Solution Manual For Marketing Real People, Real Choices, 12th Edition By Michael R. Solomon Greg W.

Instructor’s Resource Manual

By Michael Casey

Marketing: Real People, Real Choices 12th Edition Michael R. Solomon Saint Joseph’s University

Greg W. Marshall Rollins College

Elnora W. Stuart University of South Carolina Upstate

Bradley D. Carlson Saint Louis University

Janée N. Burkhalter St. Joseph’s University

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Chapter 1: Welcome to Marketing in the Modern World

Chapter 1 Welcome to Marketing in the Modern World: Create and Deliver Value I. CHAPTER OVERVIEW Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large. Therefore, marketing is all about delivering value to stakeholders, that is, to everyone who is affected by a transaction. Organizations that seek to ensure their long-term profitability by identifying and satisfying customers’ needs and wants adopt the marketing concept.

In Chapter 1, these concepts are explored. In addition, students learn the definition of product and benefit. Students are introduced to the four Ps and their interdependent relationship. Students also learn about the continuing evolution of marketing, including the very important customer experience, service-dominant logic, the co-creation of value, and how product innovations have created disruptions in marketing.

II. CHAPTER OBJECTIVES 1-1.

1-2.

1-3.

1-4.

1-5.

Explain what marketing is, the marketing mix, what can be marketed, and the value of marketing.

Explain the evolution of marketing.

Understand value from the perspectives of customers, producers, and society.

Explain the basics of market planning.

Understand how to increase your chances of getting a great first job and having a successful career by using the marketing process to create a personal brand.

III. CHAPTER OUTLINE ►MARKETING MOMENT INTRODUCTION Use a top-of-mind awareness exercise to introduce the different facets of marketing. Instruct students to write down the first word that pops into their head when you say these words: your school name, soup, jeans, marketing, and salesperson. Explain that school name, soup, and jeans were just “warm ups.” (Although Campbell’s is likely to be the most popular answer for soup—this is a great time to illustrate dominant market share.) Most students will respond “advertising” or “sales” in response to marketing—this gives the instructor a chance to introduce the marketing mix and make that point that marketing covers more than just communication. p. 3 REAL PEOPLE, REAL CHOICES—HERE’S MY PROBLEM AT PINTEREST Pinterest’s exponential data-driven growth posed a problem for the firm’s first chief marketing officer Andréa Mallard. Her primary task was to define, differentiate, and grow the Pinterest brand. However, she also had to overcome the internal mistrust about marketing as a function among the primarily engineering 1-1 Copyright © 2025 Pearson Education, Inc.

Chapter 1: Welcome to Marketing in the Modern World

employees. Previous marketing efforts were underfunded and unsuccessful, creating the impression that marketing did not work. She needed to put a team together to help her overcome these challenges. Andréa had two essential jobs to do: (1) to teach the team the art of brand marketing (a long-term perspective that prioritizes shaping consumers’ feelings toward Pinterest and keeping the platform relevant) and (2) to teach the team the science of performance marketing (which is about the more immediate challenges of acquisition or resurrection of users who no longer visited the site). Andréa knew she needed to generate results fast and had three options: 1: Educate the executive team on the effectiveness of brand marketing right away.

2: Focus on building a growth marketing engine to acquire and resurrect Pinterest users who had defected to other platforms as efficiently as possible—thus, hopefully getting some quick wins on the board.

3: Build a performance marketing engine while simultaneously running a series of small brand marketing test campaigns to quickly establish some proof points for its importance and effectiveness as part of the mix.

See what option the students choose. Discuss their reasoning in class.

Andréa chose option # 3.

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1. MARKETING: WHAT IS IT? As one of billions of consumers around the globe, each student knows about marketing because it has been part of their lives.

Marketing is first and foremost about satisfying consumer needs. The seller also has needs—to make a profit, to remain in business, and even to take pride in selling the highest-quality products possible.

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As it becomes more challenging to market to consumers, firms increasingly focus on customer experience (CX or CEX). Customers are loyal to brands that consistently deliver positive experiences.

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Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.

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1.1 “Marketing Is the Activity, Set of Institutions, and Processes…”

Marketing includes a great number of activities. The importance of marketing activities varies a lot across organizations. Activities include: understanding customer needs through marketing research; selecting people or organizations to target; developing the product; pricing the product; getting the product to the consumer; and delivering marketing messages. Agencies and other institutions help support firms’ marketing efforts.

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1.2 “…for Creating, Communicating, Delivering, and Exchanging: The Marketing Mix…” To satisfy needs, marketers need many tools. The marketing mix consists of the tools the organization uses to create a desired response among a set of predefined consumers. These tools include the product, the price, the promotional activities, and the places. We refer to the marketing mix as the four Ps: product, price, promotion, and place. The four Ps are interdependent.

1.2.1 Product The product is a good, a service, an idea, a place, and a person—whatever is offered for sale in the exchange. This aspect of the marketing mix includes the design and packaging of a good, as well as its physical features and any associated services, such as free delivery.

1.2.2 Promotion Promotion, often referred to as marketing communication, includes many different activities marketers undertake to inform consumers about their products and to encourage potential customers to buy these products.

Exhibit: Product ( p. 7)

1.2.3 Place Place refers to the availability of the product to the customer at the desired time and location. This P relates to a channel of distribution, which is the series of firms or individuals that facilitates movement of a product from the producer to the final customer.

1.2.4 Price Price is the assignment of value, or the amount the consumer must exchange to receive the offering. Marketers often turn to price to increase consumers’ interest in a product.

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At the heart of every marketing act—big or small—is an “exchange relationship.”

An exchange occurs when a person gives something and gets something else in return. For an exchange to occur, at least two people or organizations must be willing to make a trade.

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1.3 “…Offerings . . .”: What Can We Market?

We’ll refer to any good, service, or idea that we can market as a product, even though what you buy may not take a physical form.

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Figure 1.1 Snapshot: The Marketing Mix

1.3.1 Consumer Goods and Services Consumer goods are the tangible products that individual consumers purchase for personal or family use. Services are intangible products that we pay for and use but don’t own. Marketers need to understand the special challenges that arise when they market an intangible service rather than a tangible good. Because both goods and services are products, it’s more accurate to say “goods and services” rather than “products and services.”

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Exhibit: Superdry brand (p. 8)

Chapter 1: Welcome to Marketing in the Modern World

p. 9

1.3.2 Business-to-Business Goods and Services Business-to-business marketing is the exchange of goods and services from one organization to another. Businesses and other organizations buy a lot more goods than consumers do. They purchase these industrial goods for further processing or to use in their own business operations.

E-commerce is the buying and selling of products on the Internet.

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1.3.3 Nonprofit Marketing You don’t have to be a businessperson to use marketing principles. Many nonprofit organizations, also known as nongovernmental organizations or NGOs, including museums, zoos, and even churches, practice the marketing concept.

The intense competition for support of civic and charitable activities means that only the not-for-profits that meet the needs of their constituents and donors will survive.

1.3.4 Idea, Place, and People Marketing Marketing principles also encourage people to endorse ideas or to change their behaviors in positive ways. Everything from “stop smoking” to “don’t drink and drive” to anti-pollution campaigns reflect the marketing of ideas. Place marketing involves entities such as local governments adopting marketing techniques to attract new businesses and industries to their counties and cities. Visit Florida® Exhibit: (which bills itself as “the official tourism marketing corporation for the state of Florida (p.

Florida”) even has its own expertly researched and developed marketing plan that 9) is updated annually and is visible online for anyone who wants to read it.

People increasingly apply the principles used to create celebrity to package themselves using social media. Microcelebrities are famous to hundreds or thousands (vs. millions) of people. Marketing people is relevant to students who are trying to land internships or jobs.

Website: Big Brothers Big Sisters is an example of a not-for-profit organization. What benefits are offered to the volunteer? Can you cite examples of societal marketing on this site? p. 9

https://www.bbbsfoundation.org/ Go to Volunteer page.

Discussion question: Have you ever thought about the fact that not-for-profit companies need to use marketing as well? If not, why?

1.4. “…THAT HAVE VALUE FOR CUSTOMERS, CLIENTS, p. 10 Table 1.1 PARTNERS, AND SOCIETY AT LARGE…” According to the marketing concept, marketers first identify consumer needs and Value for Customers then provide products that satisfy those needs to ensure the firm’s long-term (p. 10) profitability. A need is the difference between a consumer’s actual state and some ideal or desired state. When the difference is big enough, the consumer is motivated to take action to seek the benefit to satisfy the need or want, which 1-4 Copyright © 2025 Pearson Education, Inc.

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p. 10

results in demand from the market in the marketplace.

Marketplaces continue to evolve (e.g., the sharing economy, collaborative consumption).

Discussion question: What are your favorite marketplaces in which to shop and why? p. 11

1.4.1

The Concept of Customer Value: Marketing Creates Utility

Marketing transactions create utility, which refers to the sum of the benefits we receive when we use a good or service.

Think of customer value as the ratio of benefits to costs, as perceived by the customer, that motivates purchase.

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Marketing processes create several different kinds of utility to provide value to consumers: • Form utility is the benefit marketing provides by transforming raw materials into finished products.

• Place utility is the benefit marketing provides by making products available where customers want them.

• Time utility is the benefit marketing provides by storing products until they are needed.

• Possession utility is the benefit marketing provides by allowing the consumer to own, use, and enjoy the product.

1.4.2 What About Value for Clients, Partners, and Society at Large?

Marketing meets the needs of diverse stakeholders. The term stakeholders here refers to buyers, sellers, investors in a company, community residents, and even citizens of the nations where goods and services are made or sold. Thus, marketing is about satisfying everyone involved in the marketing process.

Exhibit: Auto purchases (p. 11)

Exhibit: Dart Container (p. 11)

Is it possible to contribute in a positive way to society and the Earth and still make a good profit for stockholders? Target, one of the largest retailers, announced that two of its top priorities are environmental sustainability and responsible sourcing.

2. EXPLAIN THE EVOLUTION OF MARKETING

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p. 13

2.1 The Production Era A production orientation works best in a seller’s market when demand is greater than supply because it focuses on the most efficient ways to produce and distribute products.

2.2 The Sales Era When product availability exceeds demand in a buyer’s market, businesses may engage in the “hard sell” in which salespeople aggressively push their wares.

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Table 1.2 The Evolution of

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Selling orientation means that management views marketing as a sales function, Marketing or a way to move products out of warehouses so that inventories do not pile up. We (p. 12) are most likely to find this focus among companies that sell unsought goods— products that people do not tend to buy without some prodding.

Discussion question: Do you mind when someone tries to “hard sell” you on a product? How do you usually react to a “hard sell” salesperson? p. 13

p. 14

2.3 The Relationship Era A customer orientation prioritizes satisfaction of customers’ needs and wants.

Following the Sales Era, successful firms increasingly concentrated on improving the quality of their products. By the early 1990s, many in the marketing community followed an approach termed total quality management (TQM), a management philosophy that involves all employees from the assembly line onward in continuous product quality improvement. The COVID-19 crisis created issues for airlines in the area of customer satisfaction and airlines are still trying to repair the damage.

2.4 The Triple-Bottom-Line Era A triple-bottom-line orientation means building long-term bonds with customers rather than merely selling them stuff today. This new way of looking at business emphasizes the need to maximize three components: • The financial bottom line: Financial profits to stakeholders • The social bottom line: Contributing to the communities in which the company operates • The environmental bottom line: Creating sustainable business practices that minimize damage to the environment or that even improve it Another result of this new way of long-term thinking is the societal marketing concept, which maintains that marketers must satisfy customers’ needs in ways that also benefit society while still delivering a profit to the firm.

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An important trend now is for companies to think of ways to design and manufacture products with a focus on sustainability, which we define as “meeting present needs without compromising the ability of future generations to meet their needs.” Sustainability applies to many aspects of doing business, including social and economic practices (e.g., humane working conditions and diplomacy to prevent wars that deplete food supplies, atmospheric quality, and, of course, lives).

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One other crucial pillar of sustainability is the environmental impact of the product.

Green marketing, the development of marketing strategies that support environmental stewardship by creating an environmentally founded differential benefit in the minds of consumers, is being practiced by most forward-thinking firms today.

p. 14

In addition to building long-term relationships and focusing on social responsibility, triple-bottom-line firms place a much greater focus on 1-6 Copyright © 2025 Pearson Education, Inc.

Exhibit: Bombas (p.

14)

Chapter 1: Welcome to Marketing in the Modern World

accountability—measuring just how much value marketing activities create. This means that marketers at these organizations ask hard questions about the true value of their efforts and their impact on the bottom line. These questions all boil down to the simple acronym of ROI (return on investment), or ROMI (return on marketing investment) for marketers. However, it is not easy to assess the value of marketing activities.

Website: Visit Girls Inc. (inspiring all girls to be strong, smart, and bold) for a discussion about the societal marketing concept: www.girlsinc.org ►Marketing Moment In-Class Activity A company developed a game called JFK Reloaded, which allows the participant to get behind Lee Harvey Oswald’s sniper rifle and recreate the assassination. The player, who can most closely replicate the shot, wins the game. How would you assess this product in terms of the societal marketing concept? ►Marketing Moment In-Class Activity Marketing occurs in non-business organizations under different names. Can you think of other names for “customers” in non-business organizations? Example—hospitals: patients, psychologists: clients, schools: students, non-profit organizations: donors, etc. p. 15 2.5 What’s Next in the Evolution of Marketing?

Exhibit: LEGO brand In the years ahead, we will see an acceleration of the most important factors that marketers think about today. These predictions include: good (p. 15) content, user-generated content, branded content, Big Data, mobile marketing, the sharing economy, artificial intelligence, and corporate citizenship. p. 15

Artificial intelligence (AI) refers to computer systems capable of performing complex tasks that historically only a human could do, such as reasoning, making decisions, or solving problems.

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You’ve probably also heard of machine learning in this same context.

Technically speaking, machine learning is an application of AI. It’s the process of using mathematical models of data to help a computer learn without direct instruction.

User-generated content, or consumer-generated content, will grow and overtake the importance of branded content.

Corporate citizenship, also called corporate social responsibility, refers to a firm’s responsibility to the community in which it operates and to society in general.

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Big Data describes the voluminous data that businesses gather and how the collection of data is used to help organizations understand product, pricing, or promotion failures, fine-tune and target coupons or sales promotions, and develop new products based on a deeper understanding

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Exhibit: Adidas corporate citizenship (p. 16)

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of customer needs.

One easy example is the rapidly escalating improvements in the use of voice-activated chatbots to enhance and improve customer service experiences both online and inside actual brick-and-mortar stores (think: no need to search out a human store clerk!). Simply put, a chatbot is a computer program that simulates and processes human conversation (either written or spoken), allowing humans to interact with digital devices as if they were communicating with a real person.

Customers will expect brand organizations to have a purpose.

There will be more customers with Internet access, with strong growth in emerging markets.

We are squarely in a service economy, which refers to an economic system where the main activity is the provision of services rather than the production of goods.

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We’re shifting from goods-dominant logic to service-dominant logic, which suggests customers buy offerings that provide services and create value (not goods and services).

Within the service-dominant logic, the necessity of a customer orientation concept is heightened as a central focus for organizational success.

►Marketing Moment In-Class Activity The North Face was accused of being hypocritical for refusing a jacket order from a Texas-based oil and gas company because the brand’s business heavily relies on fossil fuels (jackets are made from petroleum products; skiing and other outdoor activities often require travel supported by fossil fuels). How should a brand like The North Face, which is not executing against commitments to environmental consciousness and sustainability, create a narrative that communicates brand values without being accused of virtual signaling or greenwashing? p. 16 Exhibit: Zappos 3. THE VALUE OF MARKETING AND THE MARKETING OF VALUE (p. 17) One way to look at value is to think of it as a ratio of benefits to costs— customers “invest” their time and money to do business with a firm, and they expect a bundle of benefits in return. p. 17

Customer co-creation, or co-creation of value, occurs when a company and their customers work to jointly create a product to suit the customer’s needs.

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Chapter 1: Welcome to Marketing in the Modern World

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3.1 Value: From the Customer Perspective The value proposition includes the whole bundle of benefits the firm promises to deliver, not just the benefits of the product itself.

Marketers communicate benefits to the customer in the form of a value proposition, a marketplace offering that fairly and accurately sums up the value that the customer will realize if he or she purchases the product.

The challenge to the marketer is to create a killer value proposition and convince customers the value proposition is superior to those offered by competitive alternatives.

3.2 Value: From the Seller Perspective Value from a seller’s perspective can take many forms such as profits, prestige among rivals, or pride in doing what they do well.

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In recent years, many firms have transformed the way they do business.

They now regard consumers as partners in the transaction rather than as passive “victims.”

Firms can measure value by determining whether the exchange is profitable. However, they also measure value in different ways. For example, in addition to making a profit, many firms measure value along other dimensions, such as prestige among rival brands or pride in doing what they do well.

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3.2.1 Provide Value Through Competitive Advantage Firms of all types seek to gain a competitive advantage over competitors in order to gain higher sales, higher profits, and more customers. A distinctive competency is a firm’s capability that is superior to that of its competition.

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Firms turn a distinctive competency into a differential benefit—one that is important to customers—to gain a competitive advantage. Differential benefits provide something unique that customers want.

Effective product benefits must be both different from the competition and from things customers want. A firm that delivers these desired benefits provides value to its customers and other stakeholders.

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3.2.2 Add Value Through the Value Chain Many different players—both within and outside a firm—need to work together to create and deliver value to customers. The value chain is a 1-9 Copyright © 2025 Pearson Education, Inc.

Exhibit: Coke (p. 18)

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useful way to appreciate all the players that work together to create value. This term refers to a series of activities involved in designing, producing, marketing, delivering, and supporting any product. In addition to marketing activities, the value chain includes business functions such as human resource management and technology development. p. 18

The main activities of value-chain members include the following: • Inbound logistics: Bringing in materials to make the product • Operations: Converting the materials into the final product • Outbound logistics: Shipping out the final product • Marketing: Promoting and selling the final product • Service: Meeting the customer’s needs by providing any additional support required We have organized this book around the sequence of steps necessary to ensure that the appropriate value exchange occurs and that both parties to the transaction are satisfied—making it more likely they will continue to do business in the future.

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3.2.3 Value Added Through Consumer-Generated Marketing: Social Networking Consumer-generated marketing (CGM). CGM creates value based on content produced by consumers themselves rather than via intra-firm sources such as the brand. CGM is an effective and (not surprisingly) quite engaging way to add two-way value in customer-product/firm relationships. Digital natives, individuals who grew up with technology, may know all the following information.

Web 1.0, the beginning phase of the Internet, was characterized by static content provided by site owners. Web 2.0, the second generation of the World Wide Web, incorporated social networking and user interactivity.

Consumers create value through social media, Internet-based platforms that allow users to create their own content and share it with others who access their sites. On social networking platforms, a user posts a profile on a website and he or she provides and receives links to other members of the network to share input about common interests.

Recommendation engines use information about what other people, with similar interests, purchased to recommend items.

The web categorizes entries according to folksonomy rather than “taxonomy.” In other words, sites rely on users rather than pre1-10 Copyright © 2025 Pearson Education, Inc.

Exhibit: Apple’s value chain (p. 19)

Exhibit: Liza Koshy (p. 20)

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established systems to sort contents.

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The wisdom of crowds perspective (from a book by that name) argues that under the right circumstances, groups are smarter than the smartest people in them are. If this is true, it implies that large numbers of (nonexpert) consumers can predict successful products. Marketers rely on crowdsourcing when they outsource marketing activities to a large group of people, often through a social networking community.

3.3 Value: From a Society-at-Large Perspective Every company’s activities influence the world around it in ways both good and bad. We must consider how marketing transactions add or subtract value from society. Companies usually find that stressing ethics and social responsibility also is good business, at least in the long run.

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3.3.1 The Dark Side of Marketing and Consumer Behavior Some marketers violate their bond of trust with consumers. Violations can be illegal, like a “bait-and-switch” selling, or legal, like advertising alcohol and tobacco products in neighborhoods where abuse of these products is a problem.

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Dimensions of “the dark side” of consumer behavior include: • Addictive consumption: Consumer addiction is a physiological or psychological dependency on goods or services.

• Illegal activities: Crimes against businesses are estimated at more 1-11 Copyright © 2025 Pearson Education, Inc.

Exhibit: Korean addiction (p. 21)

South Internet

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than $40 billion per year. p. 22 • Anticonsumption: Some types of destructive consumer behavior are anticonsumption, when people deliberately deface products. ►Marketing Moment In-Class Activity Ask students to think of businesses that engage in socially responsible activities. What is the activity and how does it help society?

