments of merchandise at relatively low prices, typically purchased from manufacturers or other retailers with excess inventory.  Extreme value retailers are a particular type of off-price retailers that usually appear in lower-income urban or rural areas.  They are smaller than traditional discount stores.

Group activity: Identify a retailer in each of these categories. Discuss how that specific retailer creates value for its target consumers.

Remind students to use the 4Ps framework for this exercise. For example, Abercrombie & Fitch is a specialty store that carries trendy, high-quality, high-priced products. Its edgy advertising appeals to consumers and stores are located in upscale malls or shopping areas.

LO3: Developing a Retail Strategy To create an effective retailer strategy, marketers must first identify the right target market and positioning. Then they need to develop their Retail Mix: product (merchandise assortment), pricing, promotion, place, personnel, and presentation (store design and display).

This introduces how the Retail Mix is used in retailing. More in-depth content follows.

Retail Mix: Product A. Providing the right mix of merchandise and services to satisfy the needs of the target market is one of retailers’ most fundamental activities.

B. Retailers store or hold inventory until consumers request it.

C. Retailers also offer private label (store) brands, which are available only from that retailer.

What is the most important thing that retailers do?

They provide assortments to customers.

Group activity: Divide the class into groups. Tell them that the classroom represents a new store.

Have them identify a target market. Ask them to decide what they are going to put into the store.

Have them consider both variety (number of categories) and assortment (number of SKUs within a category.)

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Annotated Chapter Outline

Instructor’s Notes

Retail Mix: Price A. Price defines the value of both the merchandise and the service.

B. A general price range associated with a particular store helps define its image.

Group activity continued: Now have them decide the general price range for their store and justify their recommendation.

Retailers need to create value for their customers outside of offering a great price.

How Do Retailers Create Value?  Consumer Preferences Change.  Definitions of price and quality differ.  Lifestyles have evolved toward greater casualness.  As definitions of price and quality change, so does the definition of value.  Retailers must respond by creating value through methods other than low price.

Other things that retailers offer include convenience and an easy shopping experience.

Retail Mix: Promotion A. Retailers use a wide variety of promotions, both within their retail environment and through mass media.

B. Promotions help get customers into stores, and then stimulate purchases after they are in the store.

C. Promotions can take many forms.  Unusual or exciting stores atmospherics, which influence consumers’ perceptions of value and thus their subsequent patronage.  Personal selling and customer service representatives.  CRM databases to develop loyalty programs.

Discuss how promotions affect consumers’ perceptions of value, patronage intentions, purchase, loyalty, and share of wallet devoted to a particular retailer, both individually and in combination.

Retail Mix: Presentation Store design and display are important forms of promotion.

Ask students to share examples of retailers that do a really good job of designing their stores and displays. Get them to relate their answers back to the theory and provide specifics as to what makes one retailer stand out over others.

The Wheel of Retailing  A second view of how new forms of retail outlets compete in the market.  Retailers enter with low prices, low margins, low status but over time add more service, raise prices and earn higher margins and status.

To illustrate how McDonald’s is progressing in the wheel of retailing, click on the links to show photos of redesigned, upscale restaurants in Germany and in Canada.

Retail Mix: Personnel Retailers gain customer knowledge from store

Store personnel are an extremely important part of the promotional mix.

Group activity continued: Tell the students they have a fixed amount to spend on promotion, including personal selling. How would they divide up their promotional dollar? Justify their recommendation.

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Annotated Chapter Outline

Instructor’s Notes

personnel, e.g., Internet browsing and buying activities. The data they collect on customer shopping habits can be used in customer relationship management (CRM). Based on this information, retailers may modify product, price and/or promotion attempt to increase their share of wallet, the percentage of a customer’s purchases from that particular retailer.

Customers rely on associates for a number of reasons.

The goal is to provide more value to a firm’s best customers.

Retail Mix: Place A. Convenience is a key ingredient to success, and location is an important part of convenience.

B. Customers choose stores on the basis of where they are located C. Supply chain management, part of the fourth P, is responsible for getting the right merchandise to customers when they want it.

In retailing there are two aspects to “place.” The first is location, and the second is supply chain management. Both are important.

Location is important because it is one of consumers’ most important criteria in choosing a retailer and it is a very long-term investment.

LO4: The Internet and Omnichannel Retailing  Bricks-and-Mortar Retailers Are Traditional Retail Stores.  Livestreaming offers a new and exciting shopping option.  Omnichannel Retailers Sell Merchandise in Multiple Retail Channels, e.g., stores, kiosks, catalogues and the Internet.  Each channel offers its own unique benefits.

Among others, online stores offer great convenience, and a wide selection available at any time. Consumers view offerings from the comfort of their home or office. Merchandise gets delivered directly to consumers.

This introduces channels for selling to consumers.

More in-depth content follows.

Internet Channel

Ask students what information Home Depot might gather research from web visits and how they would use it? Students might mention that they will search for products that the company does not currently stock. They might see products that consumers browse often but purchase little. For instance, they might look for lamps quite often but this is a low seller for Home Depot? What is it about the product that makes people come looking

Group activity continued: Have students choose a location and justify it. Ask them to describe how they would design their supply chain, i.e., use of wholesalers versus distribution centres; direct store delivery versus, delivery to distribution centres, etc.

Ask students what they like to buy in stores vs. catalogue vs. online?

Ask students: Have you ever started shopping online, and then visited the store to make the actual purchase? What kind of product did you buy using this method?

The Internet has also opened opportunities to sell beyond a limited geographic region.

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Annotated Chapter Outline

Instructor’s Notes and leave not buying?

Ask students when they are nervous to enter their credit card information online? How do they determine if a site is credible? How do they feel about privacy?

Effective Omnichannel Retailing  Role of brands  Using technology  Increasing share of wallet  Gaining insight into customer shopping behaviours

Consumers want a seamless experience when interacting with omnichannel retailers.

Adding an electronic channel is particularly attractive to firms with strong brand names but limited locations and distribution.

There are challenges and advantages in selling merchandise via the Internet.

For firms that use an electronic channel, the points noted in the slide will help them to be more successful.

Role of brands: provide a consistent experience for customers.

Using technology: convert touch and feel information into look and see information Increasing share of wallet: using the electronic channel with other channels can result in consumers making more total purchase from the seller.

Gaining insight: data can be collected to provide key insights.

Marketing Applications 62. Imagine that you designed a high-end line of clothing and accessories. Which factors should you consider when choosing retail partners? What type of retailer would you choose as a partner?

Why? Instructor’s Notes: This question leads the student to think of the successful aspects of retail outlet and potential growth opportunities.

Example answers: Students should discuss channel structure, customer expectations, channel member characteristics, and distribution intensity. In terms of channel structure, the line is essentially unknown, and therefore would have virtually no power resulting in significant difficulty getting retailers to stock its products. The company may also face high listing allowances. Customer expectations is another important factor. The student should consider ideal customers and where they shop. With a high-end line, customers would expect to find products at stores such as Holt Renfrew, Nordstrom, or small, upscale boutiques. Students should recognize channel member characteristics. As a small independent firm, the student might 1-202

consider partnering with an independent sales organization to help sell products to retailers.

Alternatively, they might sell the product directly to consumers over the Internet and/or through thirdparty intermediaries like Amazon or Etsy. Finally, you should consider the appropriate distribution intensity for the line. In this scenario, exclusive distribution is the most appropriate. Providing exclusive territories to one retailer will ensure that enough inventory is maintained, and retailers have a strong incentive to carry the line. Alternatively, the student could sell the products directly to consumers as noted above.

Next students should indicate which types of retailers they would use and why. For example, they may decide to partner with small, high-end boutiques which may be easier to get into than large department stores that exclusively sell well-known brands; however, they still have a dedicated customer base that expects to find new, fashionable, high-end designs. Relatively small retailers may also be beneficial so that the student doesn’t get overcommitted to supply huge amounts of merchandise in case sales increase quickly. Alternatively, as noted above, the student might assume the retailing function him/herself by opening a physical store and or by selling over the Internet or through third-party intermediaries.

2.

Name a retailer from which you have received personalized service, product, or promotional offerings online. What form of personalization did you receive? Did the personalization influence your purchase decision? Explain why or why not.

Instructor’s Notes: This question asks students to consider how personalization impacts consumer purchase behaviour.

Example answers: Depending on the retailer and product category chosen, students will answer this question differently.

3. What do retailers do to increase the value of products and services for consumers? Discuss the extent to which bricks-and-mortar retailers are threatened by Internet-only retailers with regard to these factors.

Instructor’s Notes: In considering how retailers add value, students might consider overall value creation or use the 4Ps framework to describe value creation related to each factor. The degree to which students consider Internet-only businesses threats to traditional retailers will depend on their assessments of the value each delivers to consumers.

Example answers: Retailers increase the value of products and services by bringing everything together in one place for consumers, pricing their products to reflect quality and value, promoting offerings so consumers know where to get it and at what price, and providing convenient locations. Without such efforts, consumers would be forced to do all the legwork in finding products, negotiating prices with each manufacturer, getting the products shipped, and maybe even assembling and installing the products themselves.

Traditional bricks-and-mortar retailers are being threatened in some degree by Internet-only retailers because Internet retailers can bring even more products and services together, price them attractively, and promote them without extensive investments in real estate, store locations, inventory, or staffing.

The bricks-and-mortar retailers that will fare the best are those that can differentiate themselves in the minds of consumers, whether through innovation, lower prices, convenience, or customer service.

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4. Some argue that retailers can be eliminated from the distribution channel because they only add costs to the final product without creating any value-added services in the process. Do you agree with this perspective? Is it likely that consumers will make most purchases directly from manufacturers in the near future? Provide justification for your answers.

Instructor’s Notes: Students must offer an opinion of the future of retailers and therefore should think about the ways in which retailers add value and whether manufacturers could provide such value.

Students also might address the relative power of retailers in the value chain currently as compared with the past.

Example answers: Retailers could not be eliminated from the distribution channel, because they provide value-added services that justify their associated additional costs. Such value-added services include aggregating disparate products from different vendors into convenient locations for consumers, installation and maintenance services, and customer service to answer questions or deal with issues. Consumers probably will not make more purchases directly from manufacturers in the near future, because most manufacturers are good at making products but not necessarily at serving consumers. In addition, the power relationships in the retailing industry have changed such that retailers—not manufacturers— have the greatest power. Because of this power and consumers’ preferences for direct, face-to-face service in many cases, retailers are here to stay.

5. Assume that that adidas, the shoe manufacturer, has decided to sell expensive wristwatches for men and women. What factors should it consider when developing its strategy for choosing retail partners?

Instructor’s Notes: This question challenges the student to consider aspect of the retail store that may impact the brand’s image.

Example answers: The retail partners should be chosen selectively so that the retail outlet matches the brand image that adidas is trying to display. Accessibility to the target market as well as the retail store-front (which should be upscale) will be critical to adidas in forming partnerships with retail partners.

6. Identify three categories of products especially suited for sale on the Internet. Identify three categories that are not currently suitable for sale on the Internet. Justify your choices.

Instructor’s Notes: In answering this question, students might review Exhibit 13.4, to identity advantages and disadvantages of the Internet channel and thus generalize to identify appropriate product categories.

Example answers: Three product categories that are especially well suited for sale on the Internet are pure commodities (e.g., office supplies, building supplies, coffee), quasi-commodities (e.g., books, CDs), and unique products (e.g., one-of-a-kinds, limited editions). These three categories are well suited for Internet sale because they are either so standardized that a consumer can be confident of the product’s attributes and quality or so unique that they fill a niche that traditional bricks-and-mortar retail stores cannot.

Three categories that are not suitable for sale on the Internet are medical care, home purchases, and postpurchase, low-cost services. These categories require direct human contact and a high level of

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interpersonal trust, prepurchase trial experience, and/or involvement from the retailer beyond the purchase transaction.

7. How do Staples.com or Officedepot.com provide value to their customers beyond the physical products that they sell? Identify some of the ways that the companies have overcome the inhibitors to successful Internet retailing.

Instructor’s Notes: According to the list of Internet helpers and hinderers in Exhibit 14.6, students might consider the lack of prepurchase product trial, lack of interpersonal trust, lack of instant gratification, loss of privacy and security, lack of in-store shopping experience, and high shipping and handling costs.

They then must discuss how these retailers handle such concerns.

Example answers: Websites like Staples.com and Officedepot.com offer value to their customers beyond the physical products they sell by offering services such as delivery to the customer’s home or business, rebate management, reward programs for different types of consumers, and business services such as copying and printing. A website like Staples.com can overcomes inhibitors to successful Internet retailing by posting its policies clearly, such as its guarantee of customer satisfaction (to build trust); allowing customers to create their own accounts on a secure site (to ensure privacy and security); and offering delivery to a customer’s home or business (to make gratification quicker and help eliminate the hassle and cost of customers picking up products themselves).

8. Why have so many brick-and-mortar retailers adopted an omnichannel strategy?

Instructor’s Notes: This allows the student to evaluate online stores and the importance of a omnichannel strategy.

Example answers: Brick-and-mortar retailers are adopting an omnichannel strategy to allow a more broad opportunity for consumers to access product and build relationships with customers. Retail outlets in the right locations combined with an online channel of distribution allows for customers to pick which channel is suited for their needs for the purchase.

9. You can purchase apparel at a discount store, specialty store, category specialist, off-price retailer, department store, or Internet-only store. From which of these types of stores do you shop?

Explain why you prefer one type over another.

Instructor’s Notes: Similar to the previous question, students must think about the types of stores they patronize and the circumstances that might make them prefer one type of retailer over another.

Example answers: I shop at discount stores (Target), specialty stores (HMV), category specialists (Best Buy), off-price retailers (Winners), department stores (The Bay), and Internet-only stores (iTunes). I generally appreciate convenience and value, so I tend to favour the Internet-only and discount stores.

10. Search the Internet for a product you want to buy. Are there differences in the prices, shipping charges, or return policies among the different retailers offering the product? From which retailer would you buy? Explain the criteria you would use to make the decision.

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Instructor’s Notes: Answers to this question will vary by student.

Example answers: Students will probably find that various websites will offer merchandise at similar prices, although some might be lower. Different websites might have offer additional services like free shipping or free returns. Ask students which website they chose and why? Was it the convenience? Price? Assortment?

Value added services?

Marketing Digitally 12. How does Sephora provide value to its customers beyond the physical products it sells? Why would a customer purchase online instead of going to the store? Under what circumstances would the customer prefer a store-based experience?

Instructor’s Notes: Omnichannel retailers such as Sephora reach consumers in more than one retail channel (i.e., store, catalogue, and Internet). The question asks students to consider why.

Example answers: Sephora uses a multichannel strategy that includes its website and retail store locations, and physical catalogues that the consumer can receive through the mail to sell its products. Consumers tend to buy more from multichannel retailers, the company can collect information about customers it would not be able to get through a single channel, and the company can achieve economies of scale by coordinating buying and logistics activities across channels and consolidating marketing information and activities.

Consumers may choose to purchase online due to convenience and delivery. Customers may prefer a store-based experience when they need to compare products or need additional information regarding the product.

13. Select a familiar omnichannel retailer. Evaluate its website in terms of how well it provides value to its customers. Do you believe that offering multiple selling channels to customers enhances their shopping experience? How does it help the retailer? Explain your answer.

Instructor’s Notes: This question allows the student to evaluate omnichannel retailers as well as customer service.

Example answers: Student answers will vary. Students should evaluate the Web site in terms of how well it provides value to its customers (convenience, selection, ease of use of the Web site, discounts, etc.). Multiple selling channels work well for most products except for prestigious high-ticket items such as a Mercedes or a diamond ring. Multiple channels help the retailer because it provides an opportunity to sell more goods.

End-of-Chapter Case Study: Aldo, a Retailer with a Conscience and ‘Sole’ 1. Assess the role of consumer expectations in Aldo’s success as a footwear retailer.

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Example answers: Customers who shop at Aldo stores or other fashion retailers expect to find Aldo products available for purchase. That necessitates Aldo expanding its distribution beyond its own branded stores, which is good for sales. But it means that the company no longer is able to interact directly with its consumers and must find other ways to get consumer insights.

2. How has Aldo used technology to differentiate it from other footwear retailers in a crowded, competitive marketplace?

Example answers: Aldo was an early adopter of ecommerce technology. It expanded the technological solutions it offered customers by adding a suite of mobile apps that helped its sales reps more quickly understand the needs and wants of customers coming into its stores. That app allows Aldo to provide a higher level of customer service and value add by being able to make suggestions on other shoes that match what the consumer already owns.

3. CEO David Bensadoun developed a new retail strategy for Aldo to increase value for customers.

Discuss how specific changes made to the four Ps and personnel will help the company to attract more customers online and in stores.

Example answers: Aldo has been able to design and deliver new products very quickly which allows them to stay abreast of fashion changes and introduce new products on a monthly basis. Their customers are always on the lookout for the next new thing and realize that Aldo can meet their expectations with new offerings.

Their distribution approach lets them deliver to locations around the world taking an omnichannel approach that offers a seamless experience to shoppers regardless of whether they shop in-store, online or via a mobile app. Aldo’s suite of mobile apps adds value to both customers and sales staff. The company uses social media as promotion tool and offers exciting promotions and contests to keep customers coming back.

4. While other retailers focus on pricing, Aldo has invested in staff training and introducing global styles. Discuss how the company can increase sales and the level of customer service through nontraditional initiatives like this.

Example answers: By giving staff technology solutions, they can be alerted to high value customers as soon as they enter a store. This would allow them to spend more time with long-time, loyal customers and potentially sell more products to them by understanding what they have purchased in the past and other products that may match the styles they already own. Once in stores, customers can use the mobile app or digital screens to get product information, freeing up well-trained staff to take on the role of fashion advisor.

Being able to access past purchase information and see what is in customers’ digital carts lets staff make valuable recommendations. This could result in additional purchases and would almost certainly build loyalty. Such non-traditional initiatives create a better shopping experience for customers and, ultimately, excellent customer service.

Video Activities 1-207

Video: Is Big Box Retailing Right for Your Product?

Core Concepts Covered: Choosing Retail Partners Video Summary: Vosges Haut-Chocolat, a seller of premium chocolates for the luxury market, created a new brand called Wild Orchid at a moderate price point, suitable for a wider market. The video describes the problems that arise when they tried (unsuccessfully) to sell their products in partnerships with Walmart and Walgreen’s. The basic lesson: “Our customer wasn’t there.” In addition, they suffered from their relative lack of power compared to their retail partners, giving them no control over how their products were merchandised. The video underscores the importance of choosing retail partners with care, and not being blinded by the sheer size of an opportunity.

Discussion Question #1: Why didn’t the partnership with Walmart succeed?

Brief Answer: First, Wild Orchid was not a well-established brand. Walmart sells many inexpensive products at low prices. That’s the primary focus of the stores. A small brand like Wild Orchid could be easily overlooked in this environment. Second, customers likely to buy Wild Orchid chocolates probably wouldn’t expect to find them in Walmart. This partnership didn’t meet customer expectations; as the video said, Vosges’ customers weren’t there.

Discussion Question #2: Why didn’t the partnership with Walgreen’s succeed?

Brief Answer: In addition to the issues identified relative to Walmart, it appears from what was said in the video that Walgreen’s made some promises regarding special merchandising (giving special attention to higher-end chocolate products) and then did not follow through. And there was nothing Vosges could do about it because of the unequal power in this channel relationship.

Video: Nordstrom Rack: Retail Strategy Core Concepts Covered: How Do Retailers Create Value?, Using the 4Ps to Create Value in Retailing, Multichannel Retailing Video Summary: Since 1973, Nordstrom Rack has been the off-price division of fashion retailer Nordstrom. Nordstrom Rack has been successful in applying the four Ps to its retail strategy. The stores stock high-quality merchandise from well-known designers at discounted prices, creating the “treasure hunt”: the search through ever-changing merchandise for “things they didn’t know they had to have when they walked in.” Nordstrom also sells its products on its website, and on a flash sale site called Hautelook.

Discussion Question: Which benefits of in-store shopping are related to the appeal of the “treasure hunt” discussed in the video?

Brief Answer:  Browsing: Especially since the merchandise assortment varies from day to day, browsing the racks in the store may help consumers to find things, as the video say, that “they didn’t know they needed.”  Touch and feel merchandise: Closely related, as consumers discover “treasures” on the racks, they can experience the merchandise by touching, feeling, and (for clothing) trying it on.

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 

Entertainment and Social Experience: The “treasure hunt” would be entertaining for some consumers, either alone or with friends, especially if they do indeed discover a “treasure.”

Immediate Gratification: While the consumer is excited about his or her find, s/he can take it home immediately, making the experience even more engaging.

Discussion Question: Use the situational factors influencing consumer behavior (from Chapter 4) to compare and contrast consumer experiences in Nordstrom and Nordstrom Rack. In what situations might a consumer choose one store or the other, given that both stores sell the same brands?

Brief Answer:  Purchase situation: When buying an item as a gift or for a particular occasion, it might be easier to shop at Nordstrom, where the assortment is more stable.  Shopping situation—store atmosphere, crowding: Nordstrom Rack stores are less elegantly merchandised; in addition, they are probably more crowded, both in terms of shoppers and merchandise. Bargain hunters probably don’t mind these potential inconveniences, but a shopper who prefers a more relaxed, upscale shopping experience will prefer Nordstrom’s stores.

Additional Teaching Tips This chapter explores the issues manufacturers consider when choosing retail partners. Students evaluate the types of retailers available for distributing products and learn how manufacturers and retailers work together to develop strategies.

The core component of this chapter is distribution intensity of: exclusive, selective, and intensive. It is important to also point out that the type of distribution is ALSO dependent upon the retail outlets or multi-channels that agree to stock the product. Products with high involvement of decision making such as cars, HD TVs, appliances take up space in the showroom and retailers do have a choice on whether they want to give up that space to your brand or another manufacturer’s. Good channel relationships are key especially when it comes to the retailer who will make decisions on how the product is presented to the target market.

This chapter is a good opportunity to stress CRM and the importance of retaining existing customers. It is also a good chapter to mention customization of the product and the importance of an integrated marketing effort.

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Newsletter Teaching Aid Remember to subscribe to “Grewal Levy Marketing News” at https://grewallevymarketing.com/.

Published regularly, each newsletter contains a feature article on current topics, for example Lime Rental Scooters, with discussion questions that can be used in class. Each article is tagged so instructors can quickly identify relevant chapters for the newsletter content. The site also features a selection of related articles, links to current videos that can be used in class, as well as links to archived articles sorted by chapter for ease of use in your class.

Chapter Fourteen: Integrated Marketing Communications TOOLS FOR INSTRUCTORS       

Learning Objectives Annotated Chapter Outline with Instructor’s Notes/Teaching Tips Answers to End of Chapter Learning Aids Marketing Application Questions Marketing Digitally Chapter Case Study Video Activities Additional Teaching Tips Newsletter Teaching Aid

Learning Objectives 1.

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Outline the process that firms use to communicate with consumers List the steps in planning an integrated marketing communication campaign Describe what appeals advertisers use to get customers’ attention Identify how firms determine which media to use Summarize how firms measure integrated marketing communications success Explain the six tools of integrated marketing communication campaigns

Annotated Chapter Outline

Instructor’s Notes

Opening Vignette: L’Oréal The vignette focuses on the success of L’Oréal Canada and some of the innovative ways it has found to deliver messages to consumers. Most companies have moved away from traditional advertising methods such as television and moved to more digital and mobile channels.

L’Oréal uses mobile and video apps, platforms such as YouTube, and out of home executions to

The “I’m Worth” billboard campaign raised awareness for L’Oréal Canada in a novel way because it was planned in conjunction with International Women’s Day. Taking an edgy approach got the attention of the target market and started conversations with new consumers.

The 50th Anniversary celebration of the “Because You’re Worth It” campaign illustrates the value of a

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reach its target audiences.

truly integrated campaign.

Integrated marketing communication (IMC) represents the last of the 4Ps – promotion. It encompasses a variety of communication disciplines: general advertising, personal selling, sales promotions, public relations, direct marketing, and social/mobile media. In combination, these disciplines can provide clarity, consistency, and maximum communicative impact.

The goal of IMC is to ensure all the various marketing mix elements work together to deliver a consistent message. Therefore, IMC takes the best of each communications medium and combines it to achieve the most effective marketing communications campaign possible.

Each of the firm’s marketing communications elements represent part of a whole and offers a different means to connect with the target audience.

LO1: Communicating with Consumers More media choices make it more complex to reach target customers.

New media options fragment communications and make it more difficult and complex to reach the desired target audience.

The Communication Process  The sender must be clear to the intended audience.  The transmitter, such as a creative department, works with the sender to develop marketing communications.  Encoding converts the sender’s idea into a message.  The communication channel is the medium that carries the message.  The receiver reads, hears, or sees and processes the information, then decodes it by interpreting the sender’s message.  Noise refers to any interference that stems from competing messages, a lack of clarity, or a flaw in the medium and thus poses problems for all communication channels.  Feedback loops allow receivers to communicate with the sender and indicate whether the message was received and decoded properly.

Ask students: What media do you use on a daily basis?

This should lead to a discussion of new and alternative media.

How Consumers Perceive Communication  Receivers decode messages differently, perhaps not in the way the sender intended.  Senders adjust messages according to the medium used and receivers’ traits.

Marketers must remember that they do not have control over the decoding process, because each receiver decodes the message in his or her own way.

Marketers must understand how the communication process works and identify possible communication breakdowns.

Group activity to demonstrate noise: Play the game of telephone. Start with a short message, verbally pass it around the room, and see what emerges.

Sample phrase: I caught the train heading for Richmond but went to Richland instead.

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Instructor’s Notes Group activity: Identify advertisements or brand images that often result in different reactions from different consumers (e.g. ads for beer, cigarettes, and personal care products.) Why do these ads generate differing responses? For example, a cigarette ad for smokers may arouse smokers and induce the desire for a cigarette. For former smokers it may induce a sense of loss. For nonsmokers it may not illicit any emotion.

LO2: Steps in Planning an IMC Campaign 1. Identify Target Audience  The success of any advertising program depends on how well the advertiser can identify its target audience.  Knowing the target audience enables the advertiser to develop an appropriate tone, proper media selections, and effective advertising elements.

These steps in an IMC campaign will be covered in detail. Emphasize that although the textbook walks through these steps as they relate to an advertising campaign, the same steps can be used for all IMC communications.

Consider visiting the Strategy Magazine website http://strategyonline.ca/ to show students some current issues in advertising.

Just as the target market is at the centre of all marketing mix decisions, the target audience is at the centre of all advertising-related decisions.

2. Set Objectives  Objectives derive from the overall goals of the marketing program.  The IMC plan refers to a subsection of the firm’s overall marketing plan that explicitly outlines 1. The objective of a campaign.

2. How the campaign can accomplish that objective 3. How the firm can measure the campaign’s success.

Push and pull marketing strategies were discussed in the Distribution chapter but play a role in IMC too.  With a pull strategy, advertisers try to get consumers to pull the product into the supply chain by demanding it.  A push strategy increases demand by focusing on wholesalers, distributors, and salespeople to motivate them to highlight the product, rather than the products of competitors, and thus push the product

The advertising plan must be specific to the identified target audience and include the strategic objectives and tactics to be used. Objectives can be short-term (generate inquiries, increase awareness, prompt trial) or long-term (increase sales, market share, loyalty) and may aim to inform, persuade or remind customers. (These objectives are discussed in more detail in Chapter 15.)

Group activity: Develop an advertising plan for a product you like. What are the objectives of the campaign? How are you going to accomplish those objectives? How will you measure the campaign’s success?

Consumers move through a readiness continuum.

At each stage they need information to help them progress to the next stage. The objective of some IMC campaigns may primarily be to generate awareness (e.g. new technology) while other campaigns aim to have consumers buy a new product. Each IMC tool can be used to move consumers through the buyer readiness continuum

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onto consumers.

in different ways. For example, advertising may do a good job of creating awareness and even knowledge for a company that offers marketing consulting services but it may require a call from a sales person at that company to convince a small business, new start-up venture or entrepreneur to enlist the services of that consulting company.

3. Determine the Budget  Firms must consider how IMC helps them meet their overall promotional objectives.  Expenditures vary over the course of the PLC.  The market and product nature influence the size of budgets.

Setting the promotional budget is not easy, and advertising often is the largest single expenditure in the promotional budget. Thus, firms must carefully weigh the benefits of advertising versus other communications when deciding how much to allocate.

Budgeting Methods  The objective-and-task method determines the budget required to undertake specific tasks and accomplish communication objectives.  Establish a set of communication objectives.  Determine which media best reach the target market.  Determine how much it will cost to run the number and types of communications necessary.

Many IMC elements require significant expenditures, and firms are reluctant to invest in marketing communications without some guarantee of return.

Ask students: What are the pros and cons of each method? Why would a company choose one method over another?

Answer: Each method has advantages and disadvantages. See Exhibit 14.4 for more specifics.

Other methods use prior sales and communications activities to determine communication budgets.  Competitive parity: The firm’s share of communication expenses equals its share of the market.  Percentage of sales: The communication budget is a fixed percentage of forecasted sales.  Affordable budgeting: Marketers forecast sales and expenses, excluding communication, then reserve the difference between sales and expenses, plus desired profit, for the communication budget.

LO3: Appeals Used in IMC 4. Convey the Message Firms must determine the key message they want to communicate to the target audience.

1. A unique selling proposition (USP) defines

The USP concept conveys core benefits to the target audience. The best USPs stand the test of time; consider examples such as those on the slide.

Appeals depend on the target audience, chosen

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the common theme or slogan in a campaign.

2. A USP must be meaningful and unique to be sustainable over time.

media, and type of product/service. Each appeal persuades in different ways. Whereas rational appeals are more cognitive and persuade using rational thought, emotional appeals persuade by triggering an emotional response rather than offering rational arguments.

Firms also must decide what appeal most effectively conveys their message.

1. Rational appeals offer factual information and strong arguments that encourage consumers to evaluate the brand favourably because of the key benefits it provides.

2. Emotional appeals satisfy consumers’ emotional desires rather than utilitarian needs by using emotions to create a bond between the consumer and the brand.

Ask students: How does the Coca Cola polar bear ad make you feel? Would it make you purchase Coke products?

Informational appeals are more cognitive and persuade using rational thought.

Emotional appeals persuade by triggering an emotional response rather than offering rational arguments.

5. LO4: Evaluate and Select Media  Media planning involves evaluating and selecting the media mix.  The media mix refers to the combination of media used and frequency of advertising through each medium.  A media buy means purchasing airtime or print pages and generally represents the largest expense in the advertising budget.  Mass media include national newspapers, magazines, radio, and television and therefore are ideal for reaching many anonymous audience members.  Niche media are more focused and generally used to reach narrower segments with unique demographic characteristics or interests.  Paid, Owned, Earned media distinguishes between the media a company pays for, e.g. tv ads, versus owns, e.g. a blog or website, versus that which is earned as a result of publicity, work-of-mouth, or buzz

The ability of any one media outlet to reach a mass audience is declining due to the fragmentation of media and the proliferation of new media outlets.

This trend represents a double-edged sword, because fragmenting media have also allowed for very fine targeting in media buys.

Paid, Owned, Earned media Marketers must use a combination of media when implementing their IMC plans.  Paid media - tv, print, radio or display ads is used to reach mass markets.  Owned media, e.g. website, is also controlled by the advertiser. Other forms of owned media

Paid media reaches mass markets. Paid media is created & controlled by the advertiser.

Ask students: How would a firm use both mass and niche media in the same campaign? Have them consider give examples of how McDonald’s uses both mass and niche media.

Often firms will use mass media to reach a broad audience with a product message and then choose specific niche media to customize that same message for various audiences.

Owned media is also controlled by the advertiser.

The costs are usually less expensive than paid media.

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include a company’s blog, YouTube channel or Facebook fan page.  Earned media comes as a result of word-ofmouth, buzz, or publicity.

Earned media comes from customers, the public, or the press as the media channel. Brand mentions are given voluntarily by customers and so the company “earns” the visibility.

Choose the Right Medium.  Consumers use different media for different purposes.  Advertisers therefore must match their messages to consumers’ uses.

Ask students: What media do you use and the circumstances in which you use them? For example, do you listen to the radio while driving in your car or watch television when you get home at night?

Use these lists to discuss how the usage context of each medium affects how marketers design messages for them. For example, most people listen to radio in their cars, often by themselves.

Radio is considered a more personal medium, thus marketers often use ads that employ dialogues.

This allows the person to place themselves in the conversation. This same technique cannot be used in print.

Determine the Advertising Schedule.

A continuous schedule runs throughout the year.  Suited for continually and steadily consumed products and services.  Required for products and services that need constant persuasive and/or reminder advertising.

A flighting schedule implements advertising in spurts.  Heavy advertising followed by a period of no advertising.  This pattern generally works well for products whose demand fluctuates.

A pulsing schedule combines continuous and flighting schedules by maintaining a base level of advertising but increasing intensity during certain periods.

6. Create Communications  Translate the message and appeal into words, pictures, colours, and/or music.  The type of medium determines the execution.  The campaign objectives also dictate the

Every advertising campaign has a set duration, and during that period, marketers must determine how often and when to show the ads.

Ask students: In a media buy when would each strategy be employed?

For frequently purchased goods such as soft drinks, most firms use a continuous strategy.

A flighting schedule is often used for seasonal goods since they are only advertised during certain times of the year.

A pulsing schedule is used by firms who have certain fluctuations in their demand and need to increase advertising during the periods of high or low demand.

Ads attempt to make maximum use of the medium’s ability to deliver the message.

Discuss the benefits and limitations of various media. For example, television enables advertisers

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execution.  Although creativity can be important, advertisers must be careful not to let their creativity overshadow the message.

to combine imagery, movement, and music, whereas radio must rely solely on sound to deliver the message.

LO5: Measuring IMC 7. Assess Impact Using Marketing Metrics  Before implementing a campaign, marketers pretest to ensure the various elements work in an integrated, appropriate fashion.  Tracking involves monitoring key indicators, such as daily or weekly sales volume, during the advertising span, to address any problems with the message or medium.  Posttesting evaluates the campaign’s impact after its implementation.

Group activity: Your group has been assigned to assess the impact of a campaign for a new perfume. The goal of the campaign is to increase awareness of the brand within a chosen target market by 20% over the campaign. What measures would you need to take to ensure that the campaign is remaining on track?

Answer: You could design a tracking study that measures sales, website visits and sample requests generated over the course of the campaign. You also might measure awareness levels of the target market at various stages of the campaign.

Results: Measuring IMC Success Firms must understand the outcomes they want to achieve before beginning a campaign. Whether long- or short-term, goals must be explicitly defined and measured.

Group activity: Your group has been assigned to assess the impact of a campaign for a new perfume. The goal of the campaign is to increase awareness of the brand within a chosen target market by 20% over the campaign. What measures would you need to take to ensure that the campaign is remaining on track?

Answer: You could design a tracking study to measure sales, website visits and sample requests generated over the course of the campaign. You might measure awareness levels of the target market at various stages of the campaign.

Measurements indicate whether each step has motivated consumers to move to the next step in the buying process.

1. Frequency indicates how often the audience is exposed to a communication within a specific period of time.

2. Reach refers to the percentage of the target population exposed to a marketing communication.

3. Gross rating points (GRP) equal reach multiplied by frequency.

4. Web-tracking software indicates how much time viewers spend on Web pages and the number of pages they view.

5. Click-through tracking measures how many times users click on banner advertising on Web sites.

6. Online couponing allows consumers to print coupons directly from a site and then redeem them in a store.

7. Online referring prompts consumers to fill out an interest or order form to receive a referral

Ask students: How do firms determine whether their IMC strategy has worked?

Answer: It depends on the IMC objective. If the objective is to create awareness for a new product, then the firm would measure increases in customer knowledge and awareness. If it were to generate sales, like an ad in the paper, then sales would be the objective measure.

Every communication may be measured in terms of reach and frequency. Remind students that because of the lagged effect, marketers must not only expose the target audience to the message but also ensure that it has multiple opportunities to view it. This combined measure is GRP.

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to an offline dealer that offers the product or service of interest.

Technology provides new products for tracking online communications, as well as new communication formats.

Group activity: List the types of information firms might gather from Web-tracking software, clickthrough tracking, online couponing, and online referrals. What can firms do with this information?

Many firms use this type of information in direct mail or other campaigns, it can also be used to customize the website and to build a network of buyers that are interlinked.

Answer: Firms can use this type of information to better understand the consumer decision process and, their purchase patterns. This information can used to redesign the website, develop loyalty programs, and direct mail/e-mail campaigns.

Planning, Implementing and Evaluating IMC Programs – an Illustration of Google Advertising

Ask students what Transit would want to measure if they were buying Google adwords for “sneaker store” and “NYC sneakers”. The metrics are found in the textbook in Exhibit 14.8.

He can see his total cost in column 3 and the sales from his adwords in column 4. The ROI in column 6 is higher for “sneaker store” due to its lower cost even though the sales were a bit lower.

Ask students how else they can use the website for their IMC objectives? Refer to Exhibit 14.9.

Ask students why this was important for Transit.

They should comment that the click throughs tell us nothing about the attitude, only the actions of the consumer.

LO6: Integrated Marketing Communication Tools For any communications campaign to succeed, companies must deliver the right message to the right audience through the right media.

The goal of IMC is to ensure all the various marketing mix elements work together to deliver a consistent message. Therefore, IMC takes the best of each communications medium and combines it to achieve the most effective marketing communications campaign possible. There are six key IMC tools, most of which can be used in both online and offline environments. Each tool can

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Instructor’s Notes range from being passive to very interactive. To get the right message to the right audience through the right tool and medium, an IMC planner must understand how each medium communicates and how to combine it with other media to generate the most impact.

Advertising is a paid form of communication from an identifiable source, delivered through a communication channel, and designed to persuade the receiver to take some action, now or in the future.  It is extremely effective for creating awareness of a product or service and generating interest.  Since the 1990s, advertising’s share of total promotional dollars has fallen as budgets for other forms of promotion increase.

Note: Chapter 15 covers advertising, the most visible element of IMC, in depth.