Discussion question: Do you personally feel that marketing is “evil”? Why or why not? p. 22 4. MARKETING AS A PROCESS Our definition of marketing also refers to processes. When it’s done right, marketing is a decision process in which marketing managers determine the strategies that will help the firm meet its objectives and then execute those strategies using the tools they have at their disposal.

A big part of the marketing process is market planning, where we think carefully and strategically about the “big picture” and where our firm and its products fit within it. Firms (or individuals) that engage in marketing planning ask questions like these: • What product benefits will our customers look for in three to five years?

• What capabilities does our firm have that set it apart from the competition?

• What additional customer groups might provide important market segments for us in the future?

• How will changes in technology affect our production process, our communication strategy, and our distribution strategy?

• What changes in social and cultural values are occurring now that will affect our market in the next few years?

• How will customers’ awareness of environmental issues affect their attitudes toward our manufacturing facilities?

• What legal and regulatory issues may affect our business in both domestic and global markets? p. 22

Answers to these and other questions provide the foundation for developing an organization’s marketing plan. This document describes the marketing environment, outlines the marketing objectives and strategy, and identifies who will be responsible for carrying out each part of the marketing strategy.

Some firms choose to reach as many customers as possible, so they offer their goods or services to a mass market that consists of all possible customers in a market regardless of the differences in their specific needs and wants.

Although this approach can be cost-effective, the firm risks losing 1-12 Copyright © 2025 Pearson Education, Inc.

Exhibit: Ford Motor Company (p. 22)

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potential customers to competitors whose marketing plans instead try to meet the needs of specific groups within the market. A market segment is a distinct group of customers within a larger market who are similar to one another in some way and whose needs differ from other customers in the larger market. Depending on its goals and resources, a firm may choose to focus on one segment. A target market is the segment(s) on which an organization focuses its marketing plan and toward which it directs its marketing efforts. Marketers develop positioning strategies to create a desired perception of the product in consumers’ minds in comparison to competitors’ brands.

5. Brand You: A Framework for Managing Your Career Your brand will help you present yourself to employers as a top candidate when you seek internships and jobs during college.

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5.1 Starting the Brand You Process No matter what type of career you want, creating your personal brand will help you manage that career.

5.2 Applying Marketing Concepts to Brand You Developing a brand identity is only the first step.

• Marketing is about meeting needs.

• Marketing is about creating utility.

• Marketing is about exchange relationships.

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Here’s My Choice……

Andréa hired a world-class Head of Performance Marketing as her very first move at the company. Together, they chose Option 3 and quickly built a sophisticated performance marketing engine nationally. She simultaneously ran a small-scale brand marketing test campaign in three U.S. cities and one German city, establishing control markets to measure awareness and sentiment lifts against our goals in each. The approach worked and Pinterest saw an increase in sentiment scores and a near-term positive impact on monthly active users (MAUs). Pinterest also experienced an unintended and outsized positive impact on advertisers and ad revenue. Advertiser revenue increased in the markets where they ran brand marketing, though the message was firmly targeting consumers.

Building awareness of Pinterest, even in smaller markets, reminded those working in marketing or advertising fields that they had perhaps recently been forgetting Pinterest as a viable part of their own media mix.

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IV. END-OF-CHAPTER ANSWER GUIDE CHAPTER QUESTIONS AND ACTIVITIES CONCEPTS: TEST YOUR KNOWLEDGE 1-1.

Briefly explain what marketing is.

Though marketing can be described in many ways, the best definition is that marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives.

1-2.

Describe the marketing mix and explain the four Ps represented in it.

The marketing mix—product, price, promotion, and place—serves as a foundational model in marketing that represents the core elements involved in effectively marketing a product or service. Together, these four Ps must be carefully coordinated to effectively support the overall marketing strategy, helping businesses reach their target market efficiently and achieve their marketing objectives.

Product refers to what a company offers to satisfy the needs and wants of consumers.

This can include physical goods, services, or intangible benefits. The product aspect involves decisions about product design, features, quality, packaging, and after-sales services.

Price is the amount of money consumers must pay to acquire the product. Pricing strategies can vary, ranging from premium pricing to competitive pricing, and are crucial because they affect how the product is perceived and its accessibility to different market segments. Effective pricing must consider the cost of production, the target market’s willingness to pay, and the prices of competing products.

Promotion encompasses all the methods used to communicate the benefits and value of the product to the target audience. This includes advertising, sales promotions, public relations, direct marketing, and social media campaigns. The goal of promotion is to persuade or inform customers and can significantly influence the brand’s visibility and sales.

Place involves the distribution channels through which the product is sold and how it is delivered to the consumer. This could be through physical locations like retail stores or online platforms, and the strategy here focuses on making the product conveniently available and accessible to the target consumers.

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1-3.

Define the terms consumer goods, services, and industrial goods. What do we mean by marketing ideas, people, and places?

Consumer goods are the tangible products that individual consumers purchase for personal or family use. Examples: laundry detergent, food, home computer.

Services are intangible products that we pay for and use but never own. Examples: dry cleaning, tax preparation, dermatologist.

Industrial goods are bought by organizations for further processing or for use in their business operations. Examples: wood for paper, rubber for tires, steel for cars.

Marketing principles are also used to market ideas, places, and people. Examples include: • Fatherhood involvement • Shelter-pet adoption • Microcelebrities Some of the same principles that go into “creating” a celebrity apply to you. An entertainer must “package” his/her talents, identify a market that is likely to be interested, and work hard to gain exposure to these potential customers by appearing in the right venues. You can use marketing strategies to create your unique brand—Brand You.

1-4.

What is the difference between a want and a need? What is a benefit? Explain demand.

What is a marketplace?

A need is defined as a consumer’s basic requirement that must be fulfilled. Needs are essential for survival and form the basis of human motivation to act.

A want is a desire that shapes the choice of one product over another, influenced by an individual’s background, culture, and personality.

A benefit is the value or utility a consumer receives from using a product, which motivates their buying behavior. Benefits satisfy wants and needs, and they are a key part of a product’s appeal to customers.

Demand refers to how much of a product or service is desired by buyers in the market.

The law of demand states that, all else being equal, as the price of a product increases, the quantity demanded of it will decrease, and vice versa. Demand is not merely a singular desire but is quantified by the ability and willingness to purchase at specific price points.

A marketplace is any location or medium where goods and services are exchanged. This could be a physical place, like a local store or a mall, as well as digital platforms such as e-commerce sites. The marketplace is the operational environment in marketing where exchanges between buyers and sellers take place.

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1-5. What is customer value? What is utility? List, describe, and give an example of the different types of utility.

Customer value is the perceived worth that a product or service provides to its buyers, measured by the benefits it offers relative to the cost. It involves the assessment of what customers gain from a product in comparison to what they have to give up.

Utility is the usefulness or benefit received by consumers from a product. Marketing creates several forms of utility: (a) form utility—raw materials are changed into a finished product (e.g., sewing silk using thread to make a dress); (b) place utility—the organization makes products available where consumers want them (e.g., getting the dress shipped to you on time to wear it to an event); (c) time utility—products are stored until they are needed by the consumer (e.g., renting a dress for an event); and (d) possession utility—the organization allows the consumer to own, use, and/or enjoy the product (e.g., offering a variety so the buyer can select a dress they enjoy at a good value).

1-6.

Explain the different stages in the evolution of the marketing concept. What is the triplebottom-line orientation? What role is artificial intelligence (AI) playing in the evolution of marketing?

The marketing concept has gone through a few stages throughout the years. These stages include: • The Production Era: A production orientation works best in a seller’s market when demand is greater than supply because it focuses on the most efficient ways to produce and distribute products.

• The Sales Era: A selling orientation means that management views marketing as a sales function, or a way to move products out of warehouses so that inventories do not pile up.

• The Relationship Era: A consumer orientation satisfies customers’ needs and wants.

• The Triple-Bottom-Line Era: A triple bottom-line orientation means building longterm bonds with customers rather than merely selling them stuff today. This new way of looking at business emphasizes the need to maximize three components: ▪ The financial bottom line—Financial profits to stakeholders ▪ The social bottom line—Contributing to the communities in which the company operates ▪ The environmental bottom line—Creating sustainable business practices that minimize damage to the environment or that even improve it Artificial intelligence (AI) is significantly impacting the evolution of marketing by enhancing customer interactions, improving predictive analytics, and personalizing content. AI-driven technologies like chatbots offer real-time support and tailored recommendations, enhancing the customer experience. AI also enables marketers to predict consumer behaviors and preferences accurately, allowing for more targeted and effective marketing strategies. Additionally, AI automates routine tasks such as email marketing and customer segmentation, increasing operational efficiency. It also optimizes 1-16 Copyright © 2025 Pearson Education, Inc.

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advertising campaigns by dynamically adjusting ads based on real-time user engagement, maximizing return on investment.

1-7.

Explain how marketers practice the societal marketing concept and sustainability. What is green marketing?

An important trend now is for companies to think of ways to design and manufacture products with a focus on sustainability, defined as “meeting present needs without compromising the ability of future generations to meet their needs.” Sustainability applies to many aspects of doing business, including social and economic practices (e.g., humane working conditions and diplomacy to prevent wars that deplete food supplies, atmospheric quality, and, of course, lives).

Green marketing involves creating strategies that promote environmental benefits and sustainability. It focuses on designing and marketing products that are environmentally responsible, aligning with broader corporate social responsibility commitments. This approach emphasizes “doing well by doing good.” Successful green marketing not only helps the environment but also enhances a company’s image and meets the growing consumer demand for sustainable products.

1-8.

Explain the service economy. What is service-dominant logic?

The service economy is an economic system where the main activity is the delivery of services rather than the production of goods. In such an economy, services generate the majority of economic activity and value, which is the case in many developed countries where services contribute significantly to GDP. Service-dominant logic is a perspective that prioritizes service and the co-creation of value with customers over the traditional goods-centered view of exchange. This approach sees goods simply as mechanisms for service delivery, emphasizing that value is created through the use of goods and not through the goods themselves. It highlights the interactive and dynamic process of value creation, where customers are not just passive recipients but active participants who interact with the firm and its offerings to create value. This shift reflects a broader movement in marketing toward focusing on relationships and interactions that create lasting value for both customers and businesses.

1-9.

What is consumer-generated marketing? Who are digital natives?

Consumer-generated marketing (CGM) creates value based on content produced by consumers themselves rather than by firms. This type of marketing often takes place on social media platforms and can include various forms of content such as reviews, blog posts, videos, and photos. CGM is an effective and engaging way to add value in customer-product/firm relationships, providing authentic content that can influence other consumers’ purchasing decisions. This approach leverages the input and creativity of customers, making them active participants in the marketing process.

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Digital natives are individuals who have grown up with access to digital technology from a young age. Digital natives are highly proficient with the internet and digital devices, such as smartphones and tablets. This familiarity influences their behaviors and expectations, particularly in how they gather information, interact with content, and make purchasing decisions. Digital natives are accustomed to fast-paced, multimedia environments and are adept at navigating through various digital platforms, making them a crucial demographic for marketers to understand and engage with effectively.

1-10. What does it mean for a firm to have a competitive advantage? What is a distinctive competency? What is a differential benefit?

A firm has a competitive advantage when it is able to outperform the competition, providing customers with a benefit the competition cannot. A competitive advantage gives consumers a reason to choose one product over another repeatedly.

A distinctive competency is a firm’s capability that is superior to that of its competition.

The second step in developing a competitive advantage is to turn a distinctive competency into a differential benefit—one that is important to customers.

1-11. What is involved in market planning? Explain the difference between mass market and a market segment.

Firms (or individuals) that engage in marketing planning ask questions like these: • What product benefits will our customers look for in three to five years?

• What capabilities does our firm have that set it apart from the competition?

• What additional customer groups might provide important market segments for us in the future?

• How will changes in technology affect our production process, our communication strategy, and our distribution strategy?

• What changes in social and cultural values are occurring now that will affect our market in the next few years?

• How will customers’ awareness of environmental issues affect their attitudes toward our manufacturing facilities?

• What legal and regulatory issues may affect our business in both domestic and global markets?

The mass market approach targets all potential customers in a market with a basic product and a single marketing strategy, aiming to reach as broad an audience as possible.

Conversely, market segmentation divides the total market into smaller groups or segments based on shared characteristics, allowing companies to tailor their marketing strategies to meet the specific needs and preferences of each group. ACTIVITIES: APPLY WHAT YOU’VE LEARNED 1-12. In Class, 10–25 Minutes for Teams Assume that you are a marketing consultant employed by retail giant Target, which offers consumers products in a number of brick1-18 Copyright © 2025 Pearson Education, Inc.

Chapter 1: Welcome to Marketing in the Modern World

and-mortar stores and online. Target wishes to increase its loyal customer base by engaging customers through interaction opportunities on social networks. Develop a list and describe at least 10 specific social network activities that will work together to increase customer engagement.

Students can work in small groups to develop a list of 10 specific social network activities to increase customer engagement.

1-13. In Class, 10–25 Minutes for Teams In small groups, survey 20 fellow students outside your marketing class for their own individual definitions of marketing. Compare these informal interpretations with the formal definition provided by the American Marketing Association (AMA) at the beginning of the chapter. What were the significant overlaps between the professional definition and the casual definitions? What gaps exist between the student responses and the AMA definition? Present your group’s findings to the class.

Lead the class in a brief discussion about the potential opportunities and challenges that these insights may present for marketing professionals in promoting their field and work among diverse audiences who may not specialize in marketing.

Students can work in small groups to survey other students. Findings will vary based on survey collection and individual perspectives. Encourage students to approach the survey objectively and ensure that their presentation focuses on the comparison between informal and formal definitions. Highlight that their analysis should explore both the overlaps and gaps between these definitions and consider how these insights could inform marketing practices and communication strategies among professional marketers.

1-14. In Class, 10–25 Minutes for Teams Successful firms have a competitive advantage because they are able to identify distinctive competencies and use these to create differential benefits for their customers. Consider your business school or your university. What distinctive competencies does it have? What differential benefits does it provide for students? What is its competitive advantage? What are your ideas as to how your university could improve its competitive position? Write an outline of your ideas.

Student answers will vary. Encourage students to think critically about their institution as if it were a competitive business. Advise them to identify specific attributes that make their university unique, such as special programs, faculty expertise, location advantages, or resources that other institutions might not offer. Prompt them to consider how these distinctive competencies translate into benefits for students and how they contribute to the university’s competitive advantage in the higher education market. Encourage them to propose realistic improvements based on their analysis, focusing on enhancing these competencies or addressing gaps that could strengthen the university’s position.

1-15. For Further Research (Individual) Choose a company you are familiar with that offers a customer loyalty or rewards program. Describe the program and the specific benefits it provides. How does the loyalty or rewards program support the company’s broader marketing mix? How does it impact the overall customer experience? Based on what you’ve learned in this chapter, how would you enhance or improve the loyalty or rewards program?

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For this activity, encourage students to select a company whose loyalty or rewards program they are either a part of or have sufficient knowledge about. They should describe the structure of the program and outline the specific benefits it offers, such as discounts, exclusive access, or points redeemable for products or services. Ask students to analyze how the loyalty program integrates with the company’s overall marketing mix—how it complements the product, price, place, and promotion elements. They should also assess the impact of the program on customer experience, considering aspects like customer satisfaction, retention, and brand loyalty.

Student answers will vary. Encourage students to apply the concepts learned in the chapter to propose enhancements to the program. Suggestions could focus on increasing personalization, integrating advanced technology for ease of use, or expanding benefits to foster greater loyalty.

1-16. For Further Research (Groups) Select a global or national company that you are familiar with. Examine the firm’s website and other sources of information about the company to determine its competitive advantages. Who are its biggest competitors? What are each of its competitive advantages? Give three suggestions for how the company can market its products/services to feature its advantages and overcome the advantages of the competition.

Groups should explore websites to find examples of companies to determine their competitive advantages. They can offer ideas on how these companies can market their products/services to feature their advantages and overcome their disadvantages.

1-17. For Further Research (Individual) One of the items that might be included in the dark side of marketing is advertising that has the potential to encourage discrimination, criminal behavior, and unsafe activities, or to be insensitive or insulting to certain individuals or groups. Go online and search for various articles that discuss and show hundreds of examples of these types of advertising. Develop a report and, if possible, discuss your findings with your class.

Groups should explore websites to find examples of articles and advertisements that show the dark side of marketing. They should be prepared to report back to the class, and may be asked to lead a discussion about one of the outcomes they observed. CONCEPTS: APPLY MARKETING METRICS The chapter discusses the growing importance of sustainability. As noted in Chapter 1, companies and consumers increasingly consider other costs in addition to financial ones when they decide what to sell or buy. One of these cost categories is damage to the environment. How can marketers make it easier for shoppers to compute these costs?

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The answer to this question is more apparent in some product categories than in others. For example, in the United States, many large appliances, including clothes washers, refrigerators, and air conditioners, are required to provide an EnergyGuide, a yellow label that informs buyers about the power consumption and annual costs of operating the unit. The most efficient appliances include the EnergyStar™ logo indicating that the unit offers up to 15 percent savings in energy cost over the basic model.

A growing number of consumers are concerned about their carbon footprint—how much carbon dioxide (CO2) our consumption behavior emits into the atmosphere. In October 2021, Google Flights launched a new feature that shows potential airline travelers the estimated carbon emissions of most flights. These CO2 emissions estimates are flight- and seat-specific (e.g., newer planes are more energy efficient than older planes, and a first-class seat takes up more space and thus is allocated a larger share of the total emissions for the flight). This information allows travelers to sort flights by emissions to help them understand their carbon footprint and make more sustainable travel decisions.

Although many of us are more aware today that our consumption choices carry unseen costs, there is still a lot of confusion about the best way to communicate the environmental costs of our actions, and in many cases, consumers aren’t motivated to take these issues into account unless the costs impact them directly and in the short term.

1-18. What other sustainability metrics would you suggest that might motivate environmentally conscious consumers to purchase from a company that practices sustainability? (Hint: Think in terms of the “sustainable marketing mix” discussion in section 2.6 of this chapter and what you learned about the Four Ps in Chapter 1. What metrics could a company communicate related to its marketing mix strategies?)

Sustainability applies to many aspects of doing business including social and economic practices. Within the Four Ps, possible measures of sustainability include: •

• • •

Product: Percentage of post-consumer recycled content used in production, increasing the percentage of energy costs related to production that comes from renewable resources, reductions in packaging size or increases in recyclable components, or increasing use of resources sourced from fair trade suppliers Price: Reduction in the price differential between green products and comparable traditional products, improved efficiencies leading to long-term price decreases Place/distribution: Switching to nearby suppliers to reduce reliance on long-haul trucking, creating an efficient distribution network that minimizes delivery distances Promotion: Recycling promotional materials (e.g., reusing older commercials or using them longer before changing); reducing the use of printed promotional materials

1-19. As a consumer, do you consider your carbon footprint when you make purchase decisions? As a percentage of the price, how much more would you be willing to pay for a product (e.g., an appliance or flight) that offered a smaller carbon footprint?

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Chapter 1: Welcome to Marketing in the Modern World

Student answers will vary. CHOICES: WHAT DO YOU THINK? 1-20. Critical Thinking Journalists, government officials, and consumers have been highly critical of companies for gathering and storing large amounts of data on consumers (i.e., Big Data). Others argue that such practices are essential for firms to provide high-quality, affordable products that satisfy consumers’ varied needs. What do you think? Should the government regulate such practices? How can these practices help consumers? What potential downfalls are there?

In answering this question, the student should be encouraged to examine their life personally and relate marketing to their daily activities and events. Areas that should be mentioned in this discussion are consumer purchases (such as buying food, clothes, supplies at the bookstore, and major purchases such as computers or cars) as well as advertising’s impact on their learning processes (such as learning about new products, how to do things, and contemporary trends). Students should look on the Internet for recent events regarding privacy issues and whether governmental intervention is appropriate.

1-21. Ethics As businesses continue to move further away from mass marketing and more toward segmented marketing, different consumers may receive different advertising, offers, and sometimes even prices than other consumers who may fall into different segmentations. What ethical factors need to be considered when businesses engage in this increasingly popular type of marketing?

Student answers will vary. Consider guiding students to explore the ethical considerations of targeted and segmented marketing. Encourage them to think about the implications of differential treatment of customers based on their segmentation. This could include concerns about fairness, privacy, transparency, and potential discrimination. Prompt students to consider how personalized marketing practices could impact customer trust and the company’s reputation. They also could discuss how businesses can balance effective segmentation strategies with ethical marketing practices to maintain consumer trust and comply with regulations.

1-22. Critical Thinking Organizations are now focusing more on the triple-bottom-line orientation, meaning that firms should focus on maximizing the financial, social, and environmental areas of the business. What should companies do when they realize that two or more of these conflict with one another? Do you think any one of them is more important? Why? In small groups students can offer ideas on what companies can do in the face of a conflict among the triple-bottom-line elements.