Personal Selling  Personal selling is the two-way flow of communication between a buyer and a seller, designed to influence the buyer’s purchase decision.  It can take place in various settings, including face-to-face, video teleconferencing, on the telephone, or over the internet.  The cost of communicating directly with potential customers is high compared with other forms of promotion, but it is the best and most efficient way to sell certain products and services.

Note: Chapter 15 covers personal selling, the most costly form of IMC, in detail.

Sales Promotions  Sales promotions are special incentives or excitement-building programs that encourage the purchase of a product or service.  They include coupons, rebates, contests, free samples, and point-of-purchase displays.

Note: Chapter 15 covers sales promotion in detail.

Direct Marketing  Direct marketing includes sales and promotional techniques that deliver promotional materials to potential customers using a wide variety of tools.

As advertising has declined as a percentage of the total communications budget, direct marketing has increased.

Ask students: Think about how an advertisement has made you aware of or interested in a specific product.

You can use students’ chosen advertisements as the basis for subsequent discussions.

Ask students what “advertainment” might be? It is advertising that is focused on entertaining the end user.

Ask students: For what kind of purchases is personal selling most appropriate?

Their answers should note that this form of IMC works best when the purchase is complicated, because the salesperson can customize the communication to meet the needs of that specific buyer and purchase situation, which other IMC elements cannot.

Remind students that sales promotions can be used in a wide variety of situations to stimulate demand among either end users or other channel members.

Ask students: What characteristics of direct

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 The greatest increase in aggregate spending has been devoted to direct marketing.  Customer databases enable marketers to identify and track consumers over time and across purchase situations.

marketing might explain this increased popularity?

It allows marketers to personalize messages. It enables them to communicate with an audience that is more likely to respond to their efforts.

Note: While all forms of direct marketing are shown, the following section focuses on direct mail/email, catalogues, direct response television, and kiosks. Personal selling is addressed in Chapter 15.

Direct Marketing Characteristics

Direct marketing and plays an important role in selling both products and services. Stress the four defining characteristics that make it different from conventional retailing.

Direct Mail/E-mail

Ask students: How much mail do you receive that is not well-targeted?

Most likely students will tell you it is “junk mail.”

Use this point to stress the need to start with a good list.

Catalogues

Ask students: How many of you remember thumbing through the Sears Wish Book as children? Ask what types of products do they order from catalogues versus buying in a store?

DRTV

Most students will associate DRTV with longer infomercials such as those used to sell the George Foreman grill, but they can also be shorter commercials.

Kiosks

Students may be familiar with kiosks in malls at holiday times that sell gift items. Kiosks are also showing up in airports, e.g. Best Buy and The Source sell batteries and tech products and accessories from unstaffed vending machines.

Social and Mobile Media Websites, social and mobile media make up some of the many forms of online marketing. Other forms are discussed in more detail below.  Corporate blogs contain periodic posts on a common Web page.

The Internet has radically altered the retail marketplace. Many traditional bricks-and-mortar retailers create synergy between online and traditional retailing. Omnichannel customers buy more than single channel customers.

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 Social media covers a wide variety of platforms such as Facebook, LinkedIn, Twitter, YouTube, TikTok, Pinterest, etc.  Types of social networks: Social Network Sites, Thought-Sharing Sites, Media- Sharing Sites  Mobile apps and text messaging represents an increasingly important way for marketers to communicate with consumers.

As technology improves, new media emerge (e.g. social networking sites) and marketers must incorporate them into the IMC mix.

Social and mobile media give marketers new opportunities to excite consumers, educate them, help them experience their market offering, and ultimately engage them. Different types of social media allow marketers and customers to connect with each other in a two-way dialogue. Social media also give customers the ability to build connections with and influence each other.

More in-depth coverage of social and mobile media can be found in Appendix 14A.

The 4E Framework for Social Media  Excite the Customer  Educate the Customer  Experience the Product or Service  Engage the Customer

To excite customers, an offer must be relevant to its targeted customer.

Marketers must take advantage of the opportunity to educate potential customers about its value proposition and communicate the offered benefits.

Experience - useful contributions may be the vivid information about a firm’s goods and services how they work, how to use them, and where they can be obtained.

By encouraging the use of social media tools such as blogging and micro-blogging, firms ensure that customers actively engage with the firm’s products, services, and their own social networks.

Public Relations (PR) Public relations refers to the organizational function that manages the firm’s communications to achieve a variety of objectives, including  Building and maintaining a positive image.  Handling or heading off unfavourable stories or events.  Maintaining positive relationships with the media.

As the cost of other promotional media has increased, PR has grown in importance, but its influence has declined as consumers become more skeptical.

Ask students: Do you view PR as credible, because it is not “advertising,” or not credible, because it comes from the company?

Cause-related marketing refers to commercial activities in which businesses and charities partner to market an image, product, or service for their mutual benefit.

Athletic clothing and equipment firms often sponsor popular athletes and their teams. What do these firms do when athletes change teams?

Sponsorships occur when corporations support

Although the various tools in the PR toolkit work differently, the most common and visible is sponsorship. Firms choose sponsorship opportunities that appeal to their target market and are consistent with their branding message and strategy.

Ask students: What corporate sponsorships represent consistent messages?

Ask students: How does the sponsorship of athletes benefit firms? How might it harm firms?

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Annotated Chapter Outline

Instructor’s Notes

various activities, usually in the cultural, sports, or entertainment sectors.

What can firms do when an athlete they sponsor does something to embarrass the brand?

With a popular athlete, firms stand to gain a lot of sales, but when a star athlete becomes a liability, firms quickly distance themselves and focus on another branding element.

Marketing Applications 1. Assume that the contemporary apparel company rag & bone has embarked on a new IMC strategy. It has chosen to advertise on TV during NBC Nightly News and in print in Time magazine.

The message is designed to announce new styles for the season and uses a 17-year-old woman as the model. Evaluate this strategy and, if appropriate, propose an alternative.

Instructor’s Notes: To succeed, each element of an IMC strategy must have a well-defined purpose and support and extend the message delivered by all the other elements. This question challenges students to determine which elements of rag & bone’s IMC strategy might miss the mark.

Example answers: rag & bone’s new IMC strategy will not be very successful because its target audience of teenage, fashion-forward girls probably do not watch NBC Nightly News or read Time magazine. The message might be right, but the media for delivery are not. The company might be better off showing the advertisement during The Voice and putting the print ad in a magazine such as Seventeen.

2. It’s holiday time, and you’ve decided to purchase a jewellery item for the person of your choice at Tiffany & Co. Evaluate how Tiffany’s advertising, personal selling, public relations, and digital media might influence your purchase decision. How might the relative importance of each of these IMC elements be different if your parents were making the purchase?

Instructor’s Notes: Student must imagine the relative weight they, as well as their parents, might put on each element of Tiffany’s IMC strategy. Student likely will weight on public relations and digital media more heavily, whereas their parents probably appreciate personal selling more.

Example answers: Tiffany’s advertising might pique my interest about the possibility of seeing what products it has to offer. Through its PR, the company may have gotten one of my favourite celebrities to wear its products, which subtly sends me the signal that I might want such products as well. The company’s Web site could increase my interest and desire to buy something. Finally, personal selling by a Tiffany’s sales associate in the store location would help me pick out the right gift, and I probably would make my purchase at that point. If my parents were making the purchase however, they might not pay as much attention to the PR or digital media elements and instead rely almost completely on personal selling.

3. A hotel runs several advertisements in the student newspaper of a local university, promoting its Sunday brunch menu. The ads increase the number of people visiting its restaurant, but only

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slightly. Is the campaign necessarily a failure? What other goals might the hotel have for this advertising campaign?

Instructor’s Notes: This question reinforces the concept of target market, advertising appeal, media choices, and short versus longterm objectives.

Example answers: Students’ responses could focus on various factors, including increased sales of the Sunday brunch or increased awareness among students that may enhance future business.

The short-term objective of the ad is to promote the new Sunday brunch to customers and have current customers go to the Sunday brunch more often. The increase in sales, while slight, is still a sign that the campaign may be heading the right direction. The long-term objective is probably to increase consumers’ awareness of the Sunday brunch, what it should offer, pique their interest, and plant the seed in their mind that they could choose to go to Sunday brunch in the future.

4. Bernard’s, a local furniture company, targets college students with apartments and households of young people purchasing their first furniture items. If you worked for Bernard’s, what type of media would you use for your advertising campaign? Justify your answer.

Instructor’s Notes: To engage in media planning and determine the proper media mix for Bernard’s, students must consider what will enable the store to target its desired market segments clearly and consistently.

Example answers: To reach the target consumer segments, Bernard’s should use a combination of local television advertising, newspaper ads, and Internet marketing. Local television ads would give the firm wide reach in the geographic area, especially if Bernard’s shows them during popular local events, such as televised college sporting events or local home-improvement shows. Newspaper ads would reach other members of these consumer segments, especially if the store puts its ads in a free weekly paper, which many young people prefer to traditional newspapers. Finally, it could use Internet banner ads on Web sites commonly frequented by these segments.

5. Should Bernard’s use continuous, pulsing, or flighting for its advertising schedule? Why? Instructor’s Notes: In extending their consideration of the appropriate strategy for Bernard’s, this question asks students to think about the three different schedules and which will be most effective in this case.

Example answers: Bernard’s should use a pulsing schedule and ensure it maintains a base level of advertising (e.g., newspapers and the Internet) to communicate its existence and the products it offers. Then, it should increase advertising intensity during specific periods, such as when students come back to school or during graduation, when more target consumers might make furniture purchases.

6. Social media, such as Instagram, are some of the newest tools that firms are using in public relations programs. Visit Red Bull’s Instagram account and browse through its recent posts. How is

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Red Bull using Instagram in its public relations program? How does its public relations program impact other aspects of its marketing communications?

Instructor’s Notes: Students should understand that social media can be a powerful public relations tool.

While it costs the company money, Red Bull’s sponsorship generates invaluable earned media.

Example answers: Answers will vary; however, students should discuss how Red Bull uses Instagram as a public relations tool that supports its other marketing communications. For example, sponsoring events is a major component of Red Bull’s public relations program and Red Bull frequently uses Instagram to promote them. Red Bull uses Instagram to promote events before, during, and after they occur by posting pictures, videos, and links to event information multiple times a day.

Red Bull’s public relations program positively affects other elements of its marketing communications because it helps maintain a positive public image of the company. Through the sponsorship of these events, Red Bull gains media attention that strengthens its association as a high energy brand. As an energy drink company at its core, this association supports its overall marketing mix.

7. Procter & Gamble sends new parents home from the hospital with a sample of Pampers diapers, and it has started sending Fusion ProGlide razors to each young man in America on his 18th birthday. What are the likely goals of such marketing tactics? How could Procter & Gamble measure how well it has achieved these goals with its free giveaways?

Instructor’s Notes: Students’ responses could focus on various factors, including increased sales of the promotional item, or increased awareness among consumers that may enhance future business.

Example answers: Procter & Gamble is giving away products with the intention of having customers experience the products. The goal of this tactic is to have customers use the product and then begin purchasing it on a regular basis. To measure the success of the program, Procter & Gamble should continue to contact the customers and solicit their purchasing behaviours.

8. As an intern for Michelin tires, you have been asked to develop an IMC budget. The objective of the IMC strategy is to raise Michelin’s market share by 5% in the United States in the next 18 months. Your manager explains, “It’s real simple; just increase the budget 5% over last year’s.”

Evaluate your manager’s strategy.

Instructor’s Notes: If they summon the objective-and-task method for budgeting, which determines the budget according to the specific tasks required to accomplish communication objectives, students should be able to discern the flaws in the manager’s recommendation.

Example answers: The manager’s strategy probably will not work, because there is no guarantee that increasing the budget by 5% will lead to a corresponding 5% increase in market share. The manager’s strategy also assumes that marketing communication costs have remained constant, when media rates for TV, print, and even digital media probably change considerably over time. Increasing the budget by 5% might mean just keeping pace with media price changes!

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9. Imagine that you work for Puma and are tasked with producing an IMC campaign with a goal of increasing market share by three percent. First, you decide to use traditional and online advertising and public relations to achieve this goal. Finally, you determine the cost of each product to determine the communications budget. What type of IMC budgeting process are you using? Evaluate your strategy compared to a competitive parity budgeting process.

Instructor’s Notes: The textbook examines the budgeting approaches and discusses the advantages and disadvantages of each.

Example answers: Students should recognize that they are using an objective-and-task method, which involves setting objects, determining the media, and evaluating costs to set the budget. In comparison, a competitive parity method would set the budget so that the Puma’s share of communication expenses would equal its share of market. So, if Puma has 10 percent market share of running shoes, it would spend 10 percent of the total amount that it and all its competitors spend on advertising running shoes. To achieve its goal of a three percent increase in market share, Puma would increase its communication budget by three percent compared to the previous year. Although the competitive parity method would be simpler, it has nothing to do with achieving any IMC objective. If Puma uses this method and decides it needs to run more advertisements to achieve its market share objective, it may not budget enough money. Therefore, the objective-and-task method is superior to the competitive parity method.

10. You heard a friend talking about GNC’s healthy drinks and decided to visit its website. Assume that GNC used the services of behavioural advertising firm Tacoda to track how consumers move through its website and to create more targeted advertising. Would you view these efforts as an invasion of privacy? Do you believe this action constitutes an ethical IMC strategy? How will it affect your attitude toward GNC and likelihood that you will purchase its products?

Instructor’s Notes: This scenario forces students to question to what degree tracking efforts might violate ethical standards.

Example answers:  Most students will not see tracking via cookies on a website or ads targeted specifically to them as an invasion of privacy. In some cases, they may find such customization of advertising messages helpful if they are interested in the products. However, they may state that consumers should be made aware that such tracking efforts are being used. Some students may feel that this action disrespects their privacy rights in terms of avoiding unwanted or unsolicited marketing.  The discussion of whether this action constitutes an ethical IMC strategy could lead to a good inclass discussion since this issue may not be seen as a black and white.  Students who are interested in GNC products may not care that their movement through the website is being tracked or that ads are being created to better target them as a result. However, a student who is simply visiting the site out of curiosity because of the friend’s comment, may be less enamoured with this approach.  Students who see the actions as unethical may think very negatively of GNC and avoid buying the product for just those reasons—no matter how good the product might actually be!

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Marketing Digitally 1. Visit http://www.taxi.ca to view the website of Taxi, a well-known Canadian IMC consulting firm.

The site contains a lot of information about what IMC is and how it can be used effectively by a wide variety of companies. Of particular interest is the case studies section. Locate the case studies link, read a case, and discuss the following: What were the goals of the IMC campaign?

Which IMC components were used in that particular campaign? How do those components contribute to the success of the IMC campaign in achieving its stated goals?

Instructor’s Notes: To deepen students’ understanding of how the different elements of an IMC campaign can achieve a particular goal, this question asks them to consider a specific case study by Taxi.

Example answers: One case study on the website at the time of writing refers to an IMC campaign for the LCBO (Liquor Control Board of Ontario), whose goal was to increase sales in the spirits category. The challenge was to expand the appeal of cocktails to people in their late 20s and early 30s who were not traditionally exposed to cocktail culture. Most people assumed cocktails were complicated to make so the “Shake it Up” campaign was launched to show that making cocktails could be fun and easy. The campaign extended to the web, signage in stores, shopping bags and a cocktail-themed music CD. The campaign ran for four weeks and increased sales by 3.5% or $2.8 million. Web traffic was up 200% over the same period in the previous year. LCBO.com experienced the highest ever one day total number as 10,000 unique visitors came to the site.

2. The Canadian Direct Marketing Association is the primary source of information about direct marketing activities for both academics and practitioners. The website for the CMA, at http://www.the-cma.org/, contains a wealth of information about direct marketing practices and self-regulation. How many different target markets does the CMA address on its home page? Click on the “Consumer Information” tab. What services does the CMA provide for consumers? Why do you think it offers those services? Now return to the home page and click on the “Marketing Resources” tab and check out some of the articles, case studies or white papers and reports.

Instructor’s Notes: The CMA offers an excellent source for direct marketers and consumers, so students should get a good sense of the available resources as they investigate this question.

Example answers: The CMA provides various services to consumers, including educational programs on how to be “cyber savvy” and secure online, guidance on how to stop direct marketing phone calls to their homes, information about consumer rights, and suggestions for keeping children safe online. It offers these services as a way to improve the reputation of direct marketing in the marketplace and to avoid liability by informing consumers openly. The CMA website includes tips for dealing with SPAM and identifying fraudulent offers. CMA members provide consumers with information on their products and services using addressed mail, telephone, television, radio, newspaper, magazines and the Internet. Members must abide by a Code of Ethics that requires adherence to high standards of honesty, truth, accuracy and fairness in all customer dealings.

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End-of-Chapter Case: KIND Snacks for a Kinder World 1. Describe the target market for KIND bars.

Example answers: Student responses, specifically target markets, may vary because the target market is not specifically defined in the case. Based on the case information, the target market for KIND bars are consumers who are interested in the food products they consume as well as the community and broader world.

KIND sells to consumers who care about taste, real ingredients, and creating a better world. KIND also sells to those who are looking for a high-protein snack, typically athletes and those who follow a healthy lifestyle or who follow high protein diets. KIND also produces fruit-based products that are also sold to parents who are looking for low glycemic index snacks for their children.

2. In considering what types of people does KIND sells to how could it change its message to appeal to different groups of people?

Example answers: To appeal to different groups of people, KIND could focus on the nutritional value of its bars and fruitbased snacks as a meal replacement for people on the go. It could also try to appeal to consumers who would normally reach for a chocolate bar and show them how making the choice of a KIND product would be better for them.

3. What other IMC tools could KIND use beyond the ones noted in the case?

Example answers: KIND could consider using more sales promotions tactics such as running a contest, starting a loyalty program, as well as product placement. It could use influencer marketing in its social media efforts and try to attract athletes known for living healthy lifestyles, chefs, or nutritionists.

Video Activities Video: Making a Market: Specialized Bicycle Components Core Concepts Covered: Social, Mobile, Online Video Summary: Specialized Bicycle Components (SBC), a manufacturer of bikes for cycling enthusiasts, is committed to using a robust collection of social media tools. SBC uses YouTube, Instagram, Facebook, Twitter, and microsites, in each case making specialized offerings available to match the interests of different cycling niches (mountain bikers, road bikers, racers, and so on). They know that their target market particularly values high-quality video, and SBC seeks to provide exciting and engaging content to meet this need. They also provide detailed content on pro cyclists, focusing on stories about individual riders.

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Discussion Question: The video mentions that SBC offers “stories” about bikers on its site. It takes time and costs money to create this kind of content. (You may want to show this page https://www.specialized.com/ca/en. Choose “Stories” from the SBC website menu https://www.specialized.com/ca/en/story-landing). Is this worth doing? Why or why not?

Brief Answer: First, it gives customers a reason to return to the website periodically to read new stories.

Second, an individual Googling the name of one of these pro cyclists might discover the SBC website in this way.

Video: IMC at Dunkin’: National Donut Day Core Concepts Covered: Advertising, Social & Mobile Media, Sales Promotion Video Summary: National Donut Day began in 1938 and has become an important day among donut companies, especially Dunkin’ Donuts. This video details the company’s 2018 IMC campaign using traditional media, public relations, and social media to create a consistent message across all media.

Some of the unique things they used included offering a free Lyft ride up to $10 to Dunkin’ to get a free donut with the purchase of a beverage, having filters for Instagram to generate user-created content, and sending media representatives donuts with their pictures printed on them. These are just a few of the techniques the video highlights. Metrics used at the end of the campaign showed success with Dunkin’ having 57 percent of the social media conversation about donuts that day and increased sales companywide.

Discussion Question #1: Which media vehicles did Dunkin’ use in its IMC campaign?

Brief Answer: Dunkin’ used advertising, social media, public relations, and direct marketing to execute its IMC campaign. The video discusses the use of all of these, especially social and mobile media. This question can lead to a rich discussion about IMC’s ability to convey similar messages to different audiences.

Discussion Question #2: How did Dunkin’ assess the effectiveness of its IMC campaign?

Brief Answer: The company used a heat map to identify where and how much communication about donuts was happening via social media. After the campaign, it used metrics to determine its share-of-market/shareof-voice in the social communication on social media. It obtained 57 percent. It also evaluated sales and experienced a companywide increase.

Additional Teaching Tips This chapter addresses the steps in planning an integrated marketing communication campaign.

Instructors should review the advertising budget strategies in detail. The chapter also introduces the six tools of integrated marketing communications campaigns. Students generally have a good idea of sales promotions as consumers but may not be as familiar with public relations and personal selling.

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An important concept is the IMC effort is illustrated in Exhibit 14.9 which shows the six tools of integrated marketing communications and how they work online and offline. While students often understand these components are present, what should be emphasized is that they all have to work together to deliver one, unified, unique message to the target market. For example, the brand logo should be present on advertisements but also used in electronic media and direct marketing. The same “big idea” or slogan should be used in the personal selling process, advertising, public relations efforts, etc. Remaining consistent with ONE message flowing through the elements of the promotional mix will allow more opportunity for the message to break through the “noise” enabling for brand recognition of a logo, or slogan, or shape of a package to trigger brand recall of your specific product when the consumer compares like brand.

Students often see advertisements but do not realize that the ad as well as the ad message has undergone a comprehensive process before the consumer ever sees or hears it. Instructors may want to divide students into 7 groups and assign each group one role that corresponds to one of the steps in the ad campaign planning process. Students will learn that they need to work cooperatively in order for the ad to be successful. After group 1 identifies the target market for one particular product (perhaps a new cereal) they hand it over to group 2 who sets the advertising objectives. This may take a bit of time (step 6 can be a rough sketch due to time constraints) but it is interesting to observe the class and see what the final outcome is. Online Tip: Have students in the online platform also go through the process either in teams or individually using the discussion board. One online class could be divided into three or four representing a product with 7 parts within which represent the steps in the ad campaign.

Product A has a discussion thread where the person assigned “identify target market” posts, then the person who is assigned Product A, step 2, then posts, etc. which will culminate into a full process of going through the steps. Product B would have a discussion thread, as would Product C and Product D.

Newsletter Teaching Aid Remember to subscribe to “Grewal Levy Marketing News” at https://grewallevymarketing.com/.

Published regularly, each newsletter contains a feature article on current topics, for example Lime Rental Scooters, with discussion questions that can be used in class. Each article is tagged so instructors can quickly identify relevant chapters for the newsletter content. The site also features a selection of related articles, links to current videos that can be used in class, as well as links to archived articles sorted by chapter for ease of use in your class.

Chapter Fifteen: Advertising, Sales Promotions and Personal Selling TOOLS FOR INSTRUCTORS   

Learning Objectives Annotated Chapter Outline with Instructor’s Notes/Teaching Tips Answers to End of Chapter Learning Aids Marketing Application Questions 1-228

   

Marketing Digitally Chapter Case Study Video Activities Additional Teaching Tips Newsletter Teaching Aid

Learning Objectives 1.

2.

3.

4.

5.

Describe advertising and three objectives of advertising Summarize the regulatory and ethical issues of concern to advertisers Explain how sales promotions supplement a firm’s IMC strategy Describe personal selling and how it adds value for customers Identify the steps in the personal selling process

Annotated Chapter Outline

Instructor’s Notes

Opening Vignette: Roll Up t to Win Tim Hortons is beloved by Canadians and has more than 4,000 restaurants across the country. It uses advertising, public relations and sales promotions in its marketing communications. Its Roll Up to Win annual contest has been running for over 35 years and has successfully brought customers back time and time again. In 2019 the company was criticized because of the environmental impact of the 300 million disposable cups the contest uses. The COVID-19 pandemic accelerated a number of initiatives, including moving the contest online.

Ask students if their purchasing habits changed when Tim Hortons changed from Roll Up The Rim to Roll Up to Win contest.

Advertising is a paid form of communication, delivered through media from an identifiable source, designed to persuade the receiver to take some action, now or in the future.

Many things people call advertising are not advertising at all. Word-of-mouth “advertising,” according to the definition, fails to meet several elements.

Ask how the COVID-19 pandemic affected the Roll Up to Win promotion from their perspective as consumers.

Word-of-mouth advertising and political advertising are not technically considered advertising, and they are not regulated in the same way as regular advertising is.

The AIDA Model Consists of Attention, Interest, Desire and Action. At each stage, consumers judge whether to take the next step.  Attention: The sender gains the attention of consumers.  Interest: Communication increases consumers’ interest and persuades them a product is worth

The AIDA model provides a basis for understanding how marketing communications works. Consumers move through a readiness continuum. At each stage they need information to help them progress to the next stage. The objective of some IMC campaigns may primarily be to generate awareness (e.g. new technology such as adaptive

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Annotated Chapter Outline

Instructor’s Notes

investigating.  Desire: The IMC message moves the consumer from “I like it” to “I want it.”  Action: The ultimate goal of any marketing communications is to drive the receiver to action.  The lagged effect refers to a delayed response to a marketing communications campaign; because consumers generally require several exposures to an ad they process its message.

cruise control in cars) while other campaigns aim to have consumers buy a new product (e.g. Apple Watch.)

Each IMC tool can be used to move consumers through a buyer readiness continuum in different ways. For example, advertising may do a good job of creating awareness and even knowledge for a company that offers marketing consulting services but it may require a call from a sales person at that company to convince a small business, new startup venture or entrepreneur to enlist the services of that consulting company.

Ask students to pick a product. The decision to buy this product must be somewhat complex. Then walk them through the AIDA process.

Ask students: Other than purchase, what can IMC prompt consumers to do?

Possible answers include behavioural changes (don’t drink and drive), attitude changes (that product is high quality), or physical actions (pick up the phone, log on to the Web site, volunteer).

Sometimes consumers don’t act immediately after receiving a marketing communication because of the lagged effect —a delayed response to a marketing communication campaign.

LO1: Advertising Objectives An advertising campaign has three broad Advertising objectives derive from the overall goals objectives: inform, persuade, or remind the target of the marketing program. audience.

The advertising plan refers to a subsection of the firm’s overall marketing plan that explicitly outlines: 4. The objective of an advertising campaign.

5. How the campaign can accomplish that objective 6. How the firm can measure the campaign’s success.

Informative advertising creates and builds brand awareness.  The ultimate goal is moving the consumer through the buying cycle to purchase.

Group activity: List brands that might benefit from focusing on informative, persuasive, and reminder advertising. Next, list several brands that enjoy top-of-mind awareness for you (e.g., when you

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Annotated Chapter Outline

Instructor’s Notes

 It is crucial when consumers have little information about the specific product.

think of a cola, does Coke pop into your head unprompted?)

Persuasive advertising motivates consumers to take action, usually during the growth and early maturity stages of the PLC.

Companies like Exxon-Mobil advertise their commitment to the environment, not their products, to inform, persuade, and remind consumers of positive thoughts about the company, which can prompt the purchase of products and services.

Reminder advertising prompts repurchases.  Effective for products that have gained market acceptance and are in the maturity stage of the lifecycle.  Top-of-mind awareness occurs when a product or brand holds a prominent place in people’s memories that triggers a response without them having to put any thought into it.

Focus of Advertisements A. Product-focused advertisements inform, persuade, or remind consumers about specific products or services.

B. Institutional advertisements inform, persuade, and remind consumers about issues related to places, politics, an industry, or particular corporations.

The “Got Milk” campaign generates demand for the entire milk category; an advertisement for a single brand of milk tries to generate selective demand for that particular brand. The two are not mutually exclusive; when Coca-Cola introduced Diet Coke, it created both industry wide demand for diet soda and product specific demand for Diet Coke.

Ask students: Why might Esso be particularly interested in institutional advertising? Oil and Gas companies are often accused of engaging in practices that are harmful to the environment.

Therefore, it is important for the firm to stress that they are an environmentally responsible firm to negate some of this criticism.

 Product Placement is the inclusion of a product in nontraditional situations, such as in a scene in a movie or TV program.  Public service advertising (PSA) centers on public welfare and generally is sponsored by nonprofit institutions, civic groups, religious organizations, trade associations, or political groups.  Social marketing applies marketing principles to a social issue to bring about attitudinal and behavioural changes.

Public service announcements are designed to raise awareness of public welfare issues and receive free airtime, as required by the CRTC.

LO2: Regulatory and Ethical Issues in Advertising

Most marketing communications have an

Ask students: What issues have you seen “advertised” in PSAs? Are they effective?

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Annotated Chapter Outline

Instructor’s Notes

Federal Agencies Regulate Advertising  The Competition Bureau enforces truth-inadvertising laws and defines deceptive and unfair advertising practices.  The Canadian Radio-television and Telecommunications Commission (CRTC) regulates all aspects of the Canadian broadcasting system, e.g. communications over radio, television, satellite, and cable.  Health Canada’s Food and Drug Act regulates food, dietary supplements, drugs, cosmetics, medical devices.  Advertising Standards Canada is a selfregulatory body that monitors voluntary industry codes.  Many product categories fall under selfregulatory restrictions or guidelines.  Puffery is legally exaggerated praise that stops just short of deception.

economic motivation, so they do not have the same level of protections as non-economically motivated communications. The first is regulated, meaning that the firm engaging in it is responsible for the contents of the message.

Unlike in many European countries, puffery is legal in Canada. Generally, these claims are so outrageous that no rational consumer would believe them.

Ask students: Could puffery ever be considered deceptive? If so, how should we draw the line between puffery and deception? The line between puffery and deception is a fine one. Obvious exaggerations are not the problem. More subtle issues create the problem. The line is currently drawn which determines how many individuals hold a false belief as a result of an advertising. It is a very grey area of advertising law.

For an example of false advertising, you could discuss the Competition Bureau’s $300,000 penalty against Beiersdorf Canada, the distributor of Nivea products. It claimed that its My Silhouette cream could erase as much as 3 cm from targeted body parts such as thighs, hips, waist and stomach while making the skin better toned and more elastic. TV ads said that the cream “visibly firms skin in just four weeks.” The Competition Bureau ruled that Beiersdorf misled consumers by claiming a person could slim down by simply applying a skin cream.

LO3: Sales Promotion Sales Promotions can be used to stimulate sales by either the end user consumers or to stimulate channel members to sell more of a given product/service.

If focused on the end user, the promotion is using a “pull strategy.”

Remind students that as advertising has decreased as a portion of total marketing communications budgets, sales promotions have increased.

Promotions can be used to stimulate sales by either the end user consumers or to stimulate channel members to sell more of a given product/service. If focused on the end user, the promotion is using a “pull strategy.” If focused on channel members, it is using a “push strategy.”

If focused on channel members, it is using a “push strategy.”

Consumer Sales Promotions

Sales promotions occur either in conjunction with

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Annotated Chapter Outline

Instructor’s Notes

 Coupons offer a discount on the price of specific items when purchased  Deals are a type of short-term price reduction, e.g. a price lower than the regular price; a buy one, get one free offer  Premiums offer an item for free or at a bargain price  Contests are brand-sponsored competitions requiring some form of skill or effort  Sweepstakes offer prizes based on a chance drawing of entrants’ names  Samples offer potential customers the opportunity to try a product or service before they make a buying decision  Loyalty Programs are designed to retain customers by offering premiums or other incentives  POP Displays are merchandise displays located at the point of purchase  Rebates are price reductions where a portion of the purchase price is returned by the seller to the buyer

an advertising campaign or as a stand-alone component of a marketing communications plan.

In either case, they must be consistent with the brand image.

Pop-up stores exist for a limited time and focus on new or limited-edition products.  May be offered by a retailer, manufacturer, or service providers.  Give consumers a chance to interact with the brand.  Build brand awareness.

Ask students: What type of sales promotions do you feel are most effective and why?

This ad represents a demonstration. The promotion encourages consumers to increase their level of interest by offering demonstration of the coffee maker.

In recent years, firms have become more creative in the types of promotions used.

In recent years, firms have become more creative in the types of promotions used.

Ask students: How many of them as children collected promotions in Happy Meals or other children’s products? The Happy Meal for years was McDonald’s most successful product, primarily driven by the children’s desire for the toy inside.

Many of the Happy Meal toys have become sought after collectibles. For example, the Beanie Baby promotions were so successful that McDonald’s ran out of the featured item for the week within hours of its initial distribution.

Cross-promoting occurs when two or more firms join together to reach a specific target market.  The products must appeal to the same target market.  In combination, the products must create value for consumers.

Trade Sales Promotion Tools Far more money is spent on trade channel sales promotions than on consumer sales promotions.

Trade channel promotions help convince retailers and wholesalers to stock a new brand, give it eyelevel shelf space, promote it in their flyers and ads.

Trade promotion tools include:

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 Discounts and Allowances  Co-operative Advertising  Sales Force Training Evaluating Sales Promotions using Marketing Metrics

Many sales promotion opportunities undertaken by retailers are initiated by manufacturers.

LO4: Personal Selling  The two-way flow of communication between buyers and sellers designed to influence the buyer’s purchase decision.  Personal selling can take place in various situations: face-to-face, video teleconferencing, on the phone, or over the Internet.

Many people are shocked to learn how many employees hold sales positions. Your students may have had experience in retail sales and think that all sales jobs are like that. Remind them that though many retail positions exist, professional sales positions involve a more involved skill set and offer much higher rewards.

Benefits of a professional selling career  Lifestyle  Job variety  Lucrative  Frontline emissaries for the firm, which makes personal sellers very visible to management

Ask students: Do you want to plan your own schedule and decide how much money you will make? These are just two of the many benefits of professional selling. The visibility of sales positions also offers many opportunities for advancement.

Personal Selling and Marketing Strategy Salespeople build strong strategic relationships and gather market research data from customers to ensure efficiency in the supply chain.

Ask students: How does the sales force create value for the firm through relationship selling?

The sales force focuses on building long term customer relationships, contributes to building customer loyalty, and assists the firm in identifying new opportunities with existing customers.

The Value Added by Personal Selling 1. Salespeople Build Relationships  Salespeople are in a unique position to customize messages for specific buyers.  Relationship selling emphasizes a commitment to maintaining the relationship over the long term and investing in opportunities that mutually benefit all parties.  Crucial to the success of CRM programs.

2. Salespeople Education and Provide Advice 3. Salespeople Save Time and Simplify Buying

For many products, the sales force educates customers and advises them about the best products/services to meet their needs.

Ask students: For what kind of products/services do consumers most need the expertise of salespeople?

LO5: The Personal Selling Process Depending on the sales situation and the buyer’s readiness to purchase, salespeople may not use every step, and the time required for each step

Exhibit 15.4 introduces the personal selling process, which is covered in depth in the next section.

The sales force also simplifies buying by helping the customer understand and evaluate various choices.

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varies depending on the situation.

Step One: Generate and Qualify Leads  Leads come from a variety of sources: current customers, networking events, the Internet, or trade shows.  When salespeople telephone or visit potential customers without appointments, they are engaging in cold calls.  Telemarketing is similar to cold calling but only occurs over the telephone.

Two ways leads can be generated include cold calling and telemarketing.

Step 2: Preapproach  The preapproach occurs prior to meeting the customer for the first time and extends the lead qualification procedure.  The salesperson must establish goals for the meeting to know exactly what he or she wants to accomplish.

A qualified lead requires a meeting. As the old saying goes, “You never get a second chance to make a first impression,” so salespeople must prepare carefully.

Step 3: Sales Presentation and Overcoming Objections  The presentation takes place during a face-toface meeting, after complete preparation.  Objections can arise during any stage of the selling process, but they are most likely during the sales presentation.

To handle the most difficult part of the sales encounter, salespeople go through extensive training to learn how to deal with objections.

Step 4: Closing the Sale  Obtain a commitment from the customer to make a purchase.  The sale is the reward for a job well done.

The “ABCs” of selling suggest salespeople must “Always Be Closing,” but this difficult process requires far more extensive training than that.

Group activity: Often the best source of new customers is other people. Imagine you sell investment properties; list the people you know who might provide you with viable customer contacts. How else might you gather a list of potential customers to contact? Now role play a cold calling scenario, in which one group member “calls” the others. What challenges do you face?

Would your task have been easier had you had some introduction to these “customers”?

Ask students: What kinds of preparation can help ensure the first meeting goes well?

Salespeople need to investigate the customer’s business and defined how the customer can benefit from the firm’s products/services. If possible, the salesperson should examine how the customer is currently addressing the needs it is wishing to fulfill.

Group activity: Continue with the previous activity.

Have students practice closing the sale.

Step 5: Follow-Up

Salespeople must always remember that the sale is

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 In relationship selling, the sale is never really over.  Examine post-sale satisfaction according to the five service quality dimensions.  Listen to the customer and provide fast responses.

just the beginning of a customer relationship.

Aligning the Personal Selling Process with the B2B Buying Process

Group activity: Role play a salesperson and a potential customer during the presentation. The customer should express several reservations; as the salesperson, how will you deal with them?

Discuss each group’s performance.

The B2B process must align closely with the selling process. A seller, for instance, shouldn’t be trying to close a deal when the buyer is just determining the product specifications.

Ask students: What methods can salespeople use to ensure they follow up effectively with their customers? Does it differ for B2B versus B2C selling situations? Follow up involves ensuring that customers are satisfied with their purchases. The same techniques are used in both B2B and B2C selling. Most firms now have systems to ensure the after the sale communication is established, either by telephone, email, or in person.

Marketing Applications 1. Choose one of the ads featured in this book and note its page number. What are the objectives of this ad? Does the ad have more than one objective? Explain your answer.

Instructor’s Notes: Students may select any ad they want, but to determine its possible objectives, they should discuss the product promotion, increased store traffic, entertainment tie-in, event sponsorship, or some form of sales promotion.

Example answers: The Burger King ad in this chapter attempts to promote the chain’s food items, get consumers excited about the Star Wars product tie-ins available when a consumer purchases a meal (which helps bring consumers into the stores), and show the company’s sponsorship of events like the “Kings of the Court” basketball competition.

2. Using the steps in the AIDA model, explain why a potential consumer who views Juicy Couture’s advertising may not be ready to go out and purchase a new pair of jeans.

Instructor’s Notes: The AIDA model suggests that attention leads to interest, which leads to desire, which leads to action. At each stage, the consumer judges whether to take the next step. Students should take the perspective of a potential consumer and proceed through the scenario presented in the previous question.