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1-23. Critical Thinking Many consumers are concerned about their impact on the environment.

They demand green products as well as green marketing activities. However, these same consumers often opt not to purchase green products as they are traditionally more expensive than their alternatives. What do you think is driving this decision? How can marketers change their products or the way in which they are marketing them to encourage consumers to increase their purchases of green products? What are some ideas that you have for ways companies can execute green marketing?

Students can share ideas for successful green marketing to include ways to make others buy green products.

1-24. Critical Thinking Personal branding is a strategic approach to developing and maintaining an individual’s public image and reputation. It is often emphasized during job searches and career advancement efforts. Consider the possibility of having to market yourself while applying for a marketing job in a few years. In what ways do you think branding a person is similar to the marketing of goods and services? In what ways is it different?

Student answers will vary. Consider asking students to draw parallels between personal branding and the marketing of goods and services, focusing on common elements like targeting, positioning, and the use of promotional strategies. Encourage them to consider how attributes such as quality, reliability, and uniqueness apply to both personal branding and product marketing. Then, guide them to explore the differences, such as the more dynamic and holistic nature of personal branding. Discuss how personal encompasses not only skills and experiences but also personal values, online presence, and networking.

Ask them to consider the unique challenges and opportunities personal branding presents, such as the direct impact of personal actions on brand perception and the ongoing requirement to live up to the brand promise in everyday behavior.

1-25. Ethics Fear of missing out (FOMO) is a term that has gained widespread use on social media. In what ways do marketers create FOMO by using limited-edition and timesensitive offerings? What ethical factors should marketers take into consideration when utilizing this approach?

Student answers will vary. Encourage students to analyze how marketers leverage FOMO by offering limited-time or exclusive products, which can drive immediate action from consumers eager not to miss out. Highlight examples such as flash sales, limited-edition releases, and early access for members that create urgency and increase demand. Ask students to consider the ethical dimensions of using FOMO in marketing. They could discuss potential issues like exploiting consumer anxiety, encouraging impulsive buying, or creating unrealistic expectations. Ask them to explore how transparency, honest communication, and responsible marketing can mitigate negative impacts and ensure that FOMO tactics remain within ethical bounds.

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1-26. Ethics Considering recent advances in artificial intelligence (AI), a growing number of companies are choosing to replace human-based customer service with automated bots.

In certain instances, consumers might be unaware that they are not interacting with a real person. Should businesses be obligated to disclose when consumers are communicating with AI bots? How do you think such disclosure might impact consumer trust and their overall experience with the company?

Student answers will vary. Consider asking students to evaluate the ethical and potential legal aspects of using AI in customer interactions, focusing on the importance of transparency. Encourage them to consider how disclosing the use of AI bots could influence consumer trust and expectations. Discuss the positive impacts of such transparency (such as fostering trust and setting clear service expectations) against potential drawbacks (such as perceived diminished service value).

1-27. Critical Thinking The chapter section on the dark side of marketing discussed alcohol and smoking abuse, deceptive or other advertising that can have negative consequences, illegal activities, claiming credit for something someone else has done, and deliberately defacing or damaging goods. Try to think of five additional consumer activities that could be included in the topic of the “dark side of marketing.” Describe each of your five and suggest activities for governments or marketers that would help decrease the problem.

Student responses will vary. Students who had the opportunity to watch The Social Dilemma or read about things social media companies do to keep consumers engaged may use examples from social media. The text talks about bait-and-switch. It mentions advertising tobacco and alcohol to populations that are vulnerable to abuse. Students may expand on these examples, or discuss other examples (e.g., e-cigarettes, foods that are high in saturated fats, predatory credit products). MINIPROJECT: LEARN BY DOING The purpose of this miniproject is to develop an understanding of the practice of marketing and the importance of societal marketing and sustainability to different organizations.

1-28. Working as a team with two or three other students in your class, select an organization in your community. It may be a manufacturer, a service provider, a retailer, a nonprofit organization—almost any organization will do. Then schedule a visit with someone within the organization who is involved in the marketing activities. Arrange for a short visit during which the person can give your group a tour of the facilities and explain the organization’s marketing activities.

1-29. Divide the following list of topics among your team and ask each person to be responsible for developing a set of questions to ask during the interview to learn about the company’s program: •

What customer segments the company targets.

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• • • • • • •

•

How it determines customer needs and wants.

What products it offers, including features, benefits, and goals for customer satisfaction.

What its pricing strategies are.

How it promotes its goods or services. Does it use interactive content to engage customers?

How it distributes products and whether it has encountered any problems.

How it determines whether the needs and wants of customers are being met.

Explain what marketers mean by the “societal marketing concept” and “sustainability” and ask if these are areas of concern to the organization. If so, how do they address them in their organization’s activities? If not, ask if they have any plans to move in this direction in the future and, if so, how.

What is on the horizon for the company? How will this impact its marketing strategy?

1-30. Develop a team report of your findings. In each section of the report, share what you learned that is new or surprising to you compared to what you expected.

1-31. Develop a team presentation for your class that summarizes your findings. Conclude your presentation with comments on what your team believes the company was doing that was particularly good and what was not quite so good.

This project will help students understand the difficulty, but yet the necessity, of focusing on a value proposition in an organization. Obviously, some firms do this better than others do. However, all firms must consider what they deliver to the customer and how the customer accepts this proposition. If there is disparity between what the consumer expects, what the consumer perceives or sees, what the organization says it will provide or do, and what is actually received, problems will arise. This basic project will aid the student in understanding the need to obtain information from the marketplace and focus on delivering value to customers.

V. MARKETING IN ACTION CASE: REAL CHOICES AT EARLY MAJORITY Summary of Case Early Majority, founded by Joy Howard in 2021, is a distinctive player in the fashion industry, adopting a “degrowth” strategy aimed at challenging the prevailing fast fashion model.

Positioned as “the apparel membership fighting fashion’s disposability mindset,” the company operates entirely remotely and focuses on producing versatile, durable outerwear designed to reduce consumerism. With Howard’s extensive marketing background from giants like CocaCola and Nike, and Patagonia’s influence on promoting environmental responsibility, Early Majority promotes sustainable practices like using 100 percent recycled petroleum-based products and providing products in Guppyfriend bags to minimize microfiber release.

Additionally, their business model includes a membership program offering benefits like special pricing and community engagement opportunities for $123 a year, aligning with a broader industry movement toward sustainability. Despite its innovative approach, Early Majority 1-25 Copyright © 2025 Pearson Education, Inc.

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acknowledges the need to attract and maintain investor and consumer support to thrive under its pioneering “less is more” philosophy.

Suggestions for Presentation This case could be assigned for various online or in-class discussion activities.

Online Suggestions 1. Explore Early Majority’s website: Instruct students to visit the Early Majority website (https://www.earlymajority.com) and identify how the company communicates its degrowth and sustainability missions to its consumers. Ask them to note the types of products offered and the additional services such as the membership program and lifetime guarantee with free repairs.

2. Compare Early Majority to traditional retailers: Have students visit a traditional fashion retailer’s website (e.g., H&M or Old Navy) and compare how these companies approach fashion retailing versus Early Majority’s model. Focus on aspects such as product lifecycle, sustainability claims, and customer engagement strategies.

In-Class Suggestions 1. Brainstorming session on sustainable business models: Divide the class into small groups and have them brainstorm business ideas that apply Early Majority’s “less is more” philosophy to other industries. Possible sectors could include electronics (focusing on repairability and upgradability), furniture, or household items.

2. Role-play exercise: Organize a role-play activity where students take on different roles within the Early Majority company, such as Joy Howard (CEO), a marketing director, a sustainability officer, and a customer service representative. Set up scenarios where they must address challenges such as handling customer feedback on the new business model, pitching the company to potential investors who are skeptical about the “degrowth” model, or discussing how to handle logistical challenges with recycled materials. This exercise can help students understand the internal and external pressures and decisions faced by a sustainable fashion company.

Questions for Discussion 1-32.

What are the most important challenges that Early Majority may face in positioning itself against well-established competitors in the fashion industry?

Early Majority faces several significant challenges in positioning itself against established competitors in the fashion industry: •

Market penetration: Gaining a foothold in a market dominated by well-known brands that benefit from economies of scale and extensive distribution networks can be daunting. Convincing consumers to switch from familiar brands to a new 1-26 Copyright © 2025 Pearson Education, Inc.

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• •

1-33.

concept like degrowth requires substantial marketing efforts and consumer education.

Consumer perception: The concept of buying less and focusing on sustainability might not appeal to all consumers, especially those accustomed to the frequent updates and low prices of fast fashion.

Cost implications: Operating with sustainable practices often involves higher costs, which are passed on to consumers. Balancing ethical practices with competitive pricing is a delicate task that can impact market reach and profitability.

What are some of the advantages and disadvantages associated with a business model that focuses on community engagement rather than transaction frequency?

Advantages: • • •

Customer loyalty: A community-focused model can build strong brand loyalty because customers who share the brand’s values are more likely to continue their support and promote the brand through word-of-mouth.

Brand differentiation: The degrowth- and sustainability-focused approach differentiates Early Majority from traditional models, allowing it to carve out a niche in the competitive fashion market.

Sustainable growth: By focusing on community engagement, the company can foster a more sustainable growth pattern that aligns with its degrowth philosophy, potentially leading to more consistent and predictable revenue streams.

Disadvantages:

• • •

1-34.

Scaling challenges: Community engagement models may face difficulties in scaling up, because deepening personal connections and maintaining a genuine community feel can become more challenging as the customer base grows.

Reduced reach: This model might limit the brand’s appeal to a broader market that is more transaction-focused, potentially capping the company’s growth opportunities in the wider market.

Higher operational costs: Maintaining an active and engaging community presence can be resource-intensive, requiring continuous investment in customer service and engagement activities.

Early Majority is not cheap. For example, its basic black shirt retails for $149, and its fleece jacket goes for $205. Is the company pricing itself out of a mass market? Why or why not?

Student viewpoints may vary. Possible perspectives include: Early Majority Is Not Pricing Itself out of the Mass Market 1-27 Copyright © 2025 Pearson Education, Inc.

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Early Majority specifically targets a niche market segment that prioritizes sustainability and ethical production over cost, suggesting that its higher prices are aligned with the values and spending habits of its intended customers. These consumers are often prepared to invest in products that offer greater longevity and ethical credentials, recognizing the long-term benefits and value of such purchases. The company’s strategy of offering high-quality, durable, and versatile products means that these items are designed to last longer, potentially offering better cost efficiency over time compared to cheaper, less durable alternatives. Additionally, Early Majority’s pricing strategy helps to position it as a premium brand within the sustainable fashion sector, which can attract consumers looking for unique, exclusive products that are not massproduced.

Early Majority Is Pricing Itself out of the Mass Market Early Majority's higher price points can be seen as a significant barrier to reaching the mass market. The premium pricing may alienate a large segment of consumers who, despite potentially valuing sustainability, might find the costs prohibitive, especially in a fluctuating economic climate. Competing with established brands that offer lowerpriced alternatives could pose a significant challenge, because many consumers are accustomed to the affordability and frequent style updates of fast fashion and might struggle to justify paying significantly more, even for sustainably produced apparel.

Additionally, the focus on premium pricing restricts market accessibility, limiting the brand’s appeal mostly to wealthier consumers. This exclusivity could slow the adoption of sustainable practices across the broader fashion industry if sustainable options are viewed as a luxury rather than accessible to all.

WEB RESOURCES The SmartWay brand (identifies products and services that reduce transportation-related emissions): www.epa.gov/smartway Girls Inc. (inspiring all girls to be strong, smart, and bold): www.girlsinc.org LinkedIn (professional online networking community): www.linkedin.com

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Chapter 2: Global, Ethical, and Sustainable Marketing

Chapter 2 Global, Ethical, and Sustainable Marketing I. CHAPTER OVERVIEW In this chapter, students are introduced to global marketing and explore ways in which economic, political, legal, and cultural issues influence global, as well as domestic, marketing strategies and outcomes. These issues also affect whether or not businesses choose to enter a global market.

Students also learn that if a business does enter a global market, the level of commitment is directly related to the level of control. The chapter discusses how marketers make product, price, place, and promotion decisions in foreign markets and highlights disruption in the global marketplace, including changes in the distribution of wealth, access to education, and improvements in infrastructure, especially media and telecommunications. It also discusses increasing differences in have and have-not countries that were exposed by the COVID-19 pandemic. Ethical business practices are important for the firm to do its best for stakeholders and to avoid the consequences of low ethical standards. Many firms practice sustainability when they develop target marketing, product, price, place/distribution, and promotion strategies designed to protect the environment.

II. CHAPTER OBJECTIVES 2-1.

2-2.

2-3.

2-4.

2-5.

2-6.

2-7.

Understand the big picture of international marketing and the decisions firms must make when they consider globalization.

Explain how international organizations such as the World Trade Organization (WTO), the World Bank, the International Monetary Fund (IMF), economic communities, and individual country regulations facilitate and limit a firm’s opportunities for globalization.

Understand how factors in a firm’s external business environment influence marketing strategies and outcomes in both domestic and global markets.

Explain some of the strategies and tactics that a firm can use to enter global markets.

Understand the importance of ethical marketing practices.

Explain the role of sustainability in marketing planning.

Recognize which industry and which work environment (both domestic and international) are best for you.

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Part 1: Understand the Value Proposition

III. CHAPTER OUTLINE p. 35

REAL PEOPLE, REAL CHOICES—HERE’S MY PROBLEM AT TERRACYCLE Us Tom Szaky, CEO of TerraCycle, came up with the idea for TerraCycle in 2001. Today, TerraCycle operates in 21 countries (and counting!), where it works with brands, retailers, and manufacturers to keep products and packaging out of landfills.

TerraCycle is also the parent company to Loop. Tom wants to find ways to deliver convenience, low cost, aesthetics, and function that come with single-use disposables without the waste.

Loop works with companies to create durable versions of the packaging for goods that are currently housed in single-use packaging. He has to decide how to introduce it.

1. Introduce Loop at the Davos meeting, where many stakeholders (businesses, governments, brands, luminaries) would be gathered.

2. Wait to announce the Loop model and enjoy the positive response TerraCycle got with the beach plastic bottle project.

3. Don’t pursue the concept of a durable packaging system at all.

The vignette ends by asking the student which option he/she would choose.

Tom chose option #1.

Website: www.terracycle.com p. 37

1. TAKE A BOW: MARKETING ON THE GLOBAL STAGE Students are citizens of the world. They consume products from different countries. They have knowledge about world events like “Brexit” and challenges in Myanmar, Syria, and North Korea. Firms doing business in the global economy face uncertainty.

The Greenhouse Effect, the turning of our atmosphere into a greenhouse due to carbon dioxide, may threaten the future of the planet. The result, many believe, is climate change, a warming of the earth, which will have disastrous effects on the planet.

The Arab Spring, a series of anti-government protests and uprisings in Arab countries, was aided by social media tools.

Terrorist attacks grew, which made people want to restrict 2-2 Copyright © 2025 Pearson Education, Inc.

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immigration and trade with countries that aid or harbor terrorists.

The COVID-19 pandemic has made clear the tremendous differences between have and have-not countries. We are a global community. p. 38

1.1 World Trade World trade refers to the flow of goods and services among different countries—the total value of all the exports and imports of the world’s nations. Today, we see increasing growth in world trade with world exports of merchandise increasing from $12 trillion in 2009 to nearly $19 trillion in 2019.

You may have to adapt to the needs of foreign trading partners when those firms can’t pay cash for the products they want to purchase. Believe it or not, as many as 100 countries use a nonconvertible currency, from the Chinese yuan to the Indian rupee, usually due to government restrictions. This means you can’t spend or exchange this currency outside the country’s borders.

In some countries, because sufficient cash or credit is simply not available, trading firms work out elaborate deals in which they trade (or barter) their products with each other or even supply goods in return for tax breaks from the local government.

p. 38

The growth in world trade has been accompanied by unsafe products. Although most Chinese manufacturers make quality products, some unscrupulous producers have damaged the reputation of Chinese manufacturers, resulting in increased inspections of Chinese imports to the U.S. and Europe.

1.2 Should We Go Global?

When firms consider going global, they must think about this in four steps: • Step 1. “Go” or “no go”—is it in our best interest to focus exclusively on our home market or should we cast our net elsewhere as well?

• Step 2. If the decision is “go,” which global markets are most attractive? Which country or countries offer the greatest opportunity for us?

• Step 3. What market-entry strategy, or rather, what level of commitment is best?

• Step 4. How do we develop marketing mix strategies in the foreign markets? Should we standardize what we do in other countries, or develop a unique localized marketing strategy for each country?

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Figure 2.1 Process: Steps in the Decision Process to Enter Global Markets

Part 1: Understand the Value Proposition

p. 39

1.2.1 Look at Market Conditions and Opportunities Many times, a firm decides to go global because domestic demand is declining while demand in foreign markets grows.

p. 39

1.2.2 Consider Your Competitive Advantage Firms hope to create competitive advantage over rivals. When firms compete in a global marketplace, this challenge is even greater because there are more players involved, and typically, some of these local firms have a “home-court advantage.” If it wants to go global, a firm needs to examine the competitive advantage that makes it successful in its home country. Will this competitive advantage also extend to other countries?

2. UNDERSTAND INTERNATIONAL, REGIONAL, AND COUNTRY GLOBAL TRADE CONTROLS Often governments erect roadblocks or speed bumps designed to favor local businesses over outsiders that hinder a company’s efforts to expand into foreign markets.

p. 40

p. 40

2.1

Initiatives in International Cooperation and Regulation The World Trade Organization (WTO) replaced the General Agreement on Tariffs and Trade (GATT) and helped reduce the problems that protectionism creates. The World Trade Organization has made giant strides in creating a single open world market. The objective of the WTO is to “to ensure that trade flows as smoothly, predictably and freely as possible.”

p. 40

Two additional organizations have a strong influence on the advancement of global trade: the World Bank and the International Monetary Fund (IMF).

p. 40

The primary purpose of the IMF, also founded in 1944, is to ensure the stability of the international monetary exchange by controlling fluctuations in foreign exchange rates (forex rates), the price of one currency in terms of another currency.

Stabilizing exchange rates prevents problems with the balance of payments, a statement of how much trade a country has going out compared to how much it has coming in.

p. 41

2.2 Protected Trade: Quotas and Tariffs In some cases, a government adopts a policy of protectionism in which it enforces rules on foreign firms designed to give home companies an advantage.

Many governments set import quotas on foreign goods to reduce competition for their domestic industries. Quotas can 2-4 Copyright © 2025 Pearson Education, Inc.

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make goods more expensive to a country’s citizens because the absence of cheaper foreign goods reduces pressure on domestic firms to lower their prices.

Governments also use tariffs, or taxes on imported goods, to give domestic competitors an advantage in the marketplace by making foreign competitors’ goods more expensive than their own products.

2.3 Voluntary Export Restraints (VERs), Hidden Import Quotas, and Embargoes Not all import quotas are the same. Voluntary export restraints (VERs) are voluntary quotas that countries place on their own exports to partner nations. VERs are usually negotiated with partner nations at the time a trade agreement is initially negotiated.

Some governments limit the supply of imported goods with other restrictions that result in a reduction in the number of goods that enter the country. Sometimes hidden import quotas are applied through the use of quality or content control requirements placed on imported goods.

An embargo is an extreme quota that prohibits commerce and trade with a specified country altogether.

Discussion question: Ask students to discuss products they know that are associated with import quotas, an embargo, and tariffs. How do they feel about these protected trade roadblocks in the context of the products they mentioned? p. 42 2.4 Economic Communities Groups of countries may also band together to promote trade Table 2.1 among them and make it easier for member nations to compete Some Major elsewhere. These economic communities coordinate trade Economic policies and ease restrictions on the flow of products and capital Communities across their borders.

Around the World Economic communities are important to marketers because they set policies in areas such as product content, package labeling, and advertising regulations.

The United States was part of the North American Free Trade Agreement (NAFTA) for many years. NAFTA was renegotiated on July 1, 2020, and replaced with the United States-MexicoCanada agreement (USMCA).

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The European Union (EU) represents 500 million consumers.

When the United Kingdom left the EU, it was referred to as Brexit.

Website: www.wto.org Discussion question: Ask students what they think about the various economic communities.

How would/will they affect their lives as consumers? p. 42 3. ANALYZE THE EXTERNAL MARKETING Figure 2.2 ENVIRONMENT Snapshot: Whether or not you have decided to venture into a foreign Elements of the market, it is essential to understand your external environment. External The key elements are the economic environment, competitive Environment environment, technological environment, political and legal p. 43 environments, and sociological environment.