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Example answers: To get consumers to go out and purchase its product, Juicy Couture must deal with hurdles in each stage of the AIDA model:  Attention: Even though a consumer might see the company’s advertisement, it might not catch her attention.  Interest: Once the consumer is aware that the company and product exist, she still might not believe it is worth investigating further.  Desire: The consumer might like the product but need further convincing that she wants it.  Action: If the consumer has interest and desire, it still might take several more exposures to the advertisement to prompt her to take action and make the purchase.

3. Suppose Lexus is introducing a new line of light trucks and has already created the advertising campaign. How would you assess the effectiveness of the campaign?

Instructor’s Notes: Rather than designing a campaign, students must assess the existing efforts of a company like Lexus. To test its effectiveness, students must assess the campaign before (pretesting), during (tracking), and after (posttesting) it has run.

Example answers: To determine the effectiveness of Lexus’s new advertising campaign, I would use pretesting to ensure that the various elements work in an integrated fashion and are doing what they are intended to do.

Once the advertisement is in circulation or on the air, I would track key performance indicators, such as daily or weekly sales volume, to identify any problems with the message or the medium. After the campaign has stopped running, I would use posttesting to evaluate its impact on the target audience and the firm’s brand image and sales.

4. Suppose now that Lexus is planning a sales promotion campaign to augment its advertising campaign for the new line of light trucks. Which push and pull sales promotion tools do you believe would be most effective? Why? Instructor’s Notes: Continuing the Lexus scenario, students should determine which type(s) of sales promotion might be more beneficial in conjunction with its advertising campaign—coupons, deals, premiums, contests, sweepstakes, samples, loyalty programs, POP displays, rebates, or product placements.

Example answers: Because of the high-income target consumer segment and the brand image of Lexus, the company should consider using a combination of product placement and premiums. A premium could reinforce the brand image as being one of refined quality, even for a light truck, such as a gourmet picnic basket.

5. How would the Lexus sales promotion differ if it was geared to a business organisation with a fleet of company owned trucks?

Instructor’s Notes: Students should recognize that sales promotions designed to attract businesses need to be different from consumer sales promotions. They should determine that is this case, deals and loyalty programs are the most appropriate.

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Example answers: Since Lexus is selling to businesses who want to buy a fleet of company owned trucks, it would be inappropriate to consider coupons, premiums, contests, sweepstakes, samples, point of purchase displays, or rebates. Lexus should choose either deals or loyalty programs. An example of a deal might be a short-term price reduction or special financing rate to encourage businesses to purchase within a specified timeframe. A loyalty program offering incentives to businesses that make multiple purchases over a long period of time could help retain customers.

6. Choose an ad that you believe unreasonably overstates what the product or service can do. (If you can’t think of a real ad, make one up.) Explain whether the ad is actually deceptive or just puffery.

How would your answer change if you lived in France?

Instructor’s Notes: Student must determine for themselves to what degree advertisements might be classified as deceptive. They must note that, regardless of their answer for themselves, the ad would be illegal in the EU, including France.

Example answers: Advertisements for Bowflex unreasonably overstate what the product can do for consumers. Although they might come close to deception, they seem like a better example of puffery. Some people legitimately might use the weight machine to get slimmer and add muscle, but their results are probably unusual and may be due to other factors, such as restricted diets or personal trainers. The advertisement suggests consumers can “Get the results you want in only 20 minutes a day, 3 days a week,” which reasonable people should recognize is impossible. However, if the advertisement aired in France, it would definitely be considered deceptive, because scientific evidence would not support the claim and it therefore sends a false impression to consumers.

7. You are invited to your 6-year-old niece’s birthday party and bring her a new superhero doll being advertised on television. She’s thrilled when she unwraps the gift but is in tears a short time later because her new doll is broken. She explains that on TV, the doll flies and does karate kicks, but when she tried to play with the doll this way, it broke. You decide to call the manufacturer, and a representative tells you he is sorry your niece is so upset but that the ad clearly states the doll does not fly. The next time you see the televised ad, you notice very small print at the bottom that states the doll does not fly. You decide to write a letter to the Advertising Standards Council (ASC) about this practice. What information should you include in your letter?

Instructor’s Notes: While students might refer to the federal Competition Bureau, which enforces laws that relate to misleading advertising and deceptive marketing practices, the ASC is a self-regulatory body that monitors voluntary industry codes. Advertising to children is primarily regulated by the ASC’s Broadcast Code for Advertising to Children. Students should list the type of information the agency might need if it were to follow up on a claim of deceptive advertising.

Example answers: I would include the name of the product being advertised; the nature of the advertisement, including the deceptive impression made by the animation; and the fact that the fine print is so small—and largely lost on children anyway—that consumers may believe that the product is capable of more than it is actually is.

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8. Consider all the diet products that are currently advertised on television today, including weightloss supplements, weight-loss programs, and fitness equipment. Do you believe that some of these ads overstate what the product or service can actually do? Do you think any of these ads are actually deceptive or puffery?

Instructor’s Notes: This question challenges students to consider the content of ads they see from a truth in advertising perspective. Depending on the specific ad students consider, they might agree or disagree that some ads are misleading.

Example answers: Many diet products show customers who have achieved significant weight loss (often, it seems these customers have also gotten tanner too). Some of these ads may overstate what the product can do.

However, most ads have a disclaimer at the bottom that says, “results not typical” or “expect 1-2 lbs. weight loss per week.” These disclaimers are an attempt to manage customer expectations and avoid being accused of puffery.

Students should discuss whether they believe these ads (weight-loss programs, weight-loss clinics, weight-loss products like Hydroxycut) are deceptive or puffery.

9. Choose an industry or a specific company that you would like to work for as a salesperson. How would you generate and qualify leads?

Instructor’s Notes: Even if they are not interested specifically in a sales career, students should provide a possible company and discuss their possible customers, as well as how they would assess the potential of those customers.

Example answers: If I would like to work for a firm like IBM, particularly because it tends to focus on relationship building and selling. To generate and qualify leads, I might attend technology conferences and trade shows to network and meet potential clients. By talking to these clients, I could gather information about their current situation and possible IT needs. With that information, I could follow up with further research to discover more about that company’s size, strategic direction, profit levels, and any other information that might tell me whether it is a good prospect for a sales call.

10. You have taken a summer job in the windows and doors department of a large home improvement store. During your sales training, you learn about the products, how to address customers’ needs, why the lifetime value of the customer concept is so important to a store like this, and how sell the customer the best product to fit their needs, regardless of price point. One day, your manager informs you that you are to recommend Smith Windows to every window customer, even though these windows are more expensive and do not provide superior benefits except in limited circumstances. The manager is insistent that you recommend Smith. Not knowing what else to do, you recommend Smith Windows to customers who would have been better served by lower cost windows. The manager rewards you with a sales award. Later, the manager tells you that he received an all-expenses-paid cruise for his family from Smith Windows.

What, if anything, should you do with this information?

Instructor’s Notes: This scenario forces students to question to what degree this situation might violate their ethical standards. Using the ethical decision-making framework, students can determine an appropriate course of action.

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Example answers: In applying the ethical decision-making framework:  “Have you thought broadly of any ethical issues associated with the decision to be made?” The manager’s direction bothered me from the start, so I have thought about my concerns in terms of recommending an inferior product to my customers, which may negatively affect their opinion of my company. In addition, the manager appears to have taken a bribe and involved me in this unethical action by giving me an award for going along with it.  “Have you involved as many possible people who might have a right to offer input into or have actual involvement in making this decision and action plan?” At this point, though other salespeople know about the manager’s direction to sell only Smith Windows, only I know that he received a cruise for doing so. Neither my company nor my customers know about the details.  “Does this decision respect the rights and dignity of the stakeholders?” No, because I basically am being asked to lie to customers, and customers are getting lied to.  “Does this decision produce the most good and the least harm to the relevant stakeholders?” This scheme harms almost all stakeholders except my manager. Customers pay too much for an inferior product, the company could suffer damage to its reputation, and as an employee, I have been put in a very awkward and uncomfortable position.  “Does this decision uphold relevant conventional moral rules?” Conventional standards against bribery and lying suggest the community at large would absolutely not approve. More particularly, my company says it wants to offer customers the best value, so it also does not meet the specific standards demanded by this firm.  “Can you live with this decision alternative?” The only alternative I can live with is to make sure the manager rectifies the situation and ensure it never happens again.

Based on my answers, I would approach my manager with my concerns. If he does not agree to solve the problem, I would take my concerns to his manager so that the firm can determine whether such activity is endemic to the entire sales team or specific to this one manager.

Marketing Digitally 1. Go to the website for Concerned Children’s Advertisers (www.cca-kids.ca/) an agency that produces and delivers social messaging campaigns on issues of challenge in children's lives. Click on the About Us tab and examine the history and activities of CCA. How does the role they play in responsible advertising complement the formal regulation of other agencies? Now look under the News tab. Choose one of the PSAs and discuss how these ads are used to deliver CCA’s message.

Instructor’s Notes: To help students understand what kind of groups exist for children’s advertising; this exercise encourages them to explore the website of one such group, CCA. Example answers:  CCA’s mission involves working in partnership with government, educators, parents and other experts to be an authoritative voice of responsible children's advertising and communications in Canada. It produces public service announcements and delivers its message in classrooms and community centres and to parents and health care workers, which complements more formal government regulations. CCA is actively involved in upholding responsible advertising practices in Canada.

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 One PSA called “Tell Someone” focuses on Bullying Prevention and delivers the message that the best defence against bullying is enlisting the help of a trusted adult.

2. Go to www.save.ca or www.websave.ca and identify five of the products featured. How effective are coupons for selling these products? Why? What are the benefits to the seller of using these sites over other IMC options? How do you think these sites make money?

Instructor’s Notes: This exercise pushes students to roam around the coupon save website, explore links that interest them, and think about who might use this form of sales promotion.

Example answers:  Coupons on the home page included Diet Pepsi and Amp Energy Drink, both products that I am interested in buying. Coupons were also available for Cheerios, Yoplait Yogurt and Office Depot products. Since I am on a limited budget, being able to print coupons for products is an incentive to buy them.  Sellers can reach a much broader target market using the coupon surfer site and provide a cost effective way to increase brand awareness, site traffic and sales since consumers who visit the site do so with an intention to buy.  These sites offer private label, co-branding, and partner programs designed to increase traffic to a company’s website and the revenue stream. Companies like American Express, AVON, Dell, General Mills, Kodak, Office Depot, People Magazine, PETsMART, Pfizer, Reebok, Safeway, Staples, Time Inc., and Wal-Mart are listed as clients and pay to use the service as well as likely buy reports since Coupon Surfer tracks and monitors consumer response by geographic or demographic data, which would be valuable information for these companies.

End-of-Chapter Case: Beyond Product Placement: Lexus and Marvel Partnership 1. Who was the primary target market for Lexus’ Black Panther?

Example answers: The Lexus car has a suggested retail price of $92,000 USD, so Marvel’s audience—affluent and multicultural—is an ideal target market. The median income of the Marvel fanbase is over $100,000, and Black Panther was expected to do well with African Americans. Lexus has recognized the importance of appealing to a diverse audience, noting that one-third of its customers had multicultural backgrounds.

2. Did this campaign use more informational or more emotional appeals?

Example answers: An emotional appeal aims to satisfy consumers’ emotional desires rather than their functional needs.

The key to a successful emotional appeal is the use of emotion to create a bond between the consumer and the brand. The idea was to present the company more like a lifestyle brand, which means engaging emotionally with customers.

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3. How does Lexus’ partnership with Marvel for Black Panther and The Eternals help convey its message? What benefits does it offer for Marvel?

Example answers: The partnership allows Lexus to communicate its value proposition. It’s able to succinctly communicate the most important unique attributes of the product as it’s used in the movie’s car chase. Lexus, by association, hoped to be viewed as technologically advanced and sophisticated as well. Marvel can align itself with a global luxury brand of 30 years. The partnership allowed both companies to align with their values.

4. How did the campaigns use different media to advantage?

Example answers: Lexus’ campaign used the car as a central feature that adds to the narrative in the movie. The car was featured in the movie’s first trailer, which received views on television as well as being posted to social media sites. Lexus implemented an ad campaign that accompanied the release of the movie. Lexus also commissioned an original graphic novel that showcased its technology.

5. Which sales promotion tactics could Lexus employ to leverage these advertising outcomes?

Example answers: Answers will vary. Student discussion should focus on sales promotions as special incentives or excitement-building programs that encourage consumers to purchase the car. Lexus can use many sales promotions, such as loyalty programs, contests, rebates, deals, as well as product placement, as integral components of firms’ long-term customer relationship management programs, which they use to build customer loyalty.

Video Activities Video: IMC at Dunkin': National Donut Day Core Concepts Covered: Advertising, Social & Mobile Media, Sales Promotion (Donut Day) Video Summary: National Donut Day began in 1938 and has become an important day among donut companies, especially Dunkin’ Donuts. This video details the company’s 2018 IMC campaign using traditional media, public relations, and social media to create a consistent message across all media.

Some of the unique things they used included offering a free Lyft ride up to $10 to Dunkin’ to get a free donut with the purchase of a beverage, having filters for Instagram to generate user-created content, and sending media representatives donuts with their pictures printed on them. These are just a few of the techniques the video highlights. Metrics used at the end of the campaign showed success with Dunkin’ having 57 percent of the social media conversation about donuts that day and increased sales companywide.

Discussion Question #1: Which media vehicles did Dunkin’ use in its IMC campaign?

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Brief Answer: Dunkin’ used advertising, social media, public relations, and direct marketing to execute its IMC campaign. The video discusses the use of all of these, especially social and mobile media. This question can lead to a rich discussion about IMC’s ability to convey similar messages to different audiences.

Discussion Question #2: How did Dunkin’ assess the effectiveness of its IMC campaign?

Brief Answer: The company used a heat map to identify where and how much communication about donuts was happening via social media. After the campaign, it used metrics to determine its share-ofmarket/share-of-voice in the social communication on social media. It obtained 57 percent. It also evaluated sales and experienced a companywide increase.

Additional Teaching Tips This chapter focuses on the importance of the advertising and sales promotion in the integrated marketing campaign effort. It is important for students to understand that all elements of the promotional mix must come together to form one unique, unified, marketing message or “big idea” for the product. A good understanding of AIDA in presenting design elements is also critical and instructors should spend some time in class and through critical thinking exercises to fully explore these elements.

The chapter also introduces the personal selling process, ethical and legal issues of selling, and managing the sales force.

Instructors may want to divide the class in groups and have them develop an ad based on a candy bar on large poster board. They have to work as a group and incorporate the elements of ad design (a preview of the next chapter on advertising design elements would need to be discussed) as well as contain the elements of AIDA. Have students tape their group ad to the white board and have each group present their advertisement and the AIDA concepts present. This critical thinking exercise is both creative and fun! Online tip: Have students individually create an advertisement incorporating the advertising design elements and AIDA. They can create the advertisement electronically, or hand-draw and scan to the discussion board. Students are to write a paragraph on how AIDA is present in their ads. Have an anonymous online vote using the features and declare a winner in the class!

In teaching design concepts of an ad, assign students a familiar product such as a new candy bar that also keeps you awake and have each group design an ad incorporating all the elements of the ad into their work. Each group then presents and explains the elements to the class stimulating class discussion on the topic and enhancing understanding of how critical the components are. Students really enjoy the hands-on creativity that this teaching tip brings.

Students can also design a sales promotion for the above ad stating the purpose of the sales promotion and the value it brings to both the manufacturer and the consumer.

Students may regurgitate the selling process, however, may not have a true understanding of what happens in each stage and how it leads to sales. Divide the class into 4 or 5 groups. Assign two groups the personal selling process with the mission to develop a script of selling a common product (pick one, a car perhaps). Each of these two groups should have a different product to script through the Personal Selling Process and present the skit to the class. The class will have the task of identifying the various stages of the personal selling process (taking notes) and the skit is discussed after the “debut.” Students

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have fun with the skit and learn more about the importance of the personal selling process. While two groups are scripting and rehearsing the personal selling assignment, two or three other groups are assigned a product that they will script and present using the B2B buying process. The role of the audience is again to take notes on identifying each phase of the B2B buying process with class discussion after the presentations.

Another key area is ethical and legal issues of personal selling. Online Tip: Have students post a legal or ethical selling dilemma in a story problem (bait and switch, puffery, embellishment of reimbursements, etc.). Have other students write their own and have the learning community respond to each other’s ethical selling dilemma. The writer of the dilemma would have the task of contributing to a solution through feedback on the discussion board once the student posts a response.

Newsletter Teaching Aid Remember to subscribe to “Grewal Levy Marketing News” at https://grewallevymarketing.com/.

Published regularly, each newsletter contains a feature article on current topics, for example Lime Rental Scooters, with discussion questions that can be used in class. Each article is tagged so instructors can quickly identify relevant chapters for the newsletter content. The site also features a selection of related articles, links to current videos that can be used in class, as well as links to archived articles sorted by chapter for ease of use in your class.

Chapter Sixteen: Global Marketing TOOLS FOR INSTRUCTORS       

Learning Objectives Annotated Chapter Outline with Instructor’s Notes/Teaching Tips Answers to End of Chapter Learning Aids Marketing Application Questions Marketing Digitally Chapter Case Study Video Activities Additional Teaching Tips Newsletter Teaching Aid

Learning Objectives 1.

2.

3.

4.

Explain the components of global market assessments Understand the marketing opportunities in BRIC countries Describe the various market entry strategies List the similarities of and differences between a domestic marketing strategy and a global marketing strategy 5. Explain how ethical issues affect global marketing practices 1-244

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Instructor’s Notes

Opening Vignette: Airbnb Airbnb has almost 6 million listings in hundreds of countries globally. It has worked hard to ensure consistency in standards of accommodation as well as in its branding. The COVID-19 pandemic initially resulted in low bookings. However, as consumers realized they could work from just about anywhere – their city, a different province, or even an exotic country - bookings increased. People longed to get away even if it was just to work in a new location.

Ask Students: Why has Airbnb been successful in global markets?

LO1: Assessing Global Markets - PEST The assessment of different markets relies on four criteria.

1.

Political environment: Focus on political and legal restrictions that would either impede or facilitate global commerce.

2.

Economic environment: Focuses on factors such as demand and supply conditions 3.

Sociocultural environment: Looks at cultural factors affect or create business opportunities 4.

Technological environment: Looks supporting infrastructure, technical development, sophistication of labour, and degree of technological innovations in the market.

Any entry into a new market, especially into a new country, requires careful planning. A formal market assessment prevents firms from making costly mistakes.

 Analyzing Political and Legal Conditions  Trade sanctions are penalties or restrictions imposed on a country.  A tariff (duty) is a tax levied on a good imported into a country. a. Tariffs protect domestic industries from foreign competition or penalize other countries for their trade practices. b. Dumping refers to selling a good in a foreign market at a price that is lower than its domestic price or below its cost.  Quotas designate the maximum quantity of a product that may be brought into a country during a specified period.

Remind students that this category includes not just the impact of governmental actions but also those of nongovernmental organizations (NGOs).

Ask Students: Where do companies get information about the PEST conditions in other countries?

Trade negotiations often revolve around reducing or eliminating tariffs, quotas, or similar impediments to trade.