Troubleshooting Tip: Just as in the last chapter, it is important to emphasize that the marketing environmental factors listed in this section of the chapter represent nicely the “OT” of the SWOT analysis—additionally, it is important for students to recognize that these “OT” factors are not directly controllable by the company. p. 43 3.1 The Economic Environment After the Great Recession of 2008–2009, the global economy Table 2.2 grew steadily through 2019. The coronavirus pandemic hit the Selected world in 2020. Authorities implemented the “Great Lockdown,” Comparisons of and experts were unable to predict when the world economy Economic and would return to normal.

Demographic Characteristics p. 44 p. 43 3.1.1 Indicators of Economic Health The most commonly used measure of economic health of a country is the gross domestic product (GDP): the total dollar value of goods and services a country produces within its borders in a year. In addition to total GDP, marketers may also compare countries based on per capita GDP: the total GDP divided by the number of people in a country. Per capita GDP does not reveal when the wealth of a country is concentrated in the hands of a few.

GDP and exchange rates alone do not provide the information marketers need to decide if a country’s economic environment makes for an attractive market. They must consider economic infrastructure, the quality of distribution, financial, and communications systems. p. 45

3.1.2 Level of Economic Development Level of economic development takes into consideration the broader economic picture of a country.

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A country’s standard of living is an indicator of the average quality and quantity of goods and services a country consumes.

Economists describe the following three basic levels of development: •

•

•

•

A country at the lowest stage of economic development is a least developed country (LDC). In most cases, its economic base is agricultural. In least developed countries, the standard of living is low, as are literacy levels.

When an economy shifts its emphasis from agriculture to industry, standards of living, education, and the use of technology improve. These countries are developing countries. In such locales, there may be a viable middle class, often largely composed of entrepreneurs working hard to run successful small businesses.

Bottom of the pyramid (BOP) is the name for four billion consumers who live on less than $2 a day and have a combined purchasing parity of $5 billion. They cannot afford to purchase inventory, so they may use sachet packaging.

Because over eight out of 10 consumers now live in developing countries, the number of potential customers and the presence of a skilled labor force attract many firms to these areas. The largest of the developing countries, Brazil, Russia, India, and China, are referred to as the BRICS countries or simply as the BRICS. These four countries are the fastest growing of the developing countries and they represent over 42 percent of the world’s population.

A developed country boasts sophisticated marketing systems, strong private enterprise, and bountiful market potential for many goods and services. Such countries are economically advanced, and they offer a wide range of opportunities for international marketers.

The UN recently changed their country designations to developed economies, economies in transition, and developing economies.

The Group of Seven (G7) most economically developed countries in the world includes France, Germany, Italy, Japan, the UK, the U.S., and Canada.

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The Group of 20 (G20) includes 20 countries or groups that produce 80 percent of the world’s GDP: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the United States, and the European Union, represented by the rotating council presidency and the European Central Bank. p. 46

3.1.3 The Business Cycle The business cycle is the overall pattern of changes or fluctuations of an economy. All economies go through cycles of prosperity (high levels of demand, employment, and income), recession (falling demand, employment, and income), and recovery (gradual improvement in production, lowering unemployment, and increasing income). A severe recession is a depression; a period during which prices fall, but there is little demand because few people have money to spend and many are out of work.

Inflation occurs when prices and the cost of living rise while money loses its purchasing power because the cost of goods escalates. p. 46 3.2 The Competitive Environment Firms must keep abreast of what the competition is doing so they can develop new product features, new pricing schedules, or new advertising to maintain or gain market share.

An increasing number of firms around the globe engage in competitive intelligence (CI) activities, the process of gathering and analyzing publicly available information about rivals. The firm uses this information to develop superior marketing strategies. ►Marketing Moment In-Class Activity Have students identify information about companies that is publicly available. How can you get the information? What type of information is available? What does this information tell you about the company in terms of target market, marketing strategy, pricing strategy, etc.? p. 47 3.2.1 Competition in the Microenvironment Competition in the microenvironment means the product alternatives from which members of a target market may choose.

We think of these choices at three different levels. At a broad level, marketers compete for consumers’ discretionary income: the amount of money people have left after paying for necessities such as housing, utilities, food, and clothing. A second type of choice is product competition, in which competitors offering different products attempt to satisfy the same consumers’ needs and wants. The third type of choice is brand competition, in

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which competitors offering similar goods or services vie for consumer dollars. p. 47

p. 47

3.2.2 Competition in the Macroenvironment When we talk about examining competition in the macroenvironment, we mean that marketers need to understand the big picture—the overall structure of their industry.

Four structures describe differing amounts of competition.

• A monopoly exists when one seller controls a market.

• In an oligopoly, there are a relatively small number of sellers, each holding substantial market share, in a market with many buyers.

• In a state of monopolistic competition, many sellers compete for buyers in a market.

• Finally, perfect competition exists when there are many small sellers, each offering the same good or service.

3.3 The Technological Environment Changes in technology profoundly affect marketing activities.

Amazon had been working on drones, unmanned aircraft controlled by a GPS, to deliver packages. A second gamechanging innovation is the self-driving, driverless, or autonomous vehicle.

Exhibit: Pandemic shopping

A patent is a legal document that grants inventors exclusive rights to produce and sell a particular invention in that country. p. 48

p. 48

p. 50

3.4 The Political and Legal Environment The political and legal environment refers to the local, state, national, and global laws and regulations that affect businesses.

3.4.1 American Laws Laws in the United States governing business have two purposes.

Some such as the Sherman Antitrust Act and the Wheeler–Lea Act make sure that businesses compete fairly with each other.

Others, such as the Food and Drug Act and the Consumer Products Safety Commission Act, make sure that businesses do not take advantage of consumers.

3.4.2 Political Constraints on Trade Global firms know that the political actions a government takes can drastically affect their business operations. Short of war, a country may impose economic sanctions that prohibit trade with another country (as the United States has done with several countries, including Cuba and North Korea), so access to some markets may be cut off. Nationalization occurs when a government or state seizes a business enterprise, natural resource, 2-9 Copyright © 2025 Pearson Education, Inc.

Table 2.3 Significant American Legislation Relevant to Marketers Table 2.4 U.S. Regulatory Agencies and Responsibilities

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or other asset and justifies this action as being in the best interest of the country or state. Reimbursement is typically not required.

Expropriation occurs when a government or state seizes a foreign-owned asset, normally with some compensation for company owners or individuals (but often not for the full value).

Now that the United States has normalized relations with Cuba, it remains to be seen if these firms seek reimbursement for their lost property. p. 50

3.4.3 Regulatory Constraints on Trade Governments and economic communities regulate what products are allowed in the country, what products should be made of, and what claims marketers can make about them. Local content rules are a form of protectionism stipulating that a certain proportion of a product must consist of components supplied by industries in the host country or economic community.

p. 50

3.4.4 Human Rights Issues Some governments and companies are vigilant about denying business opportunities to countries that mistreat their citizens.

They are concerned about conducting trade with local firms that exploit their workers or that keep costs down by employing children or prisoners for slave wages.

The 2023 Global Slavery Index reported that over 50 million men, women, and children in 160 countries were victims of modern slavery.

p. 51

The U.S. Generalized System of Preferences (GSP) is a program established by Congress to promote economic growth in the developing world. GSP regulations allow developing countries to export goods duty-free to the United States.

Human rights issues that we can expect in the future include continued growth in human trafficking, refugee crises, worker rights, gender equality, LGBTQ+ rights, nationalism, attacks on journalists and the spread of misinformation, responding to climate change, and a more effective UN regarding commitment to human rights.

Websites: Environmental Protection Agency (EPA): www.epa.gov Federal Communications Commission: www.fcc.gov Federal Trade Commission (FTC): www.ftc.gov Food and Drug Administration (FDA): www.fda.gov Discussion question: What human rights issues are particularly of concern among your students?

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p. 51

3.5 The Sociocultural Environment The sociocultural environment refers to the characteristics of the society, the people who live in that society, and the culture that reflects the values and beliefs of the society. Whether at home or in global markets, marketers need to understand and adapt to the customs, characteristics, and practices of its citizens.

p. 51

3.5.1 Demographics Demographics are statistics that measure observable aspects of a population, such as size, age, gender, ethnic group, income, education, occupation, and family structure.

p. 51

3.5.2 Values Every society has a set of cultural values, or deeply held beliefs about right and wrong ways to live, that it imparts to its members. For example, for most Americans, punctuality is a core value; indeed, business leaders often proclaim that “time is money.” For countries in Latin America and other parts of the world, this is not at all true.

In collectivist cultures, such as those found in Venezuela, Pakistan, Taiwan, Thailand, Turkey, Greece, and Portugal, people tend to subordinate their personal goals to those of a stable community. In contrast, consumers in individualist cultures, such as the United States, Australia, Great Britain, Canada, and the Netherlands, tend to attach more importance to personal goals, and people are more likely to change memberships when the demands of the group become too costly.

p. 52

3.5.3 Social Norms Social norms are specific rules dictating what is right or wrong, acceptable or unacceptable.

Social norms tend to change slowly unless a major event, like the Industrial Revolution, the Internet, and the pandemic change them.

p. 53

3.5.4 Language Language barriers can affect product labeling and usage instructions, advertising, and personal selling.

p. 53

3.5.5 Consumer Xenocentrism Consumer xenocentrism refers to the belief that products produced in another country are superior to those produced in one’s own.

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Exhibit: An “arisan” Tupperware gathering in Indonesia Figure: Annie’s Organic Chewable Granola

Part 1: Understand the Value Proposition

3.5.6 Consumer Ethnocentrism Ethnocentrism refers to the belief that one’s own norms and the products made in your country are superior. Consumer ethnocentrism refers to consumers’ beliefs about products produced in their country versus those from another. ►Marketing Moment In-Class Activity Have students identify countries and products or stereotypes they associate with those countries.

For example, chocolate may be associated with Switzerland while wine may be associated with France. What products do students associate with Brazil? Nothing? What does that mean if you are the minister of trade for Brazil? What other countries did students associate with “wine”?

What does that say about the global wine industry? p. 53

4. HOW “GLOBAL” SHOULD A GLOBAL MARKETING STRATEGY BE? Going global is not a simple task.

p. 53

4.1

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Company-Level Decisions: The Market Entry Table 2.5 Strategy Market-Entry Just like a romantic relationship, a firm deciding to go global Strategies must determine the level of commitment it is willing to make to operate in another country. At one extreme, the firm simply exports its products; while at the other extreme it directly invests in another country by buying a foreign subsidiary or opening its own stores. The decision about the extent of commitment entails a trade-off between control and risk. Direct involvement gives the firm more control over what happens in the country, but risk also increases if the operation is not successful.

4.1.1 Exporting If a firm chooses to export, it must decide whether it will attempt to sell its products on its own or rely on intermediaries to represent it in the target country. These specialists, or export merchants, understand the local market and can find buyers and negotiate terms. An exporting strategy allows a firm to sell its products in global markets and cushions it against downturns in its domestic market.

4.1.2 Contractual Agreements The next level of commitment a firm can make to a foreign market is a contractual agreement with a company in that country to conduct some or all of its business there.

In a licensing agreement, a firm (the licensor) gives another firm (the licensee) the right to produce and market its product in a specific country or region in return for royalties on goods sold.

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with regard to patents, and copyright or trademark violations.

Such misappropriation of trade secrets can violate either civil or criminal laws.

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p. 55

p. 55

Franchising is a form of licensing that gives the franchisee the right to adopt an entire way of doing business in the host country.

4.1.3 Strategic Alliances Firms seeking an even deeper commitment to a foreign market develop a strategic alliance with one or more domestic firms in the target country. These relationships often take the form of a joint venture: Two or more firms create a new entity to allow the partners to pool their resources for common goals. Strategic alliances also allow companies easy access to new markets, especially because these partnerships often bring with them preferential treatment in the partner’s home country.

4.1.4 Direct Investment An even deeper level of commitment occurs when a firm expands internationally through ownership. Direct investment involves buying a business in the host country outright. Instead of starting from scratch in its quest to become multinational, buying part or all of a domestic firm allows a foreign firm to take advantage of a domestic company’s political savvy and market position in the host country.

4.2 Marketing Mix Strategies: Revisiting the Four Ps In addition to “big picture” decisions about how a company will operate in other countries, managers must decide how to market the product in each country. They may need to modify the famous four Ps—product, price, promotion, and place—to suit local conditions.

Advocates of standardization argue that the world has become so small that basic needs and wants are the same everywhere. In contrast, those in favor of localization feel that the world is not that small; you need to tailor products and promotional messages to local environments. These marketers feel that each culture is unique, with a distinctive set of behavioral and personality characteristics.

Troubleshooting tip: The decision to employ a standardization vs. localization strategy is a very complex one for a firm, so plan to have an in-depth discussion of the pros and cons related to each type of strategy.

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p. 55

4.2.1 Product Decisions A firm seeking to sell a product in a foreign market has three choices: sell the same product in the new market, modify it for that market, or develop a brand-new product to sell there.

• A straight extension strategy retains the same product for domestic and foreign markets.

• A product adaptation strategy recognizes that in many cases people in different cultures do have strong and different product preferences.

• A product invention strategy means a company develops a new product as it expands to foreign markets. In some cases, a product invention strategy takes the form of backward invention. A firm may find that it needs to offer a less complex product than it sells elsewhere.

p. 56

4.2.2 Promotion Decisions Marketers must also decide whether it is necessary to modify their product promotions for a foreign market. Some firms endorse the idea that the same message will appeal to everyone around the world, while others feel the need to customize it.

p. 56

4.2.3 Price Decisions Ethnocentric pricing is a pricing strategy whereby the firm sets a single price for a product around the globe. Polycentric pricing is a pricing strategy whereby the local partners set the prices for the product in each global market. Geocentric pricing is a pricing strategy that establishes a global price floor for a product but recognizes local conditions in setting the price in each market.

To ease the financial burden of tariffs on companies that import goods, some countries have established free trade zones. These are designated areas where foreign companies can warehouse goods without paying taxes or customs duties until they move the goods into the marketplace. One danger of pricing too high is that competitors will find ways to offer their product at a lower price, even if they do this illegally. Gray market goods are items that are imported without the consent of the trademark holder.

Another unethical and often illegal practice is dumping, in which a company prices its products lower than they are offered at home—often removing excess supply from home markets and keeping prices up there.

p. 57

4.2.4 Place/Distribution Decisions

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Getting your product to consumers in a remote location can be quite a challenge. It is essential for a firm to establish a reliable distribution system if it is going to succeed in a foreign market.

p. 57

p. 57

5.

ETHICS IS JOB ONE IN MARKETING PLANNING It’s hard to overemphasize the importance of ethical marketing decisions. Businesses touch many stakeholders, and they need to do what’s best for all of them where possible. When major companies defraud the public, everyone suffers.

5.1 Ethical Philosophies What constitutes ethical behavior is often different for different people. We can point to various ethical philosophies and see how each guides people to make their decisions.

• Utilitarian approach: The decision that provides the most good or the least harm • Rights approach: The decision that does the best job of protecting the moral rights of all affected • Fairness or justice approach: The decision that treats all human beings equally • Common good approach: The decision that contributes to the good of all in the community • Virtue approach: The decision is in agreement with certain ideal virtues

Exhibit: Patagonia

Table 2.6 Some Common Ethical Philosophies

Ethical relativism suggests that what is ethical in one culture is not necessarily the same as in another culture. p. 58

p. 58 p. 59

5.2 Codes of Business Ethics Business ethics are basic values that guide a firm’s behavior. A code of ethics refers to written standards of behavior to which everyone in the organization must subscribe.

5.3 Is Marketing Unethical?

There are examples of questionable or unethical marketing.

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Table 2.7 Highlights of the American Marketing Association Statement of Ethics

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p. 60

p. 60

p. 60

p. 61

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p. 61

Criticisms of marketing: • Marketing serves the rich and exploits the poor • Products are not safe • Poor-quality products • Planned obsolescence • Marketing creates interest in products that pollute the environment • Easy consumer credit makes people buy things they don’t need and can’t afford 5.4 When Is a Bribe Not a Bribe? Ethical Issues for Global Business Understanding the environment where you do business means staying on top of the ethical values and norms of the business culture in the marketplace. Blatant bribery occurs when someone voluntarily offers payment to get an illegal advantage. Extortion occurs when someone in authority extracts payment under duress.

6.

SUSTAINABILITY: MARKETERS DO WELL BY DOING GOOD Firms today have a triple-bottom-line orientation. They don’t just look at their financial successes but also focus on how they contribute to their communities (their social bottom line) and create sustainable business practices (the environmental bottom line).

6.1 Sustainability Is a Sensible Business Decision Sustainability adds to the need of the firm to sustain itself and the long-term future of society. Sustainable companies that satisfy the long-term needs of customers will survive.

Are you more likely to shop at a store that offers recycling?

6.2 Developing a Sustainable Marketing Mix How some companies already implement sustainable marketing practices: • Target marketing strategies: They target green customers who are likely to buy eco-friendly products.

• Product strategies: Some firms choose fair trade suppliers who pay a fair price to producers in developing countries.

• Price strategies: Sustainable marketing practices aim to establish prices for green products that equal the prices of other products.

• Place/distribution strategies: Locavorism means that shoppers buy products from farms within 50 to 100 miles of their homes.

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Exhibit: Natural food products

Exhibit: African Conservation Foundation

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• p. 61 6.3 p. 61

Promotion strategies: Some firms “reuse” old commercials and tell customers that this is their way of practicing sustainability.

Sustainable Customer Behavior

Marketers need to understand what will motivate customers to seek out, pay for, and use sustainable options.

7. BRAND YOU: FINDING THE RIGHT FIT Job seekers need to understand options to consider in an international career.

p. 64

7.1 Organizational Culture Companies, like different countries and groups of people, have an organizational culture that holds unique beliefs about the right and wrong way to run a business and these beliefs may be strongly entrenched.

7.2 Differences among Industries Job seekers need to find the industry that is the best fit for their style and the work environment that is best for them.

7.3 Landing a Job Overseas Job seekers should observe clues to the culture and the work environment, including the location of the business, the personality of key players, the management philosophy and style, the level of risk taking behavior, and the company’s ethics and social responsibility.

Here’s My Choice……

Tom went with Option 1, and TerraCycle introduced Loop at the Davos meeting. The exposure increased participation by major firms. With the beach plastic bottle and Loop, the concepts behind the business were clearer for businesses and consumers than ever before, and corporations that wouldn’t have previously signed with TerraCycle (due to prohibitive barriers of cost and the unknown) were now signing on for new recycling programs, materials contracts, and Loop. The takeaway: Recycling doesn’t have to be a pain. Companies that make it easier for consumers to help the planet will help their bottom lines, as well.

IV. END-OF-CHAPTER ANSWER GUIDE CHAPTER QUESTIONS AND ACTIVITIES  CONCEPTS: TEST YOUR KNOWLEDGE

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2-1.

Describe the market conditions in the home market and those in other countries that influence a firm’s decision to enter foreign markets.

Marketers must consider domestic demand, the market potential abroad, and a firm’s ability to have a competitive advantage in foreign markets. The decision may be based on conditions where domestic demand is declining while demand in foreign markets is growing.

2-2.

What is the role of the WTO and economic communities in encouraging free trade? What is the role of the World Bank and the International Monetary Fund in global trade?

Describe and explain the reasons for protectionism, import quotas, embargoes, and tariffs.

World trade refers to the flow of goods and services among different countries that may take place through cash, credit payments, or countertrade. The World Trade Organization seeks to create a single open world market where trade flows “smoothly, predictably and freely as possible.” Two additional organizations influence the advancement of global trade: the World Bank and the International Monetary Fund (IMF). The IMF stabilizes exchange rates to try to prevent problems with the balance of payments.

Some governments adopt policies of protectionism with rules designed to give home companies an advantage. Such policies may include trade quotas, embargoes, or tariffs that increase the costs of foreign goods. Many countries have banded together to form economic communities to promote free trade.

2-3.

What are voluntary export restraints? What are hidden import quotas? How are the two different?

Voluntary export restraints (VERs) are quotas that countries place on their own exports to partner nations. Hidden import quotas restrict the quantity of goods that enter a country through the use of quality or content requirements. The main difference between the two lies in their approach: VERs are transparent, negotiated caps on exports, whereas hidden import quotas are not typically based on quantitative factors,

2-4.

What factors are used to evaluate the economic health of a country? Explain the level of economic development of countries. What is a bottom-of-the-pyramid (BOP) consumer?

How do marketers create products specifically targeted for this group?

The most commonly used measure of economic health of a country is the gross domestic product (GDP), the total dollar value of goods and services a country produces within its borders in a year. A similar but less frequently used measure of economic health is the gross national product (GNP), which measures the value of all goods and services a country’s individuals or organizations produce, whether located within the country’s borders or not.

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When marketers scout the world for opportunities, it helps if they consider a country’s level of economic development to understand the needs of people who live there and the infrastructure conditions with which they must contend. Economists look past simple facts such as growth in GDP to decide this; they also look at what steps are being taken to reduce poverty, inequality, and unemployment.

Within these LDCs and developing countries is a group of consumers known as the bottom of the pyramid (BOP), which is the collective name for the group of more than 4 billion consumers throughout the world who live on less than $2 a day. These BOP consumers represent a potentially huge marketing opportunity with purchasing power parity of $5 billion. They are unable to purchase “inventory,” such as a bottle of shampoo. Procter & Gamble, Unilever, and other companies meet these needs when they offer cleaning products, fabric softeners, and shampoo that can be used in cold water in affordable one-use sachet packaging.

2-5.

Why are human rights issues important to firms in their decisions to enter global markets? What are some common human rights issues that firms must consider when evaluating a market’s political and legal environment?

Human rights considerations are crucial for firms planning to enter global markets due to the significant impact on brand reputation and consumer trust. Companies are mindful of avoiding business practices linked to human rights abuses, such as those involving labor exploitation or unsafe working conditions. The presence of modern slavery, with over 50 million people affected worldwide, underscores the importance of ethical supply chains.

Additionally, adherence to programs like the U.S. Generalized System of Preferences (GSP) highlights the role of worker rights in trade relations.

Firms must also consider issues such as fair wages, safe working environments, and the avoidance of environmental harm. Human trafficking, gender equality, and LGBTQ+ rights further influence corporate decisions on market entry. Addressing these human rights issues not only reduces legal and reputational risks but also aligns businesses with global ethical standards, enhancing their long-term viability and social responsibility in international operations.

2-6.

How is a firm’s level of commitment related to its level of control in a foreign market?

Describe the four globalization strategies representing different levels of involvement for a firm: exporting, contractual agreements, strategic alliances, and direct investment.

A firm deciding to go global must determine the level of commitment it is willing to make to operate in another country. This commitment can range from a casual involvement to a full-scale “marriage.” The decision about the extent of commitment entails a trade-off between control and risk. Direct involvement gives the firm more control over what happens in the country, but risk also increases if the operation is not successful.

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Exporting involves the least risk. If a firm chooses to export, it must decide whether it will attempt to sell its products on its own or rely on intermediaries to represent it in the target country. An exporting strategy allows a firm to sell its products in global markets and cushions the firm against downturns in its domestic market. Because the exported products are made at home, the firm is able to maintain control over design and production decisions.

The next level of commitment a firm can make to a foreign market is a contractual agreement with a company in that country to conduct some or all of its business there.

Two of the most common forms of contractual agreement are licensing and franchising.

Firms seeking an even deeper commitment to a foreign market develop a strategic alliance with one or more domestic firms in the target country. These relationships often take the form of a joint venture: a new entity owned by two or more firms is created to allow the partners to pool their resources for common goals. Strategic alliances also allow companies easy access to new markets.

A deeper level of commitment occurs when a firm expands internationally by buying a business outright in the host country. Direct investment allows a foreign firm to take advantage of a domestic company’s political savvy and market position in the host country.

2-7.

What are the arguments for standardization of marketing strategies in the global marketplace? What are the arguments for localization? What are some ways a firm can standardize or localize its marketing mix?

Advocates of standardization argue that the world has become so small, with tastes so homogenized, that basic needs and wants are the same everywhere. Those in favor of localization feel that the world is not that small and product and promotional messages should be tailored to local environments. These marketers feel that each culture is unique and that each country has a national character: distinctive sets of behavioral and personality characteristics.

When a firm offers the same products in all its markets, it is following a standardization strategy. If a firm tailors its products or promotions to the specific tastes of a region, it is localizing its marketing mix.

2-8.

What is a code of ethics? What are some ways that companies can ensure their codes of ethics are part of their broader corporate cultures?

A code of ethics is a documented set of guidelines that outlines the ethical standards and behaviors expected within an organization. It serves as a foundational reference for employees, guiding decisions and actions across various aspects of business operations.

Companies can ensure that their code of ethics is embedded in their corporate culture by incorporating it into their planning processes, as highlighted by AT&T’s publicly

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Chapter 2: Global, Ethical, and Sustainable Marketing

accessible Code of Business Conduct, which sets clear expectations for conduct in areas like compliance, disclosure, and fair dealing.

To reinforce the code’s principles, organizations can link ethical behavior to incentive structures, learning from Wells Fargo’s experience where misaligned incentives led to unethical practices. Regular training and education programs are essential for ensuring that employees understand and can apply the code’s standards in their work.

Embedding a code of ethics into a company’s culture requires clear communication, alignment of incentives with ethical outcomes, and ongoing education to foster an environment where ethical behavior is the standard, supported by examples and guidelines that employees can follow.

2-9.

What are green consumers? What are some ways that companies can incorporate sustainability into each of the four Ps of marketing to appeal to green consumers?

Green consumers are those who are most likely to actively look for and buy products that are eco-friendly.

With growing world populations and increasing demand for products, sustainable business practices are necessary for life in the future. Many firms practice sustainability when they develop target marketing, and product, price, place/distribution, and promotion strategies designed to protect the environment and the future of our communities.

Companies implement sustainable marketing practices in the following ways: • Target marketing strategies: They target green customers who are likely to buy eco-friendly products.

• Product strategies: Some firms choose fair trade suppliers who pay a fair price to producers in developing countries • Price strategies: Sustainable marketing practices aim to establish prices for green products that equal the prices of other products.

• Place/distribution strategies: Locavorism means that shoppers buy products from farms within 50 to 100 miles of their homes.

• Promotion strategies: Some firms “reuse” old commercials and tell customers that this is their way of practicing sustainability.

Sustainability metrics are tools that measure the benefits an organization achieves through the implementation of sustainability.

ACTIVITIES: APPLY WHAT YOU’VE LEARNED 2-10. In Class, 10–25 Minutes for Teams Using the data in Table 2.2, select two countries that are substantially dissimilar from one another. Then, select one of the products below. Use the data for the two countries to develop arguments for why each of the two countries would and would not be a good opportunity for expansion of the market for your product.

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a. High-end, American-designed home furniture b. Environmentally sound home air conditioning systems c. A well-designed but inexpensive kids’ bicycle d. A water purification system that makes water potable and does not require electricity Students can share their findings with the class.

2-11. Creative Homework/Short Project With several members of your class, assume you are in the marketing department for a company that produces a high-end protein bar targeted at athletes. After great success in your home market, your firm has decided to expand internationally. Conduct research to identify your top three markets for global expansion.

What criteria did you use to select your three countries? Identify whether your firm will use a standardization or localization approach for global expansion. Explain how you arrived at that decision.

Students can share their findings with the class.

2-12. For Further Research (Individual) Consider the six different ethical philosophies in the chapter. Apply these six philosophies to one of the following ethical dilemmas. What would be the most ethical decision for each? Explain why you think so. Which would you be most likely to follow?

Decisions: a. You see a classmate go through the backpack of another student in the restroom, remove some items, and then leave. Should you ignore what you saw, report it, or do something else? b. You are the president of a school club, which gives you access to the club’s money.

You need to buy a new tire for your car, but you won’t have enough money for a week. You are considering borrowing the money from the club and paying it back in a week. What should you do? c. You have been assigned to a class project team. In a different class, you have been on a team with one of the members of your current team, and you know they refuse to do any work but expect others on the team to help them out. What are your options, and what should you do?

Students can share their answers with the class.

2-13. In Class, 10–25 Minutes for Teams Assume you are the director of marketing for a U.S. firm that produces one of the products listed below. Your firm is considering going after the Indian market and is faced with the decision of the best entry strategy. Should your firm simply export its products, or would a strategic alliance, licensing, a joint venture, or direct investment be a better choice? Develop your ideas for a best entry strategy. Be specific in your recommendations for a strategy, how to implement the strategy, and your reasons for your recommendations.

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Products: a. Smartwatches targeting the consumer market b. A “fast casual” sandwich restaurant, similar to Panera c. Bicycle-sharing transportation program Teams can present their findings and recommendations to the class.

2-14. Creative Homework/Short Project Consumer ethnocentrism is the tendency for individuals to prefer products from one’s own culture. Consumer xenocentrism is the tendency for individuals to prefer products from a country not their own. Sometimes people think products made at home are better than imported goods, while others think that imported goods are superior to those produced domestically. Develop a small study to find out what students at your university think about products made at home and abroad. Develop a survey that asks other students to evaluate 10 or more products (not brands) that are imported versus made at home. You might wish to ask if they feel the domestic or imported products are superior in quality and which they would purchase.

Prepare a report on your study for your class.

Student groups can share their findings.

2-15. In Class, 10–25 Minutes for Teams Some people argue that our environment is not in jeopardy and that sustainability efforts will only make products more expensive. Plan a debate in your class with two teams, one arguing that climate change is a real threat to our planet and our future and that we must have sustainability efforts and the other arguing against the need for sustainability efforts.

Students can have a lively debate arguing for and against sustainability efforts.

2-16. For Further Research (Individual) Amsterdam-based Stellantis is one of the world’s largest automobile manufacturers, with 16 different brands spanning the globe. Conduct some online research that compares Stellantis’s North American brands to brands it operates in other global markets. What similarities and differences do you notice regarding Stellantis’s marketing mix for its North American brands compared to its other global brands? What might be some of the key factors behind those variations?

This is an opportunity for students to discuss how companies localize their products based on demographic, psychographic, geographic, economic, and cultural differences.

Students can share their answers with the class. The class can have a follow-up discussion regarding how companies have to be culturally sensitive in order to be profitable when expanding their businesses abroad.

2-17. For Further Research (Groups) Assume you are part of a small business in the United States that manufactures portable gas barbecue grills and has decided to enter the global marketplace. What type of market entry strategy would be best suited for your company

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and why? What decisions should the company make around product, price, place, and promotion to ensure success?

Foreign-market-entry strategies represent varying levels of commitment for a firm.

Exporting of goods entails little commitment. Contractual agreements such as licensing or franchising allow greater control. With strategic alliances through joint ventures, commitment increases. Finally, the firm can choose to invest directly by buying a company or starting a foreign subsidiary. Marketers examine a country’s sociocultural environment, including demographics, values, social norms and customs, language, and ethnocentricity. In many cases, the promotional strategy, the pricing strategy, the place/distribution strategy, and the product itself must be tailored to fit the needs of consumers in another country.

Students should review the marketing mix, which includes product, price, place, and promotion. The product is what satisfies customer needs. The price is the assigned value or amount to be exchanged for the product. The place or channel of distribution gets the product to the customer. Promotion is the organization’s efforts to persuade customers to buy the product.

CONCEPTS: APPLY MARKETING METRICS The chapter discusses the growing importance of sustainability. As noted in Chapter 1, companies and consumers increasingly consider other costs in addition to financial ones when they decide what to sell or buy. One of these cost categories is damage to the environment. How can marketers make it easier for shoppers to compute these costs?

The answer to this question is more apparent in some product categories than in others. For example, in the United States, many large appliances, including clothes washers, refrigerators, and air conditioners, are required to provide an EnergyGuide, a yellow label that informs buyers about the power consumption and annual costs of operating the unit. The most efficient appliances include the EnergyStar™ logo indicating that the unit offers up to 15 percent savings in energy cost over the basic model.

A growing number of consumers are concerned about their carbon footprint—how much carbon dioxide (CO2) our consumption behavior emits into the atmosphere. In October 2021, Google Flights launched a new feature that shows potential airline travelers the estimated carbon emissions of most flights. These CO2 emissions estimates are flight- and seat-specific (e.g., newer planes are more energy efficient than older planes, and a first-class seat takes up more space and thus is allocated a larger share of the total emissions for the flight). This information allows travelers to sort flights by emissions to help them understand their carbon footprint and make more sustainable travel decisions.

Although many of us are more aware today that our consumption choices carry unseen costs, there is still a lot of confusion about the best way to communicate the environmental costs of our

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actions, and in many cases, consumers aren’t motivated to take these issues into account unless the costs impact them directly and in the short term.

2-18. What other sustainability metrics would you suggest that might motivate environmentally conscious consumers to purchase from a company that practices sustainability? (Hint: Think in terms of the “sustainable marketing mix” discussion in section 2.6 of this chapter and what you learned about the Four Ps in Chapter 1. What metrics could a company communicate related to its marketing mix strategies?)

Sustainability applies to many aspects of doing business including social and economic practices. Within the Four Ps, possible measures of sustainability include: •

• • •

Product: Percentage of post-consumer recycled content used in production, increasing the percentage of energy costs related to production that comes from renewable resources, reductions in packaging size or increases in recyclable components, or increasing use of resources sourced from fair trade suppliers Price: Reduction in the price differential between green products and comparable traditional products, improved efficiencies leading to long-term price decreases Place/distribution: Switching to nearby suppliers to reduce reliance on long-haul trucking, creating an efficient distribution network that minimizes delivery distances Promotion: Recycling promotional materials (e.g., reusing older commercials or using them longer before changing); reducing the use of printed promotional materials

2-19. As a consumer, do you consider your carbon footprint when you make purchase decisions? As a percentage of the price, how much more would you be willing to pay for a product (e.g., an appliance or flight) that offered a smaller carbon footprint?

Student answers will vary.

CHOICES: WHAT DO YOU THINK? 2-20. Critical Thinking and Ethics Assume you are the CMO for an athletic-shoe company.

Over 75 percent of your sales comes from the United States and Europe. You have conducted business with Firm ABC in Guatemala for 30-plus years, but recent reports in the world news have suggested that your supplier is using child labor to produce its goods. The reports show that the children are forced to work 70 or more hour weeks in unclean conditions without adequate air-conditioning and with few breaks. You are considering switching to Firm XYZ in Honduras that produces an identical product in a sustainable manner and provides both green marketing and fair labor certifications. The only downside is that Firm XYZ’s product is 43 percent more expensive than what you are currently purchasing from Firm ABC. The switch would require you to increase the price of your shoes, which would likely impact your sales. Were your sales to decrease,

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there is the possibility of layoffs and plant closings. You are also aware of the importance of ethics and sustainability to today’s consumers. Answer the following questions: a. What are the potential positive and negative outcomes (in addition to those already discussed) of continuing to purchase product from Firm ABC? b. What are the potential positive and negative outcomes (other than those already discussed) of changing suppliers and purchasing product from Firm XYZ? c. Which firm would you choose using the utilitarian approach to decision making? Why? d. Which firm would you choose using the rights approach to decision making? Why? e. Which firm would you personally choose? Why? Working in small groups, students should review concepts of ethics and sustainability as presented in the chapter and then discuss the answers to these questions.

2-21. Critical Thinking Do you think companies that operate in the U.S. should be able to use bribes to compete in countries where bribery is an accepted (and legal) form of doing business? Why or why not?

This question is thought provoking and could be a role-play. Students could argue that in some countries, bribes are simply part of the way business is carried out. If U.S. companies do not take part in this practice, they will not be competitive. Business deals will go to other countries willing to adopt the following attitude: “When in Rome, do as the Romans do.” Other students could argue that ethical values transcend business deals and that U.S. companies should remain true to their values. They should refer to the FCPA which prohibits U.S. companies from giving bribes.

2-22.

Critical Thinking Some countries have enacted policies that seek to protect their culture from

“Americanization.” For example, Canada requires broadcast and satellite radio companies to play a minimum amount of music from Canadian artists—sometimes as high as 40 percent of their overall playlists. What might be viewed as the positives and negatives of these types of regulations?

Student answers will likely vary. On the positive side, these regulations can be considered to foster domestic talent and ensure the preservation and promotion of local culture and identity in a globalized world dominated by American media. They provide a platform for local artists to reach audiences that might otherwise be saturated with international— predominantly American—content. On the other hand, such quotas can be seen as restrictive, potentially limiting broadcasters’ ability to choose content based solely on quality or audience preference, and possibly leading to a narrower scope of available entertainment options.

2-23. Critical Thinking Some members of the U.S. population support free trade, whereas others are unhappy, even angry, that the government has reduced regulations on imports of such products as textiles and furniture, causing factories to shut down and employees to lose their jobs. They feel that the U.S. government should legislate greater regulation of 2-26 Copyright © 2025 Pearson Education, Inc.

Chapter 2: Global, Ethical, and Sustainable Marketing

imported goods to give American companies an advantage or at least to lessen the advantage that companies in other countries receive from their governments. What do you think? How do you justify your answer?

The students will respond differently depending on their personal views on the World Trade Organization. Removing barriers to trade will allow the natural laws of supply and demand to regulate pricing and the success of business and will in the long term benefit consumers worldwide. On the other hand, developing countries need to protect their domestic industries in order to grow their economies. Developed countries may feel they need to protect their domestic labor force against imported products made in countries where wages are very low. Not all countries participate equally in the trade flows among nations, and removing barriers may just increase the disparity.

2-24. Critical Thinking In 2021, El Salvador made history by becoming the first country to adopt Bitcoin as legal tender. Since then, several other countries have explored the possibility of legally recognizing cryptocurrencies. What impact could this have on global trade? What effect do you think this will have on other economic communities?

What about the possibility of a single world currency?

Student answers will vary. The adoption of Bitcoin as legal tender in El Salvador could streamline cross-border transactions, reduce transaction costs, and enhance financial inclusion, particularly in regions with underdeveloped banking sectors. For global trade, this could mean increased efficiency and potentially more equitable access to international markets. However, the volatility of cryptocurrencies poses risks to financial stability, and their decentralized nature complicates regulatory oversight, potentially fostering financial crimes. For other economic communities—especially those reliant on traditional banking and monetary systems—there could be challenges in integrating cryptocurrencies without undermining their own currencies and financial stability. The concept of a single world currency, while appealing for its potential to eliminate exchange rate risks and simplify transactions, faces significant hurdles in terms of global governance, monetary policy coordination, and acceptance across diverse economic and political landscapes.

2-25. Critical Thinking A challenge of “cause marketing” is that societies do not always agree on all causes. What some consumers may view as positive issue awareness other consumers may view as unwelcome political activism. What factors and considerations do you think companies should use to determine the causes they support? Should a goal of cause marketing be to avoid controversy? Why or why not?

Students can share their answers. In navigating the complexities of “cause marketing,” companies must carefully select causes to support, considering several factors to align their efforts with both their brand identity and their audience’s values. Key considerations include the relevance of the cause to the company’s mission and values, the potential impact of the support on the cause, and the cause’s resonance with the company’s primary customer base. Additionally, understanding the cultural and societal context in

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which the company operates is crucial to anticipate the reception of such marketing initiatives.

Although avoiding controversy might seem like a prudent goal, it’s not always feasible or desirable in cause marketing. Attempting to avoid controversy entirely could lead to companies supporting only the most universally accepted causes, which might limit the potential for meaningful societal impact. Moreover, taking a stand on significant but potentially divisive issues can strengthen a brand’s identity and loyalty among consumers who share similar values. Therefore, rather than strictly avoiding controversy, companies should aim for authenticity and alignment with their core values, ensuring that their cause marketing efforts genuinely reflect their commitment to making a positive impact. This approach helps build trust and credibility, even in the face of potentially divisive issues.

MINIPROJECT: LEARN BY DOING The purpose of this miniproject is to gain experience in understanding what it takes to move a product that is successful in its home market into a global market in which it will continue to be successful. Assume that you are the director of marketing for a firm that produces its own highend brands of makeup, skin care, and hair care products for both men and women that are sold only in its own retail outlets. The products have been endorsed by a number of male and female musicians who are highly popular with young people around the world.

2-26. Describe your local competitive advantage and why you believe this competitive advantage will serve you globally.

This is a good opportunity to review the concepts of core competency and competitive advantage.

2-27. Determine which global market(s) is/are most attractive for your products. Will you target a single country or an economic community? Describe your reasoning.

This is a chance for students to consider the pros and cons of marketing products in developed or developing countries. They can discuss the pros and cons standardization and localization of their service.

2-28. Decide which market-entry strategy you will pursue. Again, explain your reasoning.

This question offers students the chance to review entry strategies and select one.

2-29. Describe your marketing mix strategy: • How might you need to adapt your products?

• What other product decisions do you need to make?

• How will you promote your products?

• How will you price your products?

• What place/distribution decisions must you consider?

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Prepare a short presentation to share with your class.

This is a good project to tie in many of the concepts presented in Chapters 1 and 2.

Students will have the opportunity to learn more about a country; think about values, cultures, and ethics; and apply marketing strategies in the form of the marketing mix to what they have learned.

V. MARKETING IN ACTION CASE: REAL CHOICES AT WALMART Summary of Case Walmart's strategic investment in Flipkart, a leading player in India’s e-commerce sector, has significantly impacted the country’s retail landscape. With a $16 billion injection in 2018, Walmart aimed to tap into India’s vast consumer base and counter Amazon’s growing influence.