Discuss the recent trade battles between Canada and the U.S. (e.g., softwood lumber.) Many foreign producers accuse the US of limiting market access through unfair tariffs and quotas, whereas the United States insists that it must protect U.S. industries.

Ask students: What do you think? Which side would you take in this debate?

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Annotated Chapter Outline 

A boycott pertains to a group’s refusal to deal commercially with a specific organization to protest its policies.

Instructor’s Notes For U.S. firms, their country’s unpopular war and controversial foreign policy has led to increasing tension abroad. Many consumers take out their frustration on U.S.-made goods and services.

Ask students: Have you ever boycotted a product?

What would prompt you to participate in or call one?

Consumers are likely to call a boycott if they believe that a marketing practice is unethical or unfair to group of individuals. For example, in the past, many students demanded that their universities boycott Nike products for their sports teams in protest of Nike’s labour practices.

Both governments and independent groups call boycotts.



Exchange control refers to the regulation of a country’s currency. a. Exchange rate is the measure of how much one currency is worth in relation to another. b. Countertrade is the trade of goods for other goods, not hard currency, between countries.

The Central Bank of a country generally regulates its currency. Many countries try to keep their markets attractive to foreign investors while simultaneously making their goods attractive to foreign buyers through exchange control.

Ask students: If the value of the Canadian dollar goes up compared to other currencies, what happens to international trade?

Answer: Canadian businesses and consumers will buy more imports, but since the dollar is worth more, exports will go down.



Trade agreements are designed to manage and promote trade activities among countries within a specific region.

Ask students: What trade agreements have you heard of? Can you think of an existing trading bloc?

What benefits does belonging to a trading bloc offer members?

Countries that who have signed a trade agreement constitute a trading bloc.  The European Union is an economic and monetary union that currently contains 27 countries.  The EU represents a significant restructuring of the global marketplace.  All countries in the EU use a single currency, the Euro.

Group activity: Brainstorm about how the introduction of a single currency affected various marketing aspects in the EU. The conversion to the Euro presented serious concerns for marketers, most of which have been resolved. But in France, retailers still list prices in

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Annotated Chapter Outline

Instructor’s Notes

 The US Mexico Canada Free Trade Agreement (USMCA) [formerly North American Free Trade Agreement or NAFTA] covers trade-related issues among the United States, Canada, and Mexico.  The Central American Free Trade Agreement (CAFTA) exists among the United States, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua.  Mercosur, which means Southern Common Market, covers most of South America.  The Association of Southeast Asian Nations (ASEAN) aims to build economic stability and lower trade restrictions among its six Asian member nations.

both Euros and the now defunct French Franc, which allows consumers, especially older consumers, to make better purchasing decisions. Since the Euro is used across all EU countries, it makes pricing a challenge. Many items do not sell for the same price across the EU. Will different Euro prices irritate consumers? However, having one currency across all EU countries does facilitate trade. For instance, tourists across the EU find it easier to gauge value when everything is priced in Euros.

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Ask Students: Make a list of the factors that might be considered as part of calculating political risk.

How will the weight the different factors?

Political Risk Analysis

Firms calculate political risk analysis – assessing the political, socioeconomic, and security risks of doing business with a country  Economic analysis The greater the wealth of a country, the better the firm’s opportunities in that particular country, in general.

A three-part economic analysis indicates whether the country market offers the firm an attractive target.

Three major factors determine wealth.  General economic environment  Market size and population growth  Real income The general economic environment can be measured in various ways. a. A trade deficit occurs when a country imports more than it exports. b. Gross domestic product (GDP), the most widely used measure of economy, reflects the market value of the goods and services produced by a country in a year. c. Gross national income (GNI) consists of GDP plus the net income earned from investments abroad and minus any payments made to nonresidents who contribute to the domestic economy.

Each of these standardized measures allow for comparisons across countries.

The use of each depends on specific circumstances.

Many reports now feature GNI rather than GDP, because it includes the economic impact of firms that earn income from their global operations, unlike GDP, which dramatically undercounts the impact of those activities on the economy of the firms’ home markets.

The theory of purchasing power parity (PPP) states

This index often is called the Big Mac index. Show

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Instructor’s Notes

that if the exchange rates of two countries are in equilibrium, a product purchased in one costs the same in the other, if expressed in the same currency.

students the chart at The Economist. http://www.economist.com/content/big-mac-index What other products could PPP use?

Ask students: Why might this measure be important to marketers?

A Starbucks Tall Latte index now exists as well.

Developed by the UN, the human development index (HDI) provides a composite measure of three quality-of-life indicators: i. Life expectancy at birth. ii. Educational attainment. iii. Average incomes, measured by PPP, sufficient to meet the basic needs of life in that country. iv. Scales from 0 to 1.

The HDI goes beyond traditional economic measures and considers people’s ability to afford subsistence.

Many Western nations score close to 1, whereas many African nations earn the lowest scores in the world.

Market size and population growth rates vary; the world’s population is growing dramatically, but that growth has not been equally dispersed.

The population of Canada is over 36 million people.

Although that may seem like a large number, other countries are growing at much faster rates. Some Western nations face serious population shortages and will have to rely on immigration to maintain their employment levels.

Ask students: Why do India and China offer opportunities for marketers? What about other high population countries, such as some African countries?

Answer: Although population and population growth may be important criteria for marketers to consider when entering a market, it must be considered along with other factors such as buying power and income.

To design the appropriate marketing mix, marketers must take the real income of persons within a country into consideration.

Successful firms make their products accessible to average buyers, which in many countries means offering products in smaller portions that make them affordable. Two thirds of the Chinese population earn less than $25 a month so P&G repackaged its Head & Shoulders shampoo in singleuse packets to make it affordable and allowing Head & Shoulders to become the top-selling shampoo in China.

Group activity: Break students into groups. Have

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Instructor’s Notes each group choose a less developed country for a new marketing venture. Then have each group represent a firm considering marketing a new product or service in that country. What adjustments would they have to make to their marketing strategy to be successful with their new venture?

 Analyzing socio-cultural factors  Culture includes the values, guiding beliefs, understandings, and way of doing things that members of a society share.  Culture exists on two levels: visible artifacts and underlying values.

Perhaps no other aspect of globalization has posed more difficulties to marketers than culture.

Outsiders often have trouble understanding the detailed meanings associated with proper communication in a foreign culture.

 Hofstede defined six cultural dimensions that marketers use to characterize a culture. a. Power distance: Willingness to accept social inequality as natural. b. Uncertainty avoidance: The extent to which a society relies on orderliness, consistency, structure, and formalized procedures to address daily situations. c. Individualism: Perceived obligation to and dependence on groups. d. Masculinity: The extent to which dominant values are male oriented. e. Time orientation: Short versus long-term orientation. f. Indulgence: The extent to which society allows for gratification of fun and enjoyment needs or supresses them.

Hofstede’s cultural dimensions offer an effective understanding of the subtle elements of a culture.

Taken together, these dimensions enable marketers to group countries together according to their similarity on these dimensions and therefore engage in more efficient planning.

 Analyzing technology and infrastructure capabilities  Infrastructure includes the basic facilities, services, and installations needed for a community or society to function.  The infrastructure includes transportation, distribution channels, communication, and commerce.

Changes in technology, especially communications, have been a driving force for growth in global markets for decades. A firm’s ability to conduct business in a particular country is in large measure determined by that country’s infrastructure.

LO2: The Appeal of BRIC Countries Brazil, Russia, India and China make up the four BRIC countries.

The greatest change has been the growth and expansion of four countries that together have come to be known as the BRIC countries: Brazil, Russia,

Ask students: How would you characterize Canadian culture on these dimensions? How would you characterize other cultures with which you are familiar?

Group activity: Continue with the group activity above. Have students assess how the current infrastructure in their chosen country will affect the success of their new venture.

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 Brazil is the world’s ninth largest economy.  Russia has had its share of political turmoil however its consumer markets are promising.  India has more than 1.25 billion people, or 15 percent of the world’s population, most of whom are very young. It is one of the world’s fastest growing markets.  China has experienced a large increase in GDP. It is the second largest economy in the world and may soon surpass the U.S.

India, and China.

LO3: Choosing a Global Entry Strategy 1.

Exporting: Produce goods in one country and sell them in another. Although it entails the least financial risk, it allows for only limited returns.

2.

Franchising: A contractual agreement between a franchisor and franchisees. The franchisee uses the business name and format developed by the franchisor.

3.

Strategic Alliance: Collaborative relationship between independent firms in which the firms do not invest in each other.

4.

Joint Venture: A foreign firm pools its resources with those of a local firm to form a new company with shared ownership, control, and profits.

5.

Direct Investment: The firm maintains 100% ownership of its plants, facilities, and offices in the foreign country, often in the form of wholly owned subsidiaries.

In each strategy, the risks and rewards change. As risk increases, so do the potential rewards. Exporting represents the lowest risk level for the firm.

LO4: Choosing a Global Marketing Strategy 1. Target Market: Segmentation, Targeting and Positioning

Adjusting the marketing mix and positioning strategy to meet the needs of a new market may represent the most complex topic for global marketing.

Chapter 6 discusses segmentation, targeting, and positioning in greater detail.

Firms may need to alter the positioning of their products in global markets.  A single positioning strategy maintains one message.  Alternatively, firms may adapt their message to meet local needs.

Group activity: Divide into groups that represent different firms. Each group should outline its product offering and the entry strategy it would choose for its global strategy.

Ask students: Why is your chosen entry strategy appropriate for your offering? What criteria did you use to determine your strategy? What risks does your strategy entail, and are the potential rewards worth those risks?

Group Activity: Divide the class into groups. Have them choose a product that they want to introduce into another country. (It may be the same product/firm they used in previous group activity).

Have students consider how they would adapt their positioning strategy in the new country.

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Annotated Chapter Outline 2. Define the Global Marketing Mix Global product and service strategies can:  Sell the same product or service in both the home and the host country market.  Sell a similar product or service but include minor adaptations for the host market.  Sell totally new products or services.  Despite some persistent differences, marketers are finding growing convergences in tastes and preferences for many product categories.

Instructor’s Notes Ask Students: What products are the easiest to standardize? What makes these products standardizable?

Products at the extreme ends of high tech (i.e. electronics, computers, software versus paper and pencil) or high touch (i.e. luxury goods, jewellery versus staple products) continuums are easy to standardize, but those in the middle generally require varying levels of adaptation to local markets.

Managing the Global Marketing Mix Global pricing strategies require a careful consideration of different countries’ rules governing the marketplace, as well as the effect of 1. Tariffs 2. Quotas 3. Anti-dumping laws 4. Currency exchange policies

How do firms manage the global marketing mix?

Global distribution strategies determine the length and complexity of the distribution channel by establishing the number of partner firms the seller needs to get its merchandise to the end consumer.

Delivering products to local retailers can be incredibly difficult and frustrating. Infrastructure issues often prevent traditional distribution methods and require creative adjustments. Global firms must find distribution strategies that enable them to reach even really remote markets. For instance, Avon sells and delivers cosmetics to customers in the Amazon using canoes. This example could also prompt an ethical discussion on whether or not firms should be marketing hedonic products or services to consumers with very little disposable income.

Global communication strategies must consider variations across countries, including 1. Literacy levels 2. Media availability 3. Advertising regulations 4. Languages 5. Culture 6. Customs

Ask students: How do firms market their products in countries with very low literacy levels? Imagine you are promoting a new soft drink. How would you do it without written communication?

LO5: Ethical Issues in Global Marketing Environmental Concerns Increase with Greater Industrialization.

According to the author and commentator Thomas Friedman, the next global growth industry will be green industries, that is, firms that produce scalable

In addition to competitive, cost, and other considerations, global pricing involves additional dimensions that increase its complexity.

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Annotated Chapter Outline  In particular, waste management, in terms of the amount of waste a firm generates and how it disposes of its waste, has become a crucial topic.  Global warming continues to dominate many political dialogues.

Global Labour Issues Cannot be ignored in Developing Countries.  Working conditions  Wages  Child labour

Instructor’s Notes green technologies.

Ask students: Do you agree?

Global firms must address the issue of who produces their products—literally, factory workers in developing countries. Most manufacturers do not own the plants in which workers create their goods and therefore must negotiate with factory owners to bring the factory into compliance with global labour standards. Many firms are partnering with labour advocates to improve working conditions and wages.

Ask students: Would you buy a product that was made in a factory in another country that you knew paid unfair wages, had poor working conditions, and/or used child labour if it were significantly less expensive than a similar product made under environmentally friendly conditions?

Globalization Has a Significant Impact on the Host Country Culture.  Cultural imperialism refers to the belief that one’s own culture is superior to that of other nations.  Critics of U.S. firms that enter foreign markets claim that U.S. products and services often overwhelm the local culture and replace it with cultural artifacts of the West.

How do countries balance their competing desires to participate in the global economy while still holding on to their traditional cultures and lifestyles? This question lies at the heart of the globalization debate. There is no easy answer, and future generations will continue to deal with these enduring challenges.

Marketing Applications: 1. Of the four BRIC markets, explain why you think one country might be more welcoming to lululemon than others.

Instructor’s Notes: By taking the perspective of a global marketing professional considering expansion, students should recognize the need for analyses of the Russian, Brazilian, Chinese, and Indian markets and thus recall the key concepts of a PEST analysis.

Example answers:

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Students should examine the political and legal, economic, socio-cultural climates of each of these countries as well as the infrastructure and consider which ones might be most welcoming to export products. Students may not be familiar with the Russian or Brazilian markets. Based on current world news, students will probably say that Russia would not be an attractive market or very welcoming for lululemon. Brazilians are very fashion conscious and like nothing better than to spend a day at the mall shopping. However, that does not mean lululemon clothing would be accepted as fashion forward.

Although India has a large population, many of the people have very low incomes, plus the culture would probably not accept women (or men) wearing lululemon as street clothing as in North America.

China would probably be the most attractive market based on population, economic conditions and willingness to embrace Western ways.

2. Cervélo is a high-end Canadian bicycle manufacturer. Assume the company is considering entering the U.K. and Chinese markets. When performing its market assessment, what economic factors should Cervélo consider? Which market do you expect will be more lucrative for Cervélo? Why? Instructor’s Notes: By taking the perspective of a global marketing professional considering expansion, students should recognize the need for analyses of the U.K. and Chinese markets and thus recall the key concepts of an economic analysis. However, a full market assessment also requires the other three market assessment components.

Example answers:  The three key economic factors that Cervélo should consider are the general economic environment, the population size and growth rate, and real income. In analyzing the general economic environment, the company might use such indicators as the relative level of imports/exports, the GDP, PPP, and the HDI to understand to what degree each country has a healthy economy that offers a good opportunity for global bicycle marketing. In analyzing the population size and growth rate, the company can get a sense of the potential market opportunity both now and in the near future. Finally, by analyzing real income, Cervélo can determine whether its product might be priced out of the reach of the market segment it wants to target.  The more lucrative market for Cervélo in the long term likely will be China, because of its improving economic environment and large population. However, Cervélo must price its product carefully to avoid moving it out of the reach of the majority of the population who are still fairly poor and rural.

3. Now consider the political, economic, and legal systems of China versus the United Kingdom.

Explain why you think one country might be more hospitable to Cervélo than the other.

Instructor’s Notes: As a follow-up, this question prompts students to examine the United Kingdom and China using another component: political and legal risk. In this way, students gain a more comprehensive picture of the potential issues and opportunities that exist in either the U.K. or Chinese market.

Example answers: In terms of political, economic, and legal systems, China is fairly conservative politically, in that it is still controlled by a strict Communist regime; the market economy is developing in a strong but controlled way; and contract law and intellectual property rights remain in development stages. In contrast, the United Kingdom has a democratic political system similar to that of the United States, an economically free and open market, and strong provisions for contract law and intellectual property rights in its legal

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system. The strong similarities between the United Kingdom and the United States appear to make the U.K. market more hospitable for Cervélo.

4. Colgate-Palmolive sells products in many countries throughout the world. How would you expect its market position to differ in those countries compared with that of Canada?

Instructor’s Notes: At its core, this question forces students to think about the nature of other markets relative to the product attributes sold in Canada. Cultures engender significant differences in consumer perspectives, wants, and needs, so students should recognize that Colgate-Palmolive probably must craft different market positions for different regions. An analysis of their sociocultural factors should provide students with good possibilities for the different market positions.

Example answers: Colgate should invest in understanding its international markets. Colgate-Palmolive might adapt some of the flavours and benefits of its products to meet the unique needs of international markets. For example, consumers in India might prefer different flavour profiles than Chinese consumers. Colgate should consider local brands when positioning its product as well. How will Colgate-Palmolive’s products compare to products that already exist in the local marketplace?

5.

How would Colgate-Palmolive vary its marketing strategies for product lines in low-income, emerging markets? Discuss using each of the elements of the marketing mix.

Example answers: Answers will vary, but students should discuss each element of the marketing mix: product, price, place, and promotion. Answers may include that Colgate-Palmolive would vary its product selection to meet the market’s needs. For example, the Palmolive brand currently features several shampoos and conditioners. To meet the needs of an emerging market, it may design a single use 2-in-1 shampoo and conditioner. Regarding price, Colgate-Palmolive may introduce smaller versions of its products that are very inexpensive. In emerging markets, Colgate-Palmolive may consider placing its products in small local stores in towns and villages, so customers in the area will have access to them. Finally, regarding promotion, Colgate-Palmolive may focus on in-store and paper ads to promote its products in these markets, as consumers there may not have as access to television or Internet.

6.

What is cultural imperialism? Why would a recording company such as Def Jam Recordings need to be aware of and sensitive to this issue?

Instructor’s Notes: This question focuses students’ attention on how American companies need to consider other cultures and not simply export music that would be popular in North America Example answers:  Cultural imperialism is the belief that one’s own culture is superior to that of other nations.  It would appear that the company is aware of and sensitive to this issue. It formed Def Jam Germany in 2000, its first international company. The company marketed all U.S. signed artists in Germany. However, it also signed German rappers.  A second international foray was Def Jam Japan. As in Germany, it signed Japanese bands as well as South Korean boy band, BTS.  In 2019, it launched Def Jam South East Asia signing artists from Malaysia, Thailand, Singapore, and Indonesia.

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7. Provide an example of a potentially ethically troubling practice by a foreign firm doing business in Canada.

Instructor’s Notes: The exercise forces students to consider global business from a non-Canadian perspective and thus examine different standards of acceptability. In the course of this consideration, students should recognize the importance of sensitivity to ethical standards in different countries.

Example answers: A non-Canadian firm might run into trouble if it failed to respect Canadian value of equality between genders or races. For example, if the firm only hired Latin men to work in its Canadian subsidiary, Canadian consumers might be offended.

8. Many Canadian and U.S. based firms are relocating their production facilities and services overseas (outsourcing or offshoring). Why do you believe they are doing so? Do the benefits outweigh the potential losses of Canadian and U.S. jobs? Why or why not?

Instructor’s Notes: To answer this question, students must consider the reasons for outsourcing or offshoring, their own feelings about the practice, and possibly public discussions about these issues in the media and politics.