Walmart’s investment propelled Flipkart to a 48 percent market share, surpassing rival Amazon.

Despite initial regulatory scrutiny and concerns from local business groups, Walmart’s investment has positioned it for potential brick-and-mortar expansion in India. However, challenges persist, including Flipkart’s status as still being unprofitable. Walmart’s commitment to sourcing $10 billion of India-made goods annually by 2027 underscores its long-term vision for the Indian market. As Walmart navigates the complexities of India’s retail landscape, the outcome of its direct investment in Flipkart will shape its path forward in one of the world’s fastest growing consumer markets.

Suggestions for Presentation This case could be assigned for various online or in-class discussion activities.

Online Suggestions Go to Flipkart’s website and browse around. Compare the functionality and look and feel to both Walmart.com and Amazon.com.

In-Class Suggestions In groups or as individuals, discuss Walmart’s strategy for growth in India.

Divide the class into groups of three to five students and have each group conduct a strengths, weaknesses, opportunities, and threats (SWOT) analysis to determine how Walmart should proceed with its marketing strategies in India.

Questions for Discussion 2-30. What other market-entry options were available to Walmart for a global expansion in India? What international expansion opportunities existed for Flipkart prior to Walmart’s acquisition?

Market-entry options include:

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• • • •

Continued expansion of Best Price stores, perhaps by launching a PR campaign to create grassroots support and by lobbying the government more aggressively Buying out a collection of the mom and pop stores in different areas and consolidating them into a larger Best Price store Going into partnership with the mom and pop stores Creating an India-specific version of Walmart.com

Options for international expansion vary based on international trade and commerce laws in each country. However, in general, Flipkart’s options included: • Geographic market expansion: Flipkart could have explored expanding its online retail model to other countries with similar market dynamics to India, leveraging its expertise in managing a vast logistics network and understanding of emerging market consumers.

• Acquiring international retailers: Flipkart could have looked for acquisition opportunities that aligned with its business model and expansion goals, potentially entering new markets through established players.

• Direct investment in international retailers: Similar to Walmart’s investment in Flipkart, Flipkart could have invested in other retailers abroad to gain a foothold in new markets.

• Joint ventures: Forming joint ventures with large retailers in other countries could have offered Flipkart a way to expand internationally, sharing risks and benefits with local partners.

2-31. What external factors should Walmart have taken into consideration as it considered its expansion in India?

External factors include: • India has a population of 1.4 billion people.

• The Indian retail market is approaching $1 trillion in sales each year.

• Most retail sales in India are through small individual “mom and pop” stores.

• The small store owners were able to influence government regulators to create limitations on foreign direct investment (FDI) by international retailers.

• Amazon claimed it had the most downloaded shopping app in India.

• Amazon founder Jeff Bezos said the company planned to invest more into the Indian market.

• The Confederation of All India Traders, representing 60 million businesses in India, is against Walmart’s investment in Flipkart.

2-32. How does Walmart’s strategy in India compare to its domestic strategy in the United States? What similarities and differences do you notice?

•

•

Similarities: In both markets, Walmart focuses on leveraging scale to offer a wide range of products at low prices. The acquisition of Flipkart and the operation of Best Price stores in India mirror Walmart’s emphasis on both physical and online retail in the United States.

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physical presence, leading to a greater focus on e-commerce through Flipkart.

Additionally, strategies in India include adapting to local market dynamics, such as the cash-on-delivery payment model and partnerships with small retailers, reflecting a more localized approach compared to its standardized operations in the U.S.

WEB RESOURCES Flipkart.com Amazon.com Walmart: www.walmart.com World Trade Organization (WTO): www.wto.org Table 2.1 in Chapter 2 lists websites for various economic communities.

Consumer Product Safety Commission (CPSC): www.cpsc.gov Environmental Protection Agency (EPA): www.epa.gov Federal Communications Commission: www.fcc.gov Federal Trade Commission (FTC): www.ftc.gov Foreign Corrupt Practices Act (FCPA): www.usdoj.gov/usao/eousa/foia_reading_room/usam/title9/47mcrm.htm Food and Drug Administration (FDA): www.fda.gov

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Chapter 3: Strategic Market Planning

Chapter 3 Strategic Market Planning I. CHAPTER OVERVIEW The title of Chapter 3 implies that businesses need to plan for a wide number of factors in the marketplace in order to be successful and achieve an advantage. In this chapter, students learn that ethically sound strategic planning can take place at both the corporate and strategic business unit (SBU) level in large firms and in a single stage in smaller businesses. Businesses conduct functional (including marketing) and operational planning. Successful businesses continually scan the organization’s internal environment and external business environment. By carefully following these strategies in an ethical manner, businesses can create their own advantage.

In today’s dynamic environment, strategic planning results in better tools and resources to help firms survive, compete, and thrive in the marketplace. The COVID-19 crisis impacted organizational and marketing strategy, and drew attention to the need for contingency planning and examining multiple planning scenarios.

II. CHAPTER OBJECTIVES 3-1.

3-2.

3-3.

3-4.

Explain business planning and its three levels.

Describe the steps in strategic planning.

Describe the steps in market planning.

Understand how to develop a strategic plan for a successful career.

III. CHAPTER OUTLINE p. 78

REAL PEOPLE, REAL CHOICES—HERE’S MY PROBLEM AT THE NATIONAL FOOTBALL LEAGUE (NFL) Marissa joined the NFL after an 18-year marketing career at PepsiCo. She was hired to join a journey of transformation as the league looked to the future. The NFL’s goals were to ensure the brand is relevant and exciting to the next generation of fans even though the currently boasted over 400 million fans. However, the NFL also identified major issues that could impact the league in the future. These included massive demographic shifts as the current fan base grew older, a changing media landscape, and evolving fan expectations.

The NFL developed a mantra that outlined three core goals: 1. We need to see our fans with new eyes to understand the massive change in demographics of our future fan base.

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2. We need to know our fans in a more intimate way by understanding their passions, culture, and motivations and how they engage in our sport every day.

3. We need to engage with our fans in a more meaningful way and be present where they are.

Marissa’s challenge was to guide the NFL’s future given these goals and challenges.

To accomplish this task Marissa Solis considered these three options: Option 1: Do nothing and continue to market toward the current fan base.

Option 2: Showcase and market with various demographic populations in mind.

Option 3: Focus on the Gen Z population as a whole.

The vignette ends by asking the students which option they would choose and why.

Marissa chose option #3.

Web link: www.oracle.com p. 80 1.

BUSINESS PLANNING: COMPOSING THE BIG PICTURE Strategy is the execution of the elements of a plan based on goals and objectives to bring about a desired future. It is often said that strategy is both an art and a science, and as you read about the process of planning in this chapter, you will pick up on how important it is to be both creative and analytical in planning.

Business planning is an ongoing process of making decisions that guides the firm both in the short term and for the long term.

Planning identifies and builds on a firm’s strengths, and it helps managers at all levels make informed decisions in a changing business environment.

A business plan is a plan that includes the decisions that guide the entire organization.

A marketing plan is a document that describes the marketing environment, outlines the marketing objectives and strategies, and identifies how the company will implement and control the strategies imbedded in the plan.

Chapter 3 includes a template of a marketing plan students can use as they make their way through the book. The template provides a framework that will enable students to organize

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marketing concepts by chapter and create a solid marketing plan of their own. Encourage students to keep this template as a handy reference after the class.

Use the Appendix at the end of the book to show students a sample marketing plan. p. 81

1.1 The Three Levels of Business Planning Business planning occurs at three levels: strategic, functional, and operational. The top level is “big-picture” stuff, while the bottom level specifies the “nuts-and-bolts” actions the firm will need to take to achieve these lofty goals.

p. 82

1.1.1 First-Level Planning Strategic planning is the managerial decision process that matches the firm’s resources (such as its financial assets and workforce) and capabilities (the things it is able to do well because of its expertise and experience) to its market opportunities for long-term growth.

p. 82

Strategic business units (SBUs)—individual units representing different areas of business within a firm that are different enough to each have their own mission, business objectives, resources, managers, and competitors.

p. 82

1.1.2 Second-Level Planning The next level of planning is functional planning. This level gets its name because the various functional areas of the firm, such as marketing, finance, and human resources get involved.

Vice presidents or functional directors usually do this. We refer to what the functional planning marketers do as market planning.

p. 82

1.1.3 Third-Level Planning Operational planning focuses on the day-to-day execution of the functional plans and includes detailed annual, semiannual, or quarterly plans.

p. 83

All business planning is an integrated activity. This means that the organization’s strategic, functional, and operational plans must work together for the benefit of the whole, always within the context of the organization’s mission and objectives.

2.

STRATEGIC PLANNING: FRAME THE PICTURE Listed below are typical steps followed in strategic planning.

p. 83

Figure 3.1 Snapshot: Levels of Business Planning

2.1 Step 1: Define the Mission, Vision, and Values A firm’s mission is basically its purpose—its core reason for being. Questions asked in this stage include: What business are 3-3 Copyright © 2025 Pearson Education, Inc.

Figure 3.2 Process: Steps in Strategic Planning

Part 1: Understand the Value Proposition

we in? What customers should we serve? How should we develop the firm’s capabilities and focus its efforts? Answers to these questions become part of the mission statement, a formal document that describes the organization’s overall purpose and what it hopes to achieve in terms of its customers, products, and resources. The ideal mission statement is not too broad, too narrow, or too shortsighted.

A vision is what a firm aspires to do or be in the future. This is articulated in a vision statement. Organizational values reflect core attributes valued by the firm that most closely reflect its culture. ►Marketing Moment In-Class Activity Can you identify the brand/product/company for these mission statements?

• To inspire and nurture the human spirit–one person, one cup and one neighborhood at a time (Starbucks—www.starbucks.com) •

To bring inspiration and innovation to every athlete in the world. If you have a body, you are an athlete (Nike— www.nike.com)

Troubleshooting Tip: The ideal mission statement is not too broad, too narrow, or too shortsighted. However, there is no absolute formula for creating the “ideal” mission statement.

Therefore, you could ask students to research mission statements from various companies and bring in what they perceive as “ideal” (or as close to ideal) mission statements to discuss in class. p. 84 2.2 Step 2: Evaluate the Internal and External Exhibit: Disney Environment This is referred to as a situation analysis, environmental analysis, or sometimes a business review. The analysis includes a discussion of the firm’s internal environment, which can identify a firm’s strengths and weaknesses, as well as the external environment in which the firm does business so the firm can identify opportunities and threats.

The internal environment is all controllable elements inside a firm that influence how well the firm operates. Examples include the firm’s people, its technologies, physical facilities, financial stability, and relationships with suppliers. p. 84

The external environment consists of elements outside the firm that may affect it either positively or negatively. The external environment for today’s businesses is global, so managers /marketers must consider elements such as the economy, competition, technology, law, ethics, and sociocultural trends.

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Exhibit: The NFL

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these external factors, so management must respond to them through its planning process. p. 85

A SWOT analysis, a summary of the ideas developed in the situation analysis, allows managers to focus clearly on the meaningful strengths (S) and weaknesses (W) in the firm’s internal environment and opportunities (O) and threats (T) coming from outside the firm (the external environment).

Discussion question: At the moment, which external environment factors seem the most influential across all types of product categories?

Troubleshooting tip: Students often misconceive and mislabel their various ideas for factors in a SWOT analysis. The key to correctly identifying various SWOT components is to categorize each idea for a factor in the SWOT analysis by whether that factor is controllable (“SW” – internal environment) or not directly controllable (“OT” – external environment) by the company. Make sure that you go over the various example categories for the internal environment (e.g., the firm’s people, its technologies, physical facilities, financial stability, and relationships with suppliers) and for the external environment (the economy, competition, technology, law, ethics, and sociocultural trends). p. 85 2.3 Step 3: Set Organizational or SBU Objectives Organizational or SBU objectives are a direct outgrowth of the mission statement and broadly identify what the firm hopes to accomplish within the general time frame of the firm’s longrange business plan. Objectives need to be specific, measurable, attainable, and sustainable over time. Objectives may relate to a number of elements such as revenue and sales, profitability, the firm’s standing in the market, return on investment, productivity, product development, customer satisfaction, social responsibility, and many other attributes.

p. 86

The videoconferencing industry had to ramp up capabilities and bandwidth quickly when business travel shut down in the initial months of the COVID-19 crisis in 2020. Two characteristics separate winners from losers in market planning. The first is to be a nimble organization. The second is the ability to do a strategic pivot when there is a rapid demand to change a business model, business direction, product line, or market focus.

2.4 Step 4: Establish the Business Portfolio For companies with several different SBUs, strategic planning includes making decisions about how to best allocate resources across these businesses to ensure growth for the total organization. Each SBU has its own focus within the firm’s overall strategic plan, and each has its own target market and strategies for reaching its objectives.

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Just as we call the collection of different stocks an investor owns a portfolio, the range of different businesses that a large firm operates is its business portfolio.

Exhibit: Disney Cruise Line

p. 86 Portfolio analysis is a tool management uses to assess the potential of a firm’s business portfolio. It helps management decide which of its current SBUs should receive more—or less— of the firm’s resources, and which of its SBUs are most consistent with the firm’s overall mission. p. 86 The BCG growth-market share matrix is one model managers use to assist in the portfolio management process. The BCG model focuses on determining the potential of a firm’s existing successful SBUs to generate cash that the firm can then use to invest in other businesses.

Figure 3.3 Snapshot: BCG Matrix

p. 86 SBUs are categorized as: Stars are SBUs with products that have a dominant market share in high-growth markets.

Cash cows have a dominant market share in a low-growth potential market.

Exhibit: Marvel Comics

Question marks—sometimes called “problem children”—are SBUs with low market shares in fast-growth markets.

Dogs have a small share of a slow-growth market. ►Marketing Moment In-Class Activity In small groups, have students identify various drinks sold by the Coca-Cola Company and have them classify these drinks into the Boston Consulting Group Matrix. (Students will learn the challenges of estimating market share.) (e.g., Coke=cash cow; Tab=dog; Dasani=star; Powerade=question mark) See www.virtualvender.coca-cola.com for a display of all Coke products. p. 88 2.5 Step 5: Develop Growth Strategies Figure 3.4: Part of the strategic planning at the SBU level entails evaluating Snapshot: growth strategies. The product-market growth matrix is used to Product–Market analyze different growth strategies. The matrix provides four Growth Matrix different fundamental marketing strategies.

• Market penetration: increasing sales of existing Exhibit: NFL: products to existing markets.

Washington • Market development: introducing existing products Commanders to new markets. fans • Product development: selling new products in existing markets.

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•

Diversification: emphasizing both new products and new markets to achieve growth. ►Marketing Moment In-Class Activity Using a relatively new product (such as Super Coffee, a protein-enhanced coffee drink), have students brainstorm ideas for product growth using each of the categories in the product market matrix. (e.g., Penetration—sell Super Coffee in fridge packs; New Market—sell to college students; New Products—Super Coffee ice cream; Strategy Diversification—develop line of Super Coffee apparel) p. 89 3.

MARKET PLANNING: DEVELOP AND EXECUTE MARKETING STRATEGY An important distinction between strategic planning and marketing planning is that marketing professionals focus much of their planning efforts on issues related to the marketing mix—the firm’s product, its price, promotional approach, and distribution (place) methods.

The following steps are involved in the marketing planning process: p. 90

3.1 Step 1: Perform a Situation Analysis The first step in developing a marketing plan is for marketing managers to conduct an analysis of the marketing environment.

To do this, managers build on the company’s SWOT analysis by searching out information about the environment that specifically affects the marketing plan.

p. 91

3.2 Step 2: Set Marketing Objectives Marketing objectives are more specific to the firm’s brands, sizes, product features, and other marketing-mix elements.

p. 91

Step 3: Develop Marketing Strategies: Target Markets and the Marketing Mix Marketing mix decisions identify how marketing will accomplish its objectives in the firm’s target markets by using product, price, promotion, and place.

• Product strategies include decisions such as product design, packaging, branding, support services (such as maintenance), if there will be variations of the product, and what product features will provide the unique benefits targeted customers want.

• The pricing strategy determines how much a firm charges for a product. In addition to setting prices for the final consumer, pricing strategies usually establish prices the company will charge to wholesalers and retailers. A firm may base its pricing strategies on costs, demand, or the prices of competing products.

Figure 3.5 Process: Steps in Market Planning

Exhibit: Soccer

3.3

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Exhibit: JetBlue

Part 1: Understand the Value Proposition

•

•

A promotional strategy is how marketers communicate a product’s value proposition to the target market. Marketers use promotion strategies to develop the product’s message and the mix of advertising, sales promotion, public relations and publicity, direct marketing, and personal selling that will deliver the message.

Distribution strategies outline how, when, and where the firm will make the product available to targeted customers (the place component). In developing a distribution strategy, marketers must decide whether to sell the product directly to the final customer or to sell through retailers and wholesalers.

The target market is the market segment(s) a firm selects because it believes its offerings are most likely to win those customers.

The firm assesses the potential demand—the number of consumers it believes are willing and able to pay for its products—and decides if it is able to create a sustainable competitive advantage in the marketplace among target consumers. p. 92 3.4 Step 4: Implement and Control the Marketing Plan In practice, marketers spend much of their time managing the various elements involved in implementing the marketing plan. p. 93

During the implementation phase, marketers must have some means to determine to what degree they are actually meeting their stated marketing objectives. Often called control, this formal process of monitoring progress entails three steps: (1) measuring actual performance, (2) comparing this performance to the established marketing objectives or strategies, and (3) making adjustments to the objectives or strategies on the basis of this analysis.

p. 93 Marketing metrics are specific measures that help marketers watch the performance of their marketing campaigns, initiatives, and channels, and when appropriate, serve as a control mechanism. Activity metrics (focused on measuring and tracking specific activities) are different from outcome metrics (focused on measuring and tracking specific events). Return on marketing investment (ROMI) is the metric to analyze how the marketing function contributes to the bottom line. It is the revenue or profit margin generated by investment in a specific marketing campaign or program divided by the cost of that program at a given risk level.

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p. 94 3.5 Action Plans How does the implementation and control step actually manifest itself within a marketing plan? One very convenient way is through the inclusion of a series of action plans that support the various marketing objectives and strategies within the plan. We sometimes refer to action plans as “marketing programs.” The best way to use action plans is by including a separate action plan for each important element involved in implementing the marketing plan.

3.5.1 Assign Responsibility A marketing plan can’t be implemented without people.

Table 3.1: Action Plan Template p. 94

3.5.2. Create a Timeline The timing of tasks might be portrayed in a Gantt chart or PERT chart. It helps to visualize how the pieces will come together.

3.5.3 Set a Budget Each element of the action plan links to a budget item.

3.5.4 Decide on Measurements and Controls The metric(s) a marketer uses to monitor and control individual action plans ultimately forms the overall control process. p. 96

Exhibit: Gantt chart p. 95

Leading indicators: Performance indicators that provide insight into the performance of current efforts in a way that allows a marketer to adjust relevant marketing activities (hopefully) resulting in performance improvements against the current action plan.

Lagging indicators: Performance indicators that provide insight into the performance of an action plan based on outcomes realized.

Discussion question: Pick a favorite product category and discuss what types of target markets reside in that product category. p. 96

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The best plan ever written is useless if not properly carried out.

That is what operational plans are for. They put the pedal to the metal by focusing on the day-to-day execution of the marketing plan.

The task falls to the first-line supervisors we discussed earlier, such as sales managers, marketing communications managers, and marketing research managers. Operational plans generally cover a shorter period of time than either strategic plans or marketing plans—perhaps only one or two months—and they include detailed directions for the specific activities to be carried out, who will be responsible for them, and timelines for accomplishing the tasks. p. 96

3.7 Agile Marketing and the Strategic Market Planning Process Agility is about being nimble and being able to respond quickly and easily to changes and challenges. Agile marketing uses data and analytics to source promising opportunities or solutions to problems in real time, deploying tests quickly, evaluating the results, and rapidly doing it over and over. A high-functioning agile marketing organization can run hundreds of marketing campaigns simultaneously and generate multiple new ideas every week.

p. 97 Scrum is a popular framework that aims to create a culture of transparency, inspection, and adaptation while making it easier for team members to produce consistently great products.

3.8 Digital Disruption and Strategic Market Planning Two concepts should be drivers to more effective planning.

Digital disruption is the effect of digital technologies and digital business models on an organization’s value proposition and its resulting position in the markets in which is competes. A digital vortex is the inexorable movement of industries toward a “digital center” in which business models, offerings, and value chains are digitized to the maximum extent possible.

Contingency planning takes into account market uncertainties and constant change. Enlightened firms develop and prepare for multiple strategic paths or scenarios.

3.9 Make Your Life Easier! Use the Market Planning Template

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p. 98

The template provided as a Supplement at the end of the book is cross-referenced with the questions the students must answer in each section of the plan. It provides a road map of the plan.

4. BRAND YOU: PLANNING YOUR CAREER To increase their chances of success when looking for an internship or a full-time job, students should start planning now.

A career plan involves a series of decisions, starting with a personal mission statement and ending with implementation and control.

4.1 Your Personal Strategic Plan A personal strategic plan is about answering the question: “What do I want to do with my skills and knowledge now?”

4.1.1 Define your Mission A personal mission statement defines a student’s overall purpose and what they hope to achieve in the future.

4.1.2 Your Internal Analysis Identify skills and talents. Inventory skills to identify a career direction.

4.1.3 Your External Analysis Changes in the economy, regulations, consumers, competitors, and popular culture can have a profound impact on a firm’s fortunes.

4.1.4 Your Career SWOT A student’s SWOT analysis will help guide their career direction and help them craft a personal brand message for a cover letter and résumé.

4.1.5 Your Career Objectives Objectives are specific goals that you want to achieve by a given time.

p. 102

4.2 From Strategic Planning to Success The most important part of career planning is to identify what you like to do . . . and what you don’t like to do. You will be more successful in a career using the skills you enjoy.

Here’s My Choice…

Marissa went with Option 3, and the NFL focused on the Gen Z population as a whole. They decided to drive the future fan base by ensuring they deepened engagement with the existing fans by building a more personalized relationship with each person. It was also

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imperative to court the next generation of fans: particularly women, Gen Z, and multicultural audiences such as the fast-growing Hispanic community. To accomplish this goal, they had to change the face of the NFL. The NFL called the messaging approach “Helmets Off,” because they decided to take the helmets off of players and have fans see what they are authentically about both on and off the field.

They activated the strategy during the kickoff of the 2022–2023 NFL season. This strategy is working. With Helmets Off content fueling fandom, in just a couple of years the NFL has built a different type of engagement, increasing year over year in a massive way. They are now the fastest growing U.S. sports league on social media across all platforms!

IV. END-OF-CHAPTER ANSWER GUIDE CHAPTER QUESTIONS AND ACTIVITIES CONCEPTS: TEST YOUR KNOWLEDGE 3-1.

What is a marketing plan? How does it differ from a business plan?

The marketing plan is a document that identifies where the organization is now, where it wants to go, how it plans to get there, and who will be responsible for carrying out each part of the marketing strategy. Therefore, the plan outlines the activities included in the planning process. Elements of the plan include a situation analysis (a business review that includes a SWOT analysis), specific strategies and action plans or tactics, selection of target markets, and the elements of the marketing mix: product, price, place, and promotion. Finally, the plan outlines how and by whom it is to be implemented and controlled—including budgets and schedules. Sometimes firms require that marketing plans include contingency plans that should monitor marketing activities to determine which marketing objectives are not being met and what to do about this. A business plan is a plan that includes the decisions that guide the entire organization.

3-2.

Describe the three levels of business planning: strategic, functional, and operational planning. Think about Disney and how they would plan at the three levels. Describe each level. Who do you think does the planning for each level? What do you imagine is covered in each of the three plans?

Strategic planning is the managerial-decision process that matches the organization’s resources and capabilities to its market opportunities for long-term growth. Functional planning typically includes both a broad three- to five-year plan to support the firm’s strategic plan and a detailed annual plan for the coming year. Operational planning is a decision process that focuses on developing detailed plans for day-to-day activities that carry out an organization’s tactical plans.

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Students should provide examples that relate to Disney (e.g., a strategic plan associated with Disneyland as an SBU; an HR functional plan for Disneyland/a marketing plan for Disneyland; a monthly schedule for ride operators at Disneyland would be operational planning). They should note that the organization’s strategic, functional, and operational plans must work together for the benefit of the whole, always within the context of the organization’s mission and objectives.

3-3.

What are strategic business units (SBUs)? How do SBUs impact the strategic planning process?

Strategic business units (SBUs) are individual units within a firm that operate like separate businesses, each having its own mission, business objectives, resources, managers, and competitors. SBUs are designed to allow a large organization to be more responsive to its individual market conditions by tailoring its strategies specifically to more defined groups of customers.

SBUs impact the strategic planning process by enabling a decentralized approach to planning and management. This structure allows for flexibility and a focus on specific market dynamics, which can enhance the effectiveness of strategic decisions. Each SBU develops its strategic plans that align with the overall corporate strategy but are tailored to the unique competitive environment and customer needs of that particular SBU. This allows the company to more effectively leverage its diverse product lines and markets, ideally increasing overall organizational effectiveness and efficiency.

3-4.

Describe the five steps in the strategic planning process.

The first step in strategic planning is defining the mission—a formal document that describes the organization’s overall purpose and what it hopes to achieve in terms of its customers, products, and resources. Step 2 is to evaluate the internal and external environment through a process known as situational analysis, which is later formatted as a SWOT analysis that identifies the organization’s strengths, weaknesses, opportunities, and threats. Step 3 is to set organizational or SBU objectives that are specific, measurable, attainable, and sustainable. Step 4 is to establish the business portfolio, which is the range of different businesses that a large firm operates. To determine how best to allocate resources to the various businesses, or units, managers use the Boston Consulting Group (BCG) growth–market share matrix to classify SBUs as stars, cash cows, question marks, or dogs. The final step, Step 5, in strategic planning is to develop growth strategies.

Marketers use the product–market growth matrix to analyze four fundamental marketing strategies: market penetration, market development, product development, and diversification.

3-5.

Describe three elements of an organization’s internal environment. Explain the SWOT analysis and its relationship to the firm’s internal and external environments.

The internal environment refers to the controllable elements inside an organization, including its people, its facilities, and how it does things that influence the operations of 3-13 Copyright © 2025 Pearson Education, Inc.

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the organization. Evaluating the internal and external environment is done through a process known as situational analysis, which is later formatted as a SWOT analysis that identifies the organization’s strengths, weaknesses, opportunities, and threats.

3-6.

What is a business portfolio analysis such as the BCG growth–market share matrix? What two factors are used to create the BCG scale? Identify each of the four blocks in the matrix and explain each block’s implications for strategic planning for a cash cow.

A business portfolio analysis is a management tool used to assess the potential of a firm's business portfolio. One of the most commonly used is the BCG (Boston Consulting Group) growth–market share matrix, This matrix helps management decide which of its strategic business units (SBUs) should receive more or less of the firm's resources and which are most consistent with the firm’s overall mission. The two factors used to create the BCG scale are market growth rate and relative market share.

The four blocks in the BCG matrix are: Stars: These are SBUs with high market share in a fast-growing industry. Stars are often leaders in the business but require substantial investment to maintain their position and to support further growth. Strategic planning for stars focuses on strengthening and expanding their market position, often by reinvesting earnings.

Question marks: These are SBUs with low market share in a high-growth market. They have potential but require significant investment to improve their market share. Strategic decisions often involve determining whether to increase investment to turn them into stars or to phase them out if improvement seems unlikely.

Cash cows: These are SBUs with a high market share in a slow-growing industry. They generate more cash than what is needed to maintain the business, making them a source of funds for other SBUs within the organization. Strategic planning for cash cows focuses on maintaining market dominance and maximizing cash flow. This often involves optimizing efficiency and extending profitability as long as possible without significant further investment.

Dogs: These are SBUs with low market share in a mature, slow-growing industry. Dogs may not generate sufficient cash to maintain themselves and can be a drain on corporate resources. Strategic planning might involve divesting or discontinuing these SBUs to allocate resources more effectively.

For a cash cow, the strategic planning implication is to sustain its profitability with as little investment as possible, using the cash flow it generates to fund other SBUs within the corporation, particularly those identified as stars or promising question marks. This strategy helps in maintaining a balanced portfolio and supporting overall corporate growth objectives.

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3-7.

Explain what is meant by a nimble organization. What is a strategic pivot?

A nimble organization is a firm with the culture, leadership, and operational capability to change very rapidly as external conditions demand. This type of organization is characterized by its agility and flexibility, allowing it to respond quickly to new challenges and opportunities without being bogged down by cumbersome processes or rigid structures. The concept emphasizes the importance of adaptability in fast-paced and everchanging business environments.

A strategic pivot refers to the operationalization of a rapid demand to change a firm’s business model, business direction, product line, or market focus. This includes the ability to rapidly increase output to satisfy unexpected new and/or different demand. This concept is critical when external conditions shift dramatically, requiring a business to alter its strategies significantly to remain competitive or to capitalize on new opportunities.

3-8.

Describe the four business growth strategies: market penetration, product development, market development, and diversification.

The four business growth strategies as exemplified by Figure 3.4 are: • •

• •

3-9.

Market penetration: These strategies seek to increase sales of existing products to current customers, nonusers, and users of competing brands.

Product development: These strategies create growth by selling new products in existing markets. Product development may mean that the firm improves a product’s performance, or it may mean extending the firm’s product line by developing new variations of the item.

Market development: These strategies introduce existing products to new markets. This can mean reaching new customer segments within an existing geographic market or expanding into new geographic areas.

Diversification: These strategies emphasize both new products and new markets to achieve growth.

Explain the four steps in the market planning process.

The four steps in the market planning process are: Perform a situation analysis: Marketing managers conduct an analysis of the marketing environment by building on the company’s SWOT analysis by searching out information about the environment that specifically affects the marketing plan.

Set marketing objectives: Marketing managers set objectives specific to the firm’s brands, sizes, product features, and other marketing-mix–related elements. The marketing objectives state what the marketing function must accomplish if the firm is to achieve its overall objectives.

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Develop marketing strategies: Marketing managers must make decisions about what activities they need to accomplish to achieve the marketing objectives. For example, this means deciding what markets to target and actually developing the marketing-mix strategies.

Implement and control the marketing plan: Marketing managers must spend time managing the various elements of the marketing plan. Marketing control requires appropriate marketing metrics, concrete measures of marketing performance. Return on marketing investment (ROMI) refers to a measure of how the investment in marketing has an impact on the firm’s success, financially and otherwise. Action plans provide guidance for the implementation and control of the various marketing strategies within a marketing plan.

3-10. What is return on marketing investment (ROMI)? How does considering marketing as an investment instead of an expense affect a firm? Identify the difference between activity metrics and outcome metrics.

ROMI is quantifying just how an investment in marketing has an impact on the firm’s success, financially and otherwise. This activity brings in revenue and therefore can be an investment in future business, which has a return on investment, unlike an expense that might not have a revenue stream.

Activity metrics and outcome metrics are two distinct types of marketing metrics used to gauge marketing performance. Activity metrics measure specific actions within marketing processes, such as the number of sales calls made, focusing on operational execution. In contrast, outcome metrics track the results of marketing activities, such as the number of orders resulting from those calls. Outcome metrics assess the effectiveness of these activities in achieving business goals. These metrics together offer a comprehensive view, enabling businesses to refine strategies based on both process efficiencies and the achievement of outcomes.

3-11. What is an action plan? Why are action plans such an important part of market planning?

Why is it so important for marketers to break the implementation of a marketing plan down into individual elements through action plans?

An action plan assigns responsibilities, timelines, budgets, and measurement and control processes for marketing planning. Action plans are also sometimes referred to as “marketing programs.” The best way to use action plans is by including a separate action plan for each important element involved in implementing the marketing plan. Table 3.1 provides a template for an action plan. This allows for tracking all activities in the action plan and accounting for investments of time and materials. Action plans are important because they explain what is to be accomplished—that is, what specific marketing objective and strategy within the marketing plan does the action plan support?

3-12. Give an example of operational planning that supports a marketing plan. Describe what that plan might include.

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Operational plans focus on the day-to-day execution of the marketing plan. Operational plans include detailed directions for the specific activities to be carried out, who will be responsible for them, and timelines to accomplish the tasks ACTIVITIES: APPLY WHAT YOU’VE LEARNED 3-13. Creative Homework/Short Project Visit Comcast’s corporate website at https://corporate.comcast.com. After exploring the site, compile a list of what you believe are Comcast’s strategic business units (SBUs). Identify where you would place each SBU on the BCG matrix. Provide a brief statement that explains your decision for each SBU’s placement.

Student answers may vary, with varying ways of interpreting what Comcast may consider to be SBUs. Do not worry if student answers do not align perfectly with Comcast’s own list of SBUs. What matters most is the student’s ability to justify the BCG classification.

One possible interpretation of Comcast’s SBUs and BCG placement is below; however, different interpretations should also be welcomed.

Xfinity: Broadband, television, telephone, and wireless services. Cash cow: Xfinity is dominant in broadband and stable in other telecommunications sectors, generating significant steady cash flow that reliably contributes to Comcast’s overall profitability.

NBC network and cable channels: Cable networks, broadcast television stations. Dog: As more consumers engage in cable-cutting, Comcast’s cable and broadcast channels are available in fewer and fewer homes.

Sky Group: European telecommunications and media company providing TV and broadband internet services, mobile services, and content. Question mark: Although it holds a significant share in European markets, Sky faces uncertainty with competitive and regulatory challenges that affect its growth.

Comcast Business: Broadband, communication, and video services for businesses of various sizes. Star: Experiencing rapid growth in the business services sector, Comcast Business offers advanced technology solutions with expanding market share, especially as it moves more business to fiber-optic Internet.

Comcast Spectacor: Sports and entertainment, owner of the Philadelphia Flyers and the Wells Fargo Center arena. Cash cow: Spectacor is well-established in the sports and entertainment sectors, maintaining consistent profitability with moderate growth potential.

Peacock: Streaming entertainment service. Question mark: As a new entrant into the competitive streaming service market, Peacock shows potential for growth but is still in the early stages of building its content library, subscribers, and market share.

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Universal Films: Production, acquisition, and distribution of major motion picture films.

Question mark: Although Universal Films traditionally has strong performance compared to other competitors, uncertainty surrounding the future of movie theaters, combined with the rise of in-home entertainment, mean Universal Films may need to adjust its model for the future.

Universal Parks and Resorts: Theme parks in the United States and internationally. Cash cow: Highly profitable with mature markets in the United States and ongoing expansion in international markets, Universal Parks and Resorts consistently generates revenue and high profitability.

3-14. Creative Homework/Short Project Assume that you are the marketing director for Mattel Toys. Your boss, the company vice president for marketing, has decided that it’s time to develop some new objectives for some of their product lines as the company begins market planning. Your VP has asked you to help out by writing several initial objectives. Select any product line at Mattel and develop several objectives that fulfill the criteria discussed in the chapter.

Students can work in small groups and share their findings with the class.

3-15. In Class, 10–25 Minutes for Teams Select a product that you all use: •

Shampoo

•

Toothpaste

•

Deodorant

•

Flavored water

•

Athletic or running shoes

Discuss the product among the members of your team. Make a list of the different product attributes each person uses in selecting their favorite brand or brands. Was it the fragrance, the shiny hair you have when you use it, or something else? Now, assume you are a marketing consultant. Based on this information, develop a recommendation to the firm for a new product that you believe would be successful. Develop a complete description of the product and why you are recommending it.

Students can work in teams and share their findings with the class.

3-16. In Class, 10–25 Minutes for Teams As an employee of a business consulting firm that specializes in helping people who want to start a small business, you have been assigned a client who is interested in introducing a new concept in pet care. The new business will offer a variety of services for customers: grooming, bathing, daycare, longer-term boarding, obedience training, and having healthy organic pet foods for sale. There will also be a veterinarian on staff to handle regular check-ups and immunizations as well as pet illnesses, accidents, and other emergencies. As you begin thinking about the potential success of this new business concept, you realize that it is essential that the client has a strong marketing plan from the start. Take a role-playing approach to present your 3-18 Copyright © 2025 Pearson Education, Inc.

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argument to the client as to why they need to spend the money on your services to create a formal marketing plan.

You might begin this exercise by inviting a guest speaker specializing in local research.

This expert may come from a campus department such as a bureau of research, biometry, or statistics, or from a commercial business. The guest speaker might discuss trends at the local and national level, sources of secondary research pertinent to the issue, techniques for finding the best resources, and so forth. In addition, the guest speaker should be prepared to help students find sources of information regarding the economic, competitive, technological, legal, and sociocultural environment.

3-17. For Further Research (Individual) Assume either your hometown or the town in which your college is located has asked you to participate on a task force that explores tourismbased economic growth. Using the Product–Market Growth Matrix in Figure 3.4, identify how your selected town can attract more visitors. Consider both existing businesses and attractions, as well as ideas for new businesses and attractions.

Student answers will vary. When reviewing answers, relate each one back to the two factors that make up the BCG matrix: market growth rate and market share.

3-18. Individual Written Assignment. McDonald’s, Wendy’s, and Burger King are all direct competitors vying in identical markets for similar customers. Because of this, they share similar external opportunities and threats in a SWOT analysis. However, they each have their own internal strengths and weaknesses that vary by company. Conduct a SWOT analysis that examines the strengths and weaknesses of each company, as well as the opportunities and threats that impact their shared industry.

Student perceptions and answers will vary. Here are some talking points to include in discussion: McDonald’s leverages its immense global presence and brand recognition, continuously innovating its menu to suit diverse tastes and health trends, though it struggles with service inconsistency and public perception issues related to health and environmental impacts.

Wendy’s distinguishes itself with a reputation for higher quality fresh ingredients and effective social media engagement, but it faces challenges in global reach and financial stability. Burger King stands out with its innovative offerings like the Impossible Whopper and a robust franchise model, yet it grapples with perceptions of lower quality and occasional marketing blunders. Collectively, these companies encounter opportunities in technological advancements, menu diversification toward healthier options, and potential markets in emerging regions. However, they must navigate threats from heightened consumer health consciousness, economic fluctuations (inflation), fierce industry competition, and stringent regulatory environments.

CONCEPTS: APPLY MARKETING METRICS

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Part 1: Understand the Value Proposition

You learned in the chapter that “control” involves measuring marketing performance, comparing performance to established marketing objectives, and then adjusting the objectives or strategies based on this analysis. One popular metric for measuring the overall success of the marketing strategies for a product or brand is market share, which measures the firm’s standing in the market relative to category competitors. Consider, for example, the market for PCs (towers and laptop computers). Recent statistics indicate that Lenovo holds the number-one market share, accounting for about 23.5 percent of global PC sales, followed by HP (19.8 percent), Dell (15 percent), Apple (10.6 percent), and Asus (7.1 percent).

However, despite its common appearance in marketing objectives, market share has been heavily criticized as a metric. Often it can become more of a “bragging right” for a firm than a profit enhancer. This is because—especially in situations like the global PC market that is seeing heavy annual declines in sales as smartphones, tablets, and other devices replace PCs—investing in being number one in market share may deflect focus away from more lucrative new and growing product lines. Furthermore, market share may be influenced by factors beyond the control of marketers. For example, although the global PC market declined 7.6 percent in Q3 2023 compared to Q3 2022, Apple declined 23.1 percent while HP increased 6.4 percent. Although it may be tempting to suggest that HP did a better job of marketing than Apple in 2023, the reality is that Q3 2022 was huge for Apple as the company filled orders that it wasn’t able to ship during the COVID-19 shutdowns, something he HP wasn’t able to do until Q3 2023.

3-19. Under what conditions do you believe market share is an important metric for a firm for a firm to pursue? For which of the growth strategies discussed in this chapter would market share be most relevant as a performance metric?

Students can debate the importance of market share as a metric in certain industries.

Product development strategies seek to create growth by selling new products in existing markets. If successful, this allows a firm to control a larger fraction of the current market.

3-20. What are the potential pitfalls of relying too much on market share as a key metric? What self-defeating behaviors might a firm undertake based on this overreliance?

Students may come up with many potential pitfalls of using market share. Increases in market share may not correlate with increases in sales volume or profitability. Market share is calculated relative to historical competitors; if the market is disrupted by new technologies or products, market share calculations would fail to account for new competitors. A firm might continue to undertake expenditures to increase market share even as the market shrinks (e.g., Blockbuster continued to expand locations even after streaming services like Netflix disrupted the movie rental industry). Using market share may tempt managers to reduce price to increase share at the expense of profitability. The market itself may be constantly changing, making it difficult to accurately estimate the size of the market. Managers may focus attention on products with a low market share without regard to the contribution of that product to the company’s overall sales and profitability picture.

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Chapter 3: Strategic Market Planning

3-21. Choose five brands or companies that you see or use on a weekly basis. Visit each brand’s website and try to locate its mission and/or vision statement. (In some cases, you may need to navigate to a brand’s parent company site.) Then, compare the mission and/or vision statements to elements and positioning you see in each company’s advertising and promotion (either via their websites or other forms of advertising). Do you see a link between the mission/vision and the promotional approach? Why might some companies want a link between the two? Why might some companies not want the two to be similar?

Student answers will vary. Use this as an opportunity to examine how diverse corporate mission and vision statements can be.