Example answers: Many Canadian and U.S. firms outsource primarily for cost reasons; lower labour costs in other countries provide a means to decrease production costs and thus create higher profit margins. The primary benefit is more affordable products, assuming that the savings get passed on to consumers. However, because companies can keep those cost savings or share them only with shareholders, the benefits do not outweigh the cost of the loss of Canadian and U.S. jobs.

9. Assume you work for a Canadian-based financial services firm that claims to offer experts who personally manage clients’ accounts. The clients are unaware that most of the tax preparation work, the bookkeeping, and other record keeping are performed by a company in India. The local office simply reviews the file and signs the cover letters. Yet as your manager points out, one person manages each account. After recent news stories about the practice of offshoring sensitive transactions such as tax preparation, clients have been commenting about how grateful they are to have a local firm. What, if anything, should you tell your clients about the firm’s practice of offshoring?

Instructor’s Notes: This ethical scenario forces students to question to what degree being dishonest—or at least, less than forthcoming—might violate their own ethical standards. Using the ethical decisionmaking framework from Chapter Three, students can evaluate the practice of keeping offshoring a secret from the clients.

Example answers: In applying the ethical decision-making framework:  “Have you thought broadly of any ethical issues associated with the decision to be made?” I have thought broadly about the ethical issues. In this case, I have concerns about keeping the clients in the dark about the company’s offshoring practice and what they might think if they find out. I also

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have considered my ethical obligation to those doing the work in India and my responsibility to safeguard their work and their employment.  “Have you involved as many possible people who might have a right to offer input into or have actual involvement in making this decision and action plan?” At this point, the clients themselves have not been involved at all, and they are likely the most important stakeholder to keep in mind, because without them, neither I nor the Indian employees would have work.  “Does this decision respect the rights and dignity of the stakeholders?” Clients believe that the firm is being honest and aboveboard about where the work is performed and managed, and that is simply not the case.  “Does this decision produce the most good and the least harm to the relevant stakeholders?”

Clients are not getting the type of service that they think they are. If an incident, such as identify theft, occurred because of this offshoring practice, considerable harm could ensue to both the customers and the company.  “Does this decision uphold relevant conventional moral rules?” It violates the community’s standard for what is appropriate regarding business disclosures and transparency. If a local firm portrays itself as doing everything locally, and it does not, the community will likely feel moral outrage.  “Can you live with this decision alternative?” If the decision is to be completely honest with clients about the nature of the work and how much of it is done offshore in India, then yes, I can live with that.

Based on my answers to the framework, I should tell clients that some work is performed offshore in India. I can explain exactly what type of work is done, what kind of cost savings the client is able to realize because of this practice, and the nature of the security and confidentiality of the arrangement to avert their concerns about identity theft or other malfeasance. It is also important to tell my supervisor what I am doing because to do otherwise could also be considered to be unethical.

10. Canadian companies such as Tim Hortons and Lululemon have expanded their global presence through company-owned stores. In what instances might it consider using joint ventures as its global market entry strategy into new markets?

Instructor’s Notes: This question requires students to consider the five global market entry strategies to determine when and where joint venturing would be an appropriate choice.

Example answers: Some countries, for example China, require joint ventures from companies who wish to enter the country. Tim Hortons has expanded using franchises. It entered China via an exclusive Master Franchise Joint Venture Agreement. In countries where the language and culture are very different from Canada, Lululemon may benefit from a joint venture with a local company who can provide immediate market access, an in-depth understanding of the market, and access to distribution channels as well as a sharing the financial burden of doing business in the new country. A joint venture is a good way for a company to limit its risks of entering a foreign market. However, by using a joint venture strategy, the company gives up a certain amount of control over its operations in hopes of becoming more successful. Note that the decision to use joint ventures must be based on an analysis of each country’s unique situation e.g., risk profile, cultural differences, and laws and regulations.

Marketing Digitally

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1. For many small businesses, the idea of entering a foreign market is frightening. The Government of Canada, as well as most provincial and territorial governments, now offers assistance designed specifically for small business owners. Two such government departments are DFAIT and Industry Canada. Visit Industry Canada’s “exportsource” website at http://www.exportsource.ca/ and examine the types of services it provides for Canadian businesses wishing to do business in a foreign country. Evaluate the usefulness of the information provided.

Instructor’s Notes: The exercise allows students to explore the assistance available to businesses looking to enter a foreign market.

Example answers: Exportsource.ca provides all types of information that are general in nature rather than industry or sector specific. Students might find the general information helpful but may comment it is not as helpful to those in certain specific businesses (industry, sectors or product categories). Ask students to evaluate also whether the recommended sources for additional information listed on the website are helpful.

2. McCain Foods is a global brand, but it alters its products and promotions to accommodate local tastes in each country. Go to www.mccain.ca and visit the Canadian site. Then go to www.mccain.com/about-us/contact-us and check out the websites for McCain in South America, the U.S. site, and France. How are these three websites different from the Canadian site? What products are different? What promotional elements are different?

Instructor’s Notes: Students can learn how a popular Canadian company chooses to position itself and its products in other countries.

Example answers: McCain highlights different things about itself and its products in each country. Each site uses the host country’ language, shows people that are similar to the members of the target markets in each country, and features menu items that differ according to local tastes. The three non-Canadian websites differ from the Canadian site primarily in terms of the language they use, their technical sophistication, and the media images. The products are pretty much the same, with the exception of some products that require changes because of, for example, cultural differences.

End-of-Chapter Case Study: Luxury Watches in China 1. How can luxury watch brands ensure that they remain nimble and ready to change as the markets change?

Example answers: Companies need to pay attention to all of the factors in Exhibit 16.1 Components of a Country Market Assessment. In particular, they need to focus on political and economic factors. Economic factors play a big role given the disparity of income levels. In a country like China where consumers have newfound wealth, owning a luxury watch is an indicator of a consumer’s success. Political factors also must be considered. The government may add tariffs to luxury watches, especially if international travel remains constrained and Chinese consumers buy more watches in the country instead of while they are abroad.

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2. What global marketing considerations, beyond the effects of COVID-19, are relevant for these brands?

Example answers: Other considerations when marketing globally is to pay close attention to sociocultural factors.

Understanding the language and norms are critical when running promotional campaigns. Refer to Ethical Dilemma 8.1 to see how Dolce & Gabbana sales were decimated because the company did not understand the culture. Pricing will also be an issue. If prices are set too high or too low in China compared to other countries, a company’s reputation could be damaged.

Video Activities Video: Global Marketing: Domino’s Abroad Core Concepts Covered: Global Marketing Mix, adapting product Video Summary: Domino’s is the largest pizza delivery chain in the world, with a presence in 80 international markets. To achieve success around the world, Domino’s adapts to regional tastes and customs by adjusting ingredients (for example, vegetarian pizzas in India and bagged sandwiches in France), advertising (for example, by running an ad series resembling a Korean soap opera), by introducing new ingredients carefully (for example, pepperoni in Japan), and by leveraging online and mobile ordering.

Discussion Question: Give examples of how Domino’s has adapted its global marketing mix to meet the needs of local consumers.

Brief Answer: The Summary above offers several examples.

Video: Manager’s Hot Seat: Cultural Dimensions—Let’s Break a Deal Core Concepts Covered: Analyzing Sociocultural Factors Video Summary: This video shows two short meetings between an American manager (with Mustang Jeans) and a Japanese executive whose company might sell Mustang Jeans in Japan. Mustang has reassigned this account to a new representative, which comes as a surprise to the Japanese executive.

Things go further downhill from there due to cultural differences.

Discussion Question: Why didn’t these meetings end in a signed contract? What changes might have led to a better result?

Brief Answer:  The Japanese executive values relationships with his business partners. He would like to develop a relationship with this new sales representative before doing business. The American manager is not allowing this to happen, but instead keeps breaking in and asking about the contract.  On a related note, the American manager is in too much of a hurry, as noted by his having another meeting scheduled so soon. He needed to allocate more time, probably including lunch or dinner.

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



It was a mistake to have the meeting without Roger. The best option would have been to keep Roger on this account at least until the contract was signed; if that was impossible for some reason, Roger and the new rep should have met with the Japanese executive together to make introductions and smooth the transition.

The explanation for the transition away from Roger was weak, and as such might have seemed like an insult to the Japanese executive; the company was showing a lack of respect for the relationship the Japanese executive had developed with Roger.

Additional Teaching Tips In this chapter, students are exposed global product development, distribution, and marketing strategy in this chapter. Students evaluate the similarities and differences between a domestic marketing strategy and a global marketing strategy. Ethical consideration and cultural diversity are addressed as they impact the marketing message.

Students will be re-introduced to business terms such as quota, boycott, various trade agreements, joint venture, GNP, GDP, etc. To review these terms before discussing the concepts in the chapter, the instructor may want to exercise a challenge similar to the Jeopardy game.

Divide students into 4 or 5 groups of equal size. The instructor writes down 3-4 terms from the chapter on 4 or 5 note cards. The group then takes the word and writes a story problem without the word in it.

They can transfer to a transparency. One group presents each of their story problems while the other groups (with one person being the spokesperson for the group) try to determine the term. The group earns one point if they get the story problem correct. They also can lose a point if they get it wrong and the next spokesperson’s hand that goes up (acting like a buzzer) gets a chance to answer. Instructors can award the winning group with +2 points on a quiz or exam. This “livens-up” content which is heavily laden with vocabulary.

Online Teaching Tip: This exercise can be transferred to a post situation with a term assigned to each student and fellow students determining the term. If the instructor can solicit a real-time chat, the students can submit their word problems in advance of the session and the instructor plays the role of presenting the story problems for the class.

Students do not fully appreciate cultural diversity and location and its impact on the 4 Ps until they study a country and are assigned related questions to answer. Instructors may want to make this an assignment with students turning to the Web for research. Questions asked may be: What social customs may impact the way a product is marketed? Are there barriers to the distribution system? Is the product use in the country consistent with the home country or do they differ and why? Will language barriers present a problem?

Newsletter Teaching Aid Remember to subscribe to “Grewal Levy Marketing News” at https://grewallevymarketing.com/.

Published regularly, each newsletter contains a feature article on current topics, for example Lime Rental Scooters, with discussion questions that can be used in class. Each article is tagged so instructors can quickly identify relevant chapters for the newsletter content. The site also features a selection of

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related articles, links to current videos that can be used in class, as well as links to archived articles sorted by chapter for ease of use in your class.

Chapter Seventeen: Ethics and Socially Responsible Marketing TOOLS FOR INSTRUCTORS       

Learning Objectives Annotated Chapter Outline with Instructor’s Notes/Teaching Tips Answers to End of Chapter Learning Aids Marketing Application Questions Marketing Digitally Chapter Case Study Video Activities Additional Teaching Tips Newsletter Teaching Aid

Learning Objectives Identify why marketers should be concerned about ethics Distinguish between ethics and social responsibility Describe consumerism and explain how it fosters ethical and socially responsible business practices Identify the four steps in ethical decision making Outline how ethics and social responsibility can be integrated into a firm’s marketing strategy

Annotated Chapter Outline

Instructor’s Notes

Opening Vignette: Second Hand Clothing and thredUp The growing market for second hand clothing has prompted many startups to focus on selling used garments. This opening vignette discusses the environmental impact of this market. It looks at how even large retailers recognize the need to embrace sustainability of the clothes they sell beyond the purchase stage.

Ask students Do your shopping habits support companies who practice an ethical business approach and/or are committed to sustainability initiatives?

The Scope of Marketing Ethics Understand Business Ethics  Business ethics overall refers to a branch of ethical study that examines ethical rules and principles in a commercial context, various moral or ethical problems that might arise in a

Group activity: Ask students to brainstorm the ethical issues unique to marketing. They should start with the marketing mix and proceed through each of the 4Ps. Each group should write one issue for each element on the board, and then discuss what they have produced as a class.

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Annotated Chapter Outline

Instructor’s Notes

business setting, and any special duties or obligations that apply to persons engaged in commerce.  Marketing ethics examines ethical problems specific to the domain of marketing.  Marketers must recognize the ethical implications of all their actions.

LO1: Ethical Issues Associated with Marketing Decisions The public nature of marketing often leads to the charge that marketers are unethical or at least less ethical than people in other professions.

Marketing is a very visible part of business. Often practices that are the result of other business functions will be attributed to marketing.

Marketers need to stress the good things that they do and the value that they add to society. Also, by policing practitioners and sanctioning those who violate the various codes of ethics, etc. marketers can demonstrate that they are serious about ethical standards.

Ask students: What actions can marketers take to improve their image? Do you consider the way marketers are characterized by people taking the survey to be fair?

To create an ethical climate in the workplace:  Everyone within the firm must share the same understanding of values and how they translate into the business activities of the firm, as well as a consistent language to discuss them.  All levels of the firm must be committed to establishing and maintaining an ethical climate.

A strong ethical climate requires a commitment from the top down within the firm. Everyone within the firm must agree to a system of controls that rewards appropriate behaviour and punishes inappropriate behaviour.

Ask students about the ethical climate on their campus. Pick a topic such as honour code violations or pledging procedures of sororities and fraternities. Then ask them to evaluate the topic based on values, rules, and controls.

A firm’s incentive system can encourage exactly the type of behaviour the firm states that it wants to avoid. Incentives such as a bonus can be a double-edged sword, generating sales but also encouraging overly and aggressive and potentially unethical sales tactics.

 Many professions, including marketing, have their own code of ethics. This marketing code of ethics was developed by the Canadian Marketing Association.

Each sub-area within marketing, such as marketing research, advertising, pricing, and so forth, has its own code of ethics that deals with the specific issues that arise when conducting business in those

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Annotated Chapter Outline

Instructor’s Notes areas.

Group activity: Have the students develop a Code of Ethics for their college or university. Ask students: What ethical behaviours should you include? Why are those chosen behaviours important?

The Influence of Personal Ethics  Why do people act unethically? Each person is the product of his or her culture, upbringing, genes, and other influences.  Two key questions apply to understanding unethical behaviour: What makes people take actions that create harm? Are all people who engage in such behaviour immoral or unethical?

In many cases, ethics is in the eye of the beholder.

LO2: Corporate Social Responsibility  Corporate social responsibility refers to the voluntary actions taken by a company to address the ethical, social, and environmental impacts of its business operations and the concerns of its stakeholders. It means doing things that benefit society, such as sponsoring a charity event. Such actions are typically beyond the scope of corporate ethical behaviour or the ethical behaviour of employees.  A firm can behave in a socially responsible manner, but perform unethical practices, and vice versa.

Ask students: Can a firm be socially responsible and not ethical, or ethical and not socially responsible? A firm can give money to charity (socially responsible) but be unethical (engage in deceptive advertising).

Ethics vs. Social Responsibility

It is important to distinguish between ethical business practices and corporate social responsibility programs.

LO3: Consumerism, Ethics, and Socially Responsible Practices Consumerism—a social movement aimed at protecting consumers from business practices that infringe upon their rights. More than 75% of Canadian companies have established SR policies

Consumer activism can result in boycotts of companies who do not act in an ethical or socially responsible manner or if they believe that a marketing practice is unethical or unfair to group of individuals. For example, many students demanded that their Universities boycott Nike

Ask students: Why might a salesperson lie to a young couple about the safety of a car seat for their infant? This will bring out issues such as selfinterest for the welfare of the salesperson and his/her family.

Remind students there are no definitive answers to these questions. Ethics is a difficult topic, and many people struggle to find answers to questions such as these.

Ask students: Can you think of a firm that may be either ethical or socially responsible, but not both?

Group activity: Students should create a list of firms reputed to be socially responsible. In what ways do these firms demonstrate their commitment? Do the students consider these factors when purchasing goods?

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Instructor’s Notes

and support SR projects. When companies embrace CSR they must consider their employees, customers, marketplace, and society.

products for their sports teams in protest of Nike’s labour practices.

Companies are criticized for engaging in unethical or illegal marketing practices, e.g. those that promote products and services to vulnerable groups such as people who are addicted to alcohol, tobacco, and gambling.

Employees: must be assured of a safe working environment, free of threats to their physical safety, health, or well-being.

Customers: Companies must pay attention to the marketing environment, take shifts and trends into account and react to them quickly.

Ask Students: are the criticisms of marketing justified?

Marketplace: When one firm in the industry leads the way toward CSR, its partners and competitors often have no choice but to follow.

Society: 95 percent of CEOs believe that society increasingly expects companies to take on public responsibilities.

LO4: A Framework for Ethical Decision Making

Exhibit 17.5 can be used on its own to introduce the framework. Additional information follows which can be used to provide more detail as desired.

Step 1: Identify issues

In a marketing research firm, ethical issues might include: - data collection methods—not informing respondents that they are being observed - hiding the true purpose of a study from respondents—telling them they are an independent research company, but actually doing research for a particular politician - using results to mislead or even harm the public—results of a pharmaceutical study.

Step 2: Gather information and identify stakeholders  Gather key facts related to the ethical issue, including all relevant legal information.  Identify and discuss the issue with those persons and groups that have a stake in its resolution.

Ask students: What are the ramifications of publishing misleading research findings for a new pharmaceutical product? Answer: there could be real harm to users. Then ask: Why might this happen?

Answer: The pharmaceutical industry wants the product to come to market to meet sales goals.

They might be paying the researchers to do the project.

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Instructor’s Notes

 A stakeholder analysis matrix defines each stakeholder’s responsibility to the others.

The stakeholders are interrelated because an ethical violation may impact others. Falsifying results for a new pharmaceutical study will, for instance, impact the researchers, the pharmaceutical company, the legal system, the physicians, and most importantly the patients.

Step 3: Brainstorm alternatives

The alternative solutions depend on the type of ethical issue and how the stakeholders are affected.

The relevant stakeholders come together to brainstorm alternative solutions.

Step 4: Choose a course of action  Weigh the various alternatives and choose a course of action that generates the best ethical solution.  Rank the alternatives in order of preference.  With an ethical framework, decision makers can include all relevant ethical issues, evaluate alternatives, and choose the course of action that will help them avoid serious ethical lapses.

Alternatives are then evaluated and a course of action is chosen. The chosen course represents the best solution for the stakeholders using ethical best practices.

LO5: Integrating Ethics into Marketing Strategy The pertinent ethical questions vary at each stage of the strategic marketing planning process.

Remind students that as marketers, they must ask questions specific to each stage and examine those questions carefully before moving on to the next phase.

Planning Phase  Include an ethical statement in the firm’s mission or vision statements.  Ethical mission statements can guide SWOT analyses.

By incorporating ethics into the firm’s mission statement, the firm sets a standard for its subsequent ethical decision making. The mission statement signals the firm’s strategic priorities.

Implementation Phase  Ensure the values stated by the firm are consistent with the values of the target market.  Various choices lead to potential ethical issues, including 1. Target market 2. Resource allocation 3. Sourcing decisions

Group activity: For each question related to the implementation phase, have students use the textual examples as a basis for a discussion in which they identify other products or examples for which a firm faces potential ethical issues. Many students will use examples such as tobacco, alcohol or other controversial product companies.

Point out that other products also encounter the same issues, even if the products themselves seem less controversial.

Control Phase

Any plan requires constant evaluation and revision,

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Instructor’s Notes

 An implemented system must address any potential ethical issues.  As new technologies emerge, so might new ethical issues.

and this truism applies particularly to the evaluation of ethical issues.

Understanding Ethics by Using Scenarios

The scenarios that follow are designed to stimulate discussion and offer no single correct answer.

Scenario 1: Retailers Lack Ethical Guidelines Peavy’s Bridal is exerting pressure on Renata to make quote or be fired. Another salesperson tells her to sell the most expensive dress in the store and as many accessories as possible to prospective brides, saying Renata needs to tell them that doing so will make them feel more beautiful on their wedding day.

Ask students: If Marilyn is correct about the brides’ goal of everyone gasping when they first see her, is she doing the right thing?

Scenario 2: Giving credit where credit isn’t due A catalogue retailer that appeals to families wants to pursue a new market. A market research firm suggests targeting low-income single parents, who make up an attractively large new market but have severe resource constraints. The marketing plan would offer a generous credit policy with direct payment requirements. The accounts would carry extremely high interest rates. Is the catalogue retailer offering a valuable service or encouraging unmanageable debt levels?

Lower-income consumers often are denied credit, and when they get credit then pay it off, they build their credit. Rent-to-own and cheque cashing firms use this argument to justify their exorbitant fees and interest rates. Opponents argue that encouraging non–credit-worthy consumers to take credit cards harms them by making them responsible for debts they likely cannot pay off.

Scenario 3: The jeweller’s tarnished image A family-owned and operated costume jewellery manufacturer traditionally has sold only to wholesalers. Recently a saleswoman approached the firm about selling its product through a network of distributors via home parties. The saleswoman generated revenue, and the firm started making plans for expansion. Then, a party attendee informs the manufacturer that she was misled into purchasing products at a home party.

Is the manufacturer responsible for the actions of its distributor?

When the owners learn about the deception, should they immediately stop using the distributors? Why or why not?

Scenario 4: No wonder it’s so good A new soft drink, advertised as the perfect way to relax, contains no caffeine and has become very popular with woman. The marketing director

Many people believe that legal actions de facto must be ethical, but are they really? If the chance of harm is very low, should the firm disclose the presence of the alcohol to avoid any potential

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Instructor’s Notes

learns that the firm is not disclosing that the cola contains alcohol, though below the legal limit required for reporting. However, the director worries that any alcohol may pose a danger for certain consumers. Even if the lack of disclosure is legal, is it ethical?

issues?

Scenario 5: Bright Baby’s bright idea A manufacturer of infant toys has issued a recall order for one of its products. The CEO is looking for options other than destroying all inventory of this project. Perhaps the product could be repackaged and sent to another country in which the recall is not in effect. The CEO decides to accept this recommendation. No deaths or serious injuries related to the product have been reported; is the CEO’s decision therefore ethical?

Avoiding a large loss often creates the potential for ethically questionable actions. Would the scenario change if some infants had died from this product?

Marketing Applications 1. Why are marketers likely to be faced with more ethical dilemmas than members of other functional areas of the firm, like finance, accounting, or real estate?

Instructor’s Notes: This exercise challenges students to consider the substantive differences among various business functions. If, for example, a student considers the functions from the perspective of quantitative versus qualitative decision making, he or she might recognize that finance and accounting are largely number driven and that real estate quantitatively estimates property values and financing arrangements. In contrast, marketing tends to include a significant qualitative component, and subjective decisions often increase the associated ethical issues.

Example answers: Marketers generally face more ethical dilemmas, because they promote the company’s product or service to an external customer base. Decisions about pricing, distribution, the marketing strategy’s influence on both the target market and other customer segments, and whether to inform the public of product defects often fall to marketers.

2. Develop an argument for why a cosmetics firm should build and maintain an ethical climate.

Instructor’s Notes: Students must consider the potential ethical issues that a cosmetics company faces and therefore how unethical behaviour on the part of the company might affect it negatively.

Example answers: Answers will vary but should include maintaining long-term customer loyalty, social responsibility, and the protection brand image. Responses should also mention avoiding litigation if it violates safety standards and the impact of recalls on brand equity. An ethical environment would help the company 1-266

attract top talent to work at the firm as well. It would foster positive attitudes in the target market that might cause consumers to trust the firm and its products and investors to invest more in the firm without fear of potential legal issues.

3. An insurance company gives generously to charities and sponsors cancer awareness programs. It also makes it difficult for elderly consumers to make claims on policies that they have owned for years. Evaluate this company from an ethical and social responsibility perspective.

Instructor’s Notes: This exercise illustrates the difference between ethics and social responsibility, noting that no guarantee ensures socially responsible companies necessarily act ethically.

Example answers: Corporate social responsibility describes the voluntary actions taken by a company to address the ethical, social, and environmental impacts of its business operations and the concerns of its stakeholders. Therefore, it is socially responsible for the company to donate generously to charities and sponsor cancer awareness programs. However, it is unethical for the company to increase the difficulty elderly customers have when making claims on policies they have held for years. Overall, the company might be criticized for showing a socially responsible face to the public while pursuing unethical business practices in private.

4. A clothing company gives generously to charities and sponsors donation drives to help lowerincome teen girls get reasonably priced prom dresses. It also locates its manufacturing plants in countries with few labour laws, such that it does not know if children are working in its factories, and works to prevent union activity among its employees. Evaluate this company from an ethical and social responsibility perspective Instructor’s Notes: This exercise allows students to analyze an ethical decision from the different perspectives of a variety of stakeholders and apply the stakeholder analysis matrix tool.

Example answers: Stakeholder

The public

Brazilian workers

Stakeholders’ Concerns

Result or Impact on the Stakeholder

Purchasing a product that might violate their sense of fairness, decency, or ethical behaviour.

Must work long hours in very poor conditions for very little pay; children possibly forced to do the work.

Loss of trust in the company’s product, so they purchase from another company.

Potentially poor health or injury, even if the wage earned is high relative to that offered by other local employers.

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Potential Strategies for Obtaining Support or Diminishing Impact  Enforce “no child labour” and fair wage practices.  Notify public of such practices.  Stipulate wage and labour condition guarantees in contract with Brazilian firm.  Stipulate penalties for lack of compliance with these directives.

Canadian company

The Brazilian company

Being seen as unethical and socially irresponsible for using sweatshops in manufacturing.

A foreign company dictates business practices and ethical behaviour it must use.

Loss of business and potential investment, as well as possible legal action by outside parties.

Loss of competitive advantage if labour costs increase; potentially negative repercussions and image in its own country.

 

 

Put ethics clauses in all labour contracts.

Monitor the business practices of outsourcing vendors.

Absorb some of wage costs.

Offer appropriate concessions and potential support.

5. Based on the evaluation you developed for question 4, provide responses to the ethical decisionmaking metric from Exhibit 17.6. Provide a rationale for your score for each question.

Instructor’s Notes: This exercise prompts students to take their evaluation of the ethical situation to another level. In particular, their use of the evaluation questionnaire forces them to analyze their own thinking and ability to empathize with the various stakeholders involved.

Example answers:  “Have I/we thought broadly about any ethical issues associated with the decision that must be made?” = 5, very confident. The ethical issues of outsourcing apparel manufacturing to a thirdworld country are fairly well publicized.  “Have I/we involved as many possible people who have a right to offer input into or have actual involvement in making this decision and action plan?” = 1, not confident. The only evaluation is the student’s own and lacks actual involvement or input from the parties.  “Does this decision respect the rights and dignity of the stakeholders?” = 4, somewhat confident.

The student should have focused on solutions that consider the dignity of the parties involved, with the possible exception of the reaction of the Brazilian company to outside interference in its business practices.  “Does this decision produce the most good and the least harm to the relevant stakeholders?” = 5, very confident. Despite potential reservations regarding the Brazilian company, the decision generally helps the workers, the general public, and both companies, with little to no downside.  “Does this decision uphold relevant conventional moral rules?” = 5, very confident. The decision upholds conventional moral rules about helping those who are less fortunate and those who cannot help themselves.  “Can I/we live with this decision alternative?” = 5, very confident. Students should have no qualms about living with this decision from either an ethical or a socially responsible standpoint.

6. A company that makes granola and other “healthy” snacks has the following mission statement: “Our goal is to profitably sell good-tasting, healthy products and to better society.” Although its products are organic, they also are relatively high in calories. The company gives a small portion of its profits to the United Way. Evaluate the mission statement.

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Instructor’s Notes: Student should consider this hypothetical brand and explore to whom its products are targeted and how such targeting actually appeals to the consumer audience in question.

Example answers: As far as the quoted mission statement, the company is following the letter, if not the spirit. There is nothing ethically wrong with any of the company’s actions; high caloric content does not necessarily mean something is unhealthy, and the portion of the profits going to the United Way helps society, regardless of the size of the contribution. However, the company could do more to better society than just donating a small contribution to the United Way. 7. The granola company described in the last question is thinking about starting an advertising campaign directed at children that would air on Saturday morning television. Explain why you think it should or should not do so.

Instructor’s Notes: This exercise challenges students to extend their thinking to determine if ethical standards remain the same even when circumstances change. In this particular case, the issue is whether such a product should be marketed directly to children, who are not the most informed consumers when it comes to what products are nutritionally best for them.

Example answers: The company should not market such a product directly to children, because of the high calorie content and the incidence of childhood obesity in Canada. In an ideal world, parents make purchase decisions based on whether products are nutritionally appropriate for their children. However, that ideal assumes the parent is present for every purchase and that the parent uses nutrition as a criterion for selection, even though in the real world, such is not always the case.

8. Discuss why marketers use Internet cookies and the potential ethical issues this practice creates.

Instructor’s Notes: These conversations are complex, in-depth, and serious. They also are becoming increasingly important for marketers as the marketing environment expands to include advanced technology and brand new methods for collecting data.

Example answers: Cookies enable marketers to discern where a shopper starts the search process, how he or she proceeds, and where the online encounter ends - as well as what he or she buys, or doesn’t. A long history of arguments - even before the computer era - debated the acceptability of wire taps on telephones, whether traditional or mobile, and whether governments had the right to gather specific information (e.g., recordings) or just metadata (e.g., general information about the number called, when, and for how long).

9. A women’s clothing retailer has been found guilty of misleading pricing practices. In spite of significant fines, its pricing practices remain unchanged. Explain how consumerism could force the company to act more ethically in the future.

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Instructor’s Notes: This question encourages students to think about what differences their actions can make in ensuring companies uphold high ethical standards. It also reinforces the importance of strong consumerism on the ethical practices of businesses.

Example answers: Students will propose several measures or actions they can take, which will include things such as (1) lobbying for tougher penalties, (2) “shame the companies” by making their actions more widely known, (3) boycott, (4) or keep a vigilant eye on companies and report them to the Competition Bureau.

10. Choose a company that you believe is particularly socially responsible that is not discussed in this chapter. How do you justify your choice? What counterarguments might someone make to suggest that your chosen company is not responsible? Consider all key stakeholders in developing both sides of the argument.

Instructor’s Notes: This question will allow students to examine how they and others may hold different views of the same company in terms of its level of social responsibility.

Example answers: Students should consider firms that they believe are socially responsible and should justify their answers as to why that company is socially responsible. What makes a firm irresponsible? What are the implications for all stakeholders within a firm?

Marketing Digitally 1. Perhaps no sub discipline of marketing receives more scrutiny regarding ethical compliance than direct marketing, a form of non-store retailing in which customers are exposed to and purchase merchandise or services through an impersonal medium such as telephone, mail, or the Internet.

Ethical issues in direct marketing cover a broad spectrum because this means of selling is conducted through all forms of communication. The Canadian Marketing Association (CMA) takes ethics very seriously and has several programs to ensure that its member organizations comply with its Code of Ethics. Go to the Web site for the Canadian Marketing Association (http://www.the-cma.org/) and type the word “ethics” in the search box. Discuss the results of your search. How many different ways did you find that the CMA was involved in assisting consumers and the industry to create a more ethical marketplace?

Instructor’s Notes: Although the actual student notes will vary, it should be clear from everyone’s search results that the CMA publishes its ethical standards and provides links to other government departments

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(federal and provincial, e.g., the Competition Bureau) as well as other websites (e.g., Phonebusters, Public Interest Advocacy Centre, Consumer Association of Canada) that reports on whether member companies follow those standards. By publicizing such standards and reports of violations, the CMA hopes to address the general public’s ethical concerns about direct marketing by providing a transparent portrait of how the industry self-regulates.

Example answers: The CMA uses two main methods to help create a more ethical marketplace: (1) It publishes its ethical standards and code of conduct for all to see, and (2) it links to key websites (governments and other special interest groups) that releases reports on those companies that fail to follow the ethical practices it outlines, so people can readily see which firms are not in compliance.

2. An increasing number of firms are stating their strong commitment to corporate social responsibility initiatives. The Corporate Social Responsibility Newswire Service keeps track of these various initiatives and posts stories on its Web site about what various corporations are doing. Go to http://www.csrwire.com/ and choose one story. Write a description of the corporation and the initiative.

Instructor’s Notes: The CSR Newswire contains many stories, so each student should be able to pick one and provide a brief description. The site is a good source of such news and goes a long way toward showing that many such efforts exist.

Example answers: “GROW: Design for Sustainability” is a day-long conference on the business incentives for choosing sustainable design principles and practices. The conference is hosted by the American Institute of Graphic Arts (AIGA).

Chapter Case Study: Corporate Social Responsibility Drives Meaningful Change 1. How does Canada Goose compare to its competitors when it comes to the principles of ethical behaviour?

Example answers: Answers will vary because students will choose different competitors. Answers should highlight the following. Canada Goose: 1) Has worked to preserve polar bear habitats for over two decades.

2) Provides free sewing materials to Inuit who make its parkas.

3) Supports Project Atigi which helps Inuit create original parka collections.

4) Has committed to meet net zero greenhouse gas emissions by 2025.

5) Supports culture, the arts, philanthropic and community needs 6) Switched to reclaimed coyote fur to appease animal rights activists.

7) Uses responsibly sourced down.

8) Commits to 90% of materials use to be recycled and organic.

9) Commits to having 100% of packaging based on sustainable solutions.

10) Does not use offshore production. All of its products are made in Canada.

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2. Discuss how the actions of Canada Goose outlined in this case address the needs of each of the different stakeholder groups: consumers, society, marketplace, and employees?

Example answers: Student’s answers should include a discussion of the unique needs of each stakeholder group and how those needs are interdependent. Students should discuss how Canada Goose meets the needs of the consumers by offering high-quality, functional clothing. It stopped using new coyote fur, switching to reclaimed fur, and uses only responsibly sourced down to satisfy marketplace activists. Societal needs are met in that it works to protect and preserve the environment and culture. It gave employees passes to get out into nature during business hours.

Video Activities Video: Conscious Marketing at the Gluten Free Bar (GFB) Core Concepts Covered: corporate social responsibility Video Summary: The current trend in companies is shifting from focusing on just profits to conscious marketing, which means firms consider stakeholders, including employees, customers, society, and the marketplace. The GFB has been a conscious marketing firm since its inception. It became a certified B Corporation or benefits corporation. It is trying to make the world a better place one piece at a time.

When considering the bottom line, it considers people, the planet, and the product equally.

Discussion Question #1: What are the four key principles of conscious marketing?

Brief Answer:  Having a higher purpose  Considering stakeholders  Creating a conscious culture  Using ethical decision making Discussion Question #2: The GFB has a core value, “We win together.” How do they demonstrate this to their employees?

Brief Answer: They demonstrate the core value through a variety of things, such as:  Giving everyone a raise when the company does well  Offering health care benefits  Providing a low-cost 401K  Hiring employees who are not always considered by some companies. Approximately 40 percent are “returning” citizens, which means they are returning to the working community from incarceration.

Video: Zipcar: Conscious Marketing Core Concepts Covered: corporate social responsibility

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Video Summary: Conscious marketing is built into the DNA of Zipcar, with its car sharing service. The company has built its conscious marketing program on three principles: using cars for good, enabling community service, and enabling volunteerism. The video gives several examples of Zipcar’s commitment to conscious marketing.

Discussion Question #1: Give some examples from the video of conscious marketing as practiced at Zipcar. How does Zipcar spread the word about these initiatives?

Brief Answer Examples include:  “Pride Cars” during Pride Month  Partnership with GLAAD on Spirit Day  Drive the Vote program: free use of Zipcars on Election Day to help voters to get to the polls  Free or heavily discounted cars provided to charitable organizations  Paid time off for employees to volunteer  Discounted cars for employees to support local charities  Subsidized education and skill building support for employees Zipcar’s initiatives are promoted largely through social media, both by the company itself and by its members sharing information with their social media networks.

Discussion Question #2: What did the video say about consumer behaviour toward companies that practice conscious marketing? Ask students if they can think of examples from their own purchases (or those of people they know) of companies that demonstrate these types of behaviour.

Brief Answer: The video says that one study found that 91 percent of respondents said they were likely to switch brands to one supporting a good cause; in another study, a little under half of respondents were willing to spend more for products from companies that give back to society. Students may have examples to offer (one might be a purchase of TOMS shoes instead of those from a competitor). It may also be worth following up with some devil’s advocate questions, since behavioural intentions like those expressed in the surveys do not always translate into actual behaviour.

Additional Teaching Tips In this chapter the goal is to introduce students to ethics and social responsibility. The text introduces the Stakeholder Analysis Matrix and the Ethical Decision Metrics I and II as tools to reaching good ethical decisions. Ethics is difficult to teach because it is based on one’s beliefs and culture. Consequently, instructors should keep in mind that much debate and excitement can occur in the classroom when discussing topics in this chapter.

Instructors can teach the various metrics by using Application Questions 4, 5, 6 where students are divided into group and each group asked to participate in each of the questions by reading the scenario and being assigned part of the matrix to complete. The class would then have one class completed metric for each question for class discussion. Online tip: This exercise can also be transferred to the

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online setting assigning one metric to each team the asking the other teams to critique it and/or add their suggestions.

Most students aren’t aware of the Canadian Marketing Association Code of Ethics. Instructors should fully address this which can be done by asking students to give an example of how the CMA ethical values (honesty, responsibility, fairness, respect, openness, and citizenship) are used in marketing.

Another exercise may be for students to identify an advertisement or a marketing situation that did not adhere to the CMA Code of Ethics and the subsequent outcome. Usually, that outcome is detrimental to the companies which demonstrate the effectiveness of following the CMA Code of Ethics. Online tip: Have students make up story problems that are based on ethical marketing dilemmas. Then have other students in the online class respond to it.

Social responsibility should be addressed. Students often think that social responsibility is a legal requirement when it is not. Start students off with this topic by asking if social responsibility is a legal requirement? The discussion should turn to class discussion of examples of social responsibility and why it is important (from the marketing viewpoint) for the organization to be involved in social responsibility.

Online Tip: Have students write up social responsibility problems (from the stakeholder’s viewpoint) in a post and have their peers reply back as to what they would do in the situation.

Newsletter Teaching Aid Remember to subscribe to “Grewal Levy Marketing News” at https://grewallevymarketing.com/.

Published regularly, each newsletter contains a feature article on current topics, for example Lime Rental Scooters, with discussion questions that can be used in class. Each article is tagged so instructors can quickly identify relevant chapters for the newsletter content. The site also features a selection of related articles, links to current videos that can be used in class, as well as links to archived articles sorted by chapter for ease of use in your class.

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