3-22. Strategic planning is an intensive process that takes a good bit of time and company resources. Is this process useful to small businesses? What are the pros of developing a strategic plan for small businesses? Are there any cons, and if so, what are they? What are five mistakes that small businesses can make because they do not have a business plan?

How can a business plan make them more successful?

Careful planning enables a firm to speak in a clear voice in the marketplace so that customers understand what the firm is and what it has to offer that competitors don’t. The knowledge gained from going through a formal planning process is worth its weight in gold. Without market planning as an ongoing activity in a business, there’s no real way to know where you want the firm to go, how it will get there, or even if it is on the right or wrong track right now. There’s nothing like a clear road map when someone is lost in the wilderness. Students can offer their opinions on the possible negative aspects of strategic planning.

3-23. Within the BCG matrix, products that earn the dog label have limited market potential for the firm and also only hold a small relative market share. Products identified as dogs within this framework are typically obvious candidates for divestment, but are there any cases where doing so would not be wise for an organization? That is, why would a firm want to hold onto a dog?

Encourage students to do Internet research and find products identified as dogs that have not been divested. They can present the rationale for why these products have been retained.

3-24. Most planning involves strategies for growth. But is growth always the right direction to pursue? Can you think of situations where a contraction strategy would be better than a growth strategy? Do you know of any organizations that have actually planned to get smaller rather than larger to increase their success? (Hint: Use the Internet for information.)

Begin by asking students if growth is always the right direction. Have students consider the costs associated with growth. These costs might include costs of manufacturing, distribution, and marketing. Can growth cause a greater distance between the company and its customers? How big should cities get? How big should your university or college get?

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Part 1: Understand the Value Proposition

When would benefits suffer from growth? Organizations that have contraction rather than expansion as their goal might include a small specialty retailer or a manufacturer of specialty equipment. In an effort to maintain a high level of quality, service contraction is often desired. Expansion might be the goal when demand for the good or service is not being served by the firm or its competitors.

3-25. To be effective in strategic planning, a firm must be transparent—sharing the big picture with employees is critical to achieving success at the lowest levels of planning. What issues do you think might arise if a company decides not to fully share its strategic plan details with employees? How might this impact functional planning? How about operational planning? Why do you think it is important that all three areas of planning are aligned?

In small groups students can discuss this question. They can share their ideas about having strategic plans shared at all levels of the organization.

3-26.

Globalization and the continuous rise of e-commerce have opened new geographic markets to many businesses that previously may have only served smaller geographic footprints.

Explain how this trend impacts strategic and marketing planning. What are some of the key planning factors businesses need to consider when expanding internationally?

Student answers will vary. Encourage students to consider how these trends necessitate a more comprehensive and adaptive approach to both strategic and marketing planning.

Students should be guided to discuss the importance of understanding diverse consumer markets, adapting marketing strategies to different cultural, legal, and economic environments, and leveraging technology for global reach. Also consider asking students to discuss real-world examples of businesses that have successfully expanded internationally or faced challenges in doing so.

MINIPROJECT: LEARN BY DOING The purpose of this miniproject is to gain an understanding of the marketing planning through actual experience.

3-27. a. Select one of the following for your market planning project: • Yourself (in your search for a career) • Your university • A specific department in your university • A new health club • A new spa • A new brand of toothpaste b. Next, develop the following elements of the marketing planning process: • A mission statement • A SWOT analysis • Objectives 3-22 Copyright © 2025 Pearson Education, Inc.

Chapter 3: Strategic Market Planning

• • •

A description of the target market(s) A positioning strategy A brief outline of the marketing mix strategies—the product, pricing, distribution, and promotion strategies

c. Prepare a brief outline of a marketing plan using the template provided at the end of this chapter as a guide.

This project will help students start to think about marketing in a practical sense. They will gain experience formulating a plan, learning how each part is dependent upon another.

If students choose to focus on themselves, they will gain some introspection and perhaps direction for the future. In fact, students may want to build on this exercise throughout the term, preparing for earning a job after graduation.

V. MARKETING IN ACTION CASE: REAL CHOICES AT US MOBILE Summary of Case US Mobile distinguishes itself in the mobile virtual network operator (MVNO) industry not only through unique products but also through exceptional customer service, positioning itself alongside customer-centric companies like Nordstrom and Zappos. The company was founded in 2014 after CEO Ahmed Khattak’s firsthand frustrations with the inaccessibility of mobile services as an international student. US Mobile’s strategy includes offering around-the-clock support and leveraging a strong internal culture that translates into high customer satisfaction and loyalty. This focus on service quality has enabled US Mobile to rely less on traditional advertising, instead benefiting from word-of-mouth promotion by satisfied customers. The company utilizes real-time data to offer competitively priced and profitable service plans, and has quickly gained a dedicated following, growing rapidly in its initial years. With possible plans for a potential IPO and increasing competition in the MVNO sector, US Mobile seeks to identify ways to continue its growth while also taking on new challenges in an ever-evolving industry.

Suggestions for Presentation This case could be assigned for various online or in-class discussion activities.

Online Suggestions Review the marketing messages found at tidecleaners.com and compare with the website of a fullservice laundry in the student’s hometown. What benefits, if any, does Tide Cleaners offer over a “mom and pop” cleaners?

Review the US Mobile website at https://www.usmobile.com. Compare it with the websites of other MVNO operators, such as Xfinity Mobile, Google Fi, Red Pocket, or others. Then, compare against the websites of mobile operators, such as Verizon, T-Mobile, and AT&T. Identify if you

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Part 1: Understand the Value Proposition

think US Mobile is going after similar or different target audiences as its competitors. Explain why or why not.

In-Class Suggestions In groups or as individuals, discuss the key benefits that consumers in different generations look for when shopping for cell service. What are the main benefits cell providers offer that would be attractive to those in various generations? Where does US Mobile fall in this spectrum?

Questions for Discussion 3-28. Write a possible mission statement for US Mobile.

Student answers will vary. Consider using this as an opportunity to discuss what makes a good mission statement. Common examples include those that are clear and concise, inspiring and motivating, specific and focused, aligned with values and culture, and differentiated from competitors.

3-29. US Mobile wants to position itself next to well-known customer-centric brands such as Nordstrom and Zappos. Identify two other brands known for providing outstanding customer service that might fit this US Mobile objective. What aspects of each of those brands do you believe makes them great candidates for US Mobile to identify with them?

Student answers will vary. Consider encouraging critical thinking by prompting students to discuss specific aspects of customer service, such as responsiveness, personalization, and problem-solving.

3-30. What potential new service or product opportunities do you believe US Mobile might successfully pursue in the future to expand its portfolio of offerings? Why do you suggest what you do?

Student answers will vary. Consider encouraging students to review emerging trends in the mobile industry, customer needs and preferences, and opportunities for differentiation and innovation. Ask students to provide rationale for their suggestions, emphasizing factors such as market demand, competitive landscape, and alignment with US Mobile’s core objectives and values.

WEB RESOURCES US Mobile: https://www.usmobile.com McDonald’s: www.mcdonalds.com 3-24 Copyright © 2025 Pearson Education, Inc.

Chapter 3: Strategic Market Planning

Discover all of Walt Disney Company’s SBUs: www.disney.com

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Chapter 4: Market Research

Chapter 4 Market Research I. CHAPTER OVERVIEW Chapter 4 exposes students to the value of sound marketing research. Through careful planning, collection, analysis, and implementation, research is an invaluable tool for successful businesses.

Students are introduced to a typical marketing research process; learn the differences between exploratory, descriptive, and causal research; explore various types of data collection methods and samples; and understand the growing use of online research. It talks about ethical considerations in market research, including data privacy, data security, risk management, robocalls/spoofed calls, and catfishing online. Market research helps managers make good decisions based on solid information.

II. CHAPTER OBJECTIVES 4-1.

4-2.

4-3.

4-4.

Explain the role of a marketing information system and a marketing decision support system in marketing decision making.

Understand the concept of evidence-based decision making toward gaining customer insights.

List and explain the steps and key elements of the market research process.

Understand how to research both online and offline resources to search for a job or internship.

III. CHAPTER OUTLINE p. 116

REAL PEOPLE, REAL CHOICES—HERE’S MY PROBLEM AT THE CAMPBELL SOUP COMPANY Stephanie Scalice is a senior market research manager at LinkedIn, where she focuses on both quantitative and qualitative research to support Talent Solutions, which is LinkedIn’s suite of hiring products for job seekers and recruiters. LinkedIn has five business lines that drive revenue across the company: Marketing, Sales, Hiring Solutions, Learning, and LinkedIn Premium. To measure customer experience and brand health across these business lines, LinkedIn has relied heavily on the net promoter score (NPS). NPS is a widely used market research metric that assesses customer satisfaction and loyalty. LinkedIn created multiple tracking programs within each business unit centered on NPS. However, as LinkedIn continued to grow NPS was deemed insufficient to measure customer value. Stephanie and her team

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Part 2: Determine the Value Propositions Different Customers Want

developed a new metric; Perceived Value = Benefits – Effort.

Now she had to figure out how to incorporate this metric into the business.

Stephanie had three options: Option 1: Create a complimentary program to the current NPS programs that focuses on perceived customer value.

Option 2: Create an entirely new program and phase out existing NPS programs.

Option 3: Add a customer value metric into our current NPS programs. The vignette ends by asking the student which option they would choose.

p. 118

Stephanie chose option #2.

1.

KNOWLEDGE IS POWER Market research refers to the process of collecting, analyzing, and interpreting data about customers, competitors, and the business environment to improve marketing effectiveness.

To make good decisions, marketers must have information that is accurate, up to date, and relevant. GIGO, garbage in, garbage in, is important because marketers must have information that is not “garbage.”

1.1 Disruption and Market Research Several aspects of market research are fraught with the potential for ethics breaches. Marketing research ethics refers to taking an ethical and above-board approach to conducting marketing research that does no harm to the participant in the process of conducting the research.

Data privacy (or information privacy) refers to the ability of an organization or individual to determine what data collected can be shared with third parties.

When the organization collects data, important issues of privacy and confidentiality come into play. Marketers must be very clear when they work with research respondents about how they will use the data and give them full disclosure on their options for confidentiality and anonymity. For example, it is unethical to collect data under the guise of marketing research when your real

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Chapter 4: Market Research

intent is to develop a database of potential customers for direct marketing.

The field of risk management in marketing has grown exponentially in recent years, mostly related to issues of data security.

A database is an organized collection (often electronic) of data that can be searched and queried to provide information about contacts, products, customers, inventory, and more.

Without the knowledge that only well-interpreted data can provide, marketers are at a huge competitive disadvantage in their ability to compete through marketing strategy and planning elements. p. 120

1.2 The Marketing Information System Many firms use a marketing information system (MIS) to collect information. The MIS is a process that first determines what information marketing managers need. Then it gathers, sorts, analyzes, stores, and distributes relevant and timely marketing information to users. The MIS system includes three components: • Four types of data (internal company data, marketing intelligence, marketing research, and acquired databases) • Computer hardware and software to analyze that data and to create reports • Output for marketing decision makers

p. 120

1.2.1 Internal Company Data The internal company data system uses information from within the organization to produce reports on the results of sales and marketing activities.

Figure 4.1 Process: The Marketing Information System

Often, an MIS allows marketers and also salespeople and sales managers in the field to access relevant information through a company intranet.

Savvy marketing organizations make sure that access and usability of valuable internal information is maximized by creating an appealing interface for employees called a marketing dashboard. p. 121

1.2.2 Market Intelligence The second important element of the MIS is the market intelligence system, which includes information from monitoring 4-3 Copyright © 2025 Pearson Education, Inc.

Exhibit: Marketing dashboard

Part 2: Determine the Value Propositions Different Customers Want

sources like company websites, industry trade publications, and direct field observations of the competitive marketplace.

Mystery shoppers are hired to experience the way customers are handled by providers. p. 121

Reverse engineering is the process of physically deconstructing a competitor’s product to determine how it’s put together.

p. 122

1.2.3 Market Research Market intelligence data is continuously gathered. Market research is called for when managers need unique information to help them make specific decisions.

p. 122

Syndicated research is general information that specialized firms collect on a regular basis and subsequently sell to other firms. Custom research provides answers to specific questions.

1.2.4 Acquired Databases External databases can be useful. Government databases are available at little or no cost. State and local governments may make information available for a fee.

p. 123

p. 123

1.3 Marketing Decision Support System Sometimes reports generated by the firm’s marketing information system are inadequate. As a result, many firms beef up their MIS with a marketing decision support system (MDSS). An MDSS includes analysis and interactive software that allows marketing managers, even those who are not computer experts, to access MIS data and conduct their own analyses, often over the company intranet.

Typically, an MDSS includes sophisticated statistical and modeling software tools. Statistical software allows managers to examine complex relationships among factors in the marketplace.

Modeling software allows decision makers to examine possible or preconceived ideas about relationships in the data—to ask “what-if” questions.

2.

EVIDENCE-BASED DECISION MAKING IN MARKETING Data are raw, unorganized facts that need to be processed. Data are then processed, organized, structured, and presented in order to become useful for decision making. This transformation creates information, which is interpreted data.

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Exhibit: Las Vegas Table 4.1 Comparison of Questions an MIS VERSUS an MDSS Might Answer

Chapter 4: Market Research

Evidence-based decision making refers to a marketer’s capability to utilize all of the relevant information available in order to make the best possible marketing decisions. Data analytics is the process of examining raw data to discover trends, answer questions, and gain insights in order to make evidencebased decisions.

Exhibit: Evidence-based decision making

Customer insights refer to the collection, deployment, and interpretation of information that allows a business to acquire, develop, and retain its customers. Companies maintain experts whose jobs are to sift through information to support market planning decisions.

p. 124

p. 125

p. 126

p. 126

The insights manager integrates feedback from syndicated studies, marketing research, customer service, loyalty programs, and to paint a picture the organization can use.

3.

STEPS IN THE MARKET RESEARCH PROCESS Ideally, marketing research is an ongoing process, a series of steps marketers take repeatedly to learn about the marketplace.

3.1 Step 1: Define the Research Problem The first step in the marketing research process is to clearly understand what information managers need. We refer to this step as defining the research problem. Defining the problem has three components: • Specify the research objectives: What questions will the research attempt to answer?

• Identify the consumer population of interest: What are the characteristics of the consumer group(s) of interest?

• Place the problem in an environmental context: What factors in the firm’s internal and external business environment might influence the situation?

Providing the right kind of information for each of these pieces of the problem is not as simple as it seems.

3.2 Step 2: Determine the Research Strategy Once marketers isolate specific problems, the second step of the research process is to decide on a “plan of attack.” This plan is the research strategy, which specifies exactly what information marketers will collect and what type of study they will do.

Research designs fall into two broad categories: secondary research and primary research.

3.2.1 Research with Secondary Data

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Figure 4.2 Process: Steps in the Market Research Process

Figure 4.3 Process: Market Research Strategies

Part 2: Determine the Value Propositions Different Customers Want

The first question marketers must ask when they determine their research design is whether the information required to make a decision already exists. We call data that have been collected for some purpose other than the problem at hand secondary data. If secondary data are available, it saves the firm time and money because the expense to design and implement a study has already been incurred.

Websites: • Opinion Research Associates (offers numerous industry and trend reports that are useful as secondary data sources): http://opinionresearchassoc.com • The U.S. Census Bureau: www.census.gov • The American Marketing Association: www.ama.org • Dialog (sorts companies by location, size, and industry): www.dialog.com • LexisNexis (a large database featuring information from sources such as Dun & Bradstreet, the New York Times, CNN, and National Public Radio transcripts): www.lexisnexis.com p. 127 3.2.2 Research with Primary Data Of course, secondary research is not always the answer. When a company needs to make a specific decision, it often needs to collect primary data; information it gathers directly from respondents to specifically address the question at hand. p. 127 3.2.3 Exploratory Research Marketers use exploratory research to come up with ideas for new strategies and opportunities or perhaps just to get a better handle on a problem they are currently experiencing with a product. Because the studies are usually small scale and less costly than other techniques, marketers may use exploratory research to test their hunches about what is going on without too much risk. Exploratory studies often involve in-depth probing of a few consumers who fit the profile of the “typical” customer.

p. 127

We refer to most exploratory research as qualitative: that is, the results of the research project tend to be nonnumeric and instead might be detailed verbal or visual information about consumers’ attitudes, feelings, and buying behaviors in the form of words rather than in numbers. In contrast, quantitative research produces numeric results that can be analyzed using a variety of statistical programs. An in-depth interview is a type of qualitative research with a single respondent.

The focus group is the technique that marketing researchers use most often for collecting exploratory data. Focus groups typically consist of five to nine consumers who have been recruited because they share certain characteristics (they all play golf at least twice a month, are women in their twenties, and so on).

These people sit together to discuss a product, ad, or some other 4-6 Copyright © 2025 Pearson Education, Inc.

Exhibit: Finish brand

Chapter 4: Market Research

p. 127

marketing topic a discussion leader introduces. Typically, the leader records (by videotape or audiotape) these group discussions, which may be held at special interviewing facilities that allow for observation by the client who watches from behind a one-way mirror.

p. 127

A market research online community (MROC) is a privately assembled group of people, usually by a market research firm or department, utilized to gain insight into customer sentiments and tendencies.

p. 127

The case study is a comprehensive examination of a particular firm or organization.

p. 127

An ethnography is a different kind of in-depth report. It uses a technique marketers borrow from anthropologists who go to “live with the natives” for months or even years. Some marketing researchers visit people’s homes or participate in real-life consumer activities to get a handle on how they really use products.

3.2.4 Descriptive Research The next step in marketing research, then, often is to conduct descriptive research. This kind of research probes systematically into the marketing problem and bases its conclusions on a large sample of participants. Results typically are expressed in quantitative terms—averages, percentages, or other statistics that result from a large set of measurements.

Marketing researchers who employ descriptive techniques most often use a cross-sectional design. This approach usually involves the systematic collection of responses to a consumer survey instrument, such as a questionnaire, from one or more samples of respondents at one point in time. The data may be collected on more than one occasion but generally not from the same pool of respondents. In contrast to these one-time studies, a longitudinal design tracks the responses of the same sample of respondents over time. Market researchers sometimes create consumer panels to get information; in this case, a sample of respondents that are representative of a larger market agrees to provide information about purchases on a weekly or monthly basis.

3.2.5 Correlational Research

p. 129

We’ve already established that descriptive research is mostly conducted with the intention of gaining a better understanding of the study population. However, if we want to take our understanding one

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Table 4.2: Types of Exploratory Research Approaches

Part 2: Determine the Value Propositions Different Customers Want

step further to uncover and explain relationships that exist between two or more factors (variables), we need to consider correlational research. Whereas descriptive research focuses on collecting and analyzing descriptive data, correlational research may use some of the same types of cross-sectional or longitudinal data to identify associations that exist between variables.

p. 129

3.2.6 Causal Research Causal research attempts to identify cause-and-effect relationships. Marketers use causal research techniques when they want to know if a change in something (for example, placing cases of beer next to a diaper display) is responsible for a change in something else (for example, a big increase in diaper sales).

p. 129

To rule out alternative explanations, researchers must carefully design experiments that test predicted relationships among variables in a controlled environment. Because this approach tries to eliminate competing explanations for the outcome, researchers may bring respondents to a laboratory so they can control precisely what the participants experience.

Discussion question: Describe in your own words and examples why a controlled environment is crucial for a marketing research experiment. p. 130 3.3 Step 3: Select the Research Design When the researcher decides to collect primary data, the next step in the market research process is deciding what materials should be used in the process; this includes the methods and tools used to collect, analyze, and present data. We broadly describe primary data-collection methods as either survey or observation.

Exhibit: Neuromarketing, or brain research, uses magnetic resonance Neuromarketing imaging (fMRI) to measure brain activity to better understand p. 145 why consumers make the decisions they do. p. 130 3.3.1 Survey Methods Table 4.3 Survey research is simply the collection of information from re- Advantages and spondents via their answers to questions. This approach freDisadvantages of quently involves the use of a questionnaire. Questionnaires differ Survey Data in their degree of structure. With a very unstructured questionCollection naire, the researcher loosely determines the items in advance.

Methods Questions may evolve from the respondent’s answers to previous p. 131 questions. At the other extreme, the researcher uses a completely structured questionnaire. She asks every respondent the exact same questions and each participant responds to the same set of fixed choices. Moderately structured questionnaires ask each respondent the same questions, but the respondent is allowed to answer the questions in her own words.

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Chapter 4: Market Research

Mail questionnaires are easy to administer and offer a high degree of anonymity to respondents. On the downside, because the questionnaire is printed and mailed, researchers have little flexibility in the types of questions they can ask and little control over the circumstances under which the respondent answers them. Mail questionnaires also take a long time to get back to the company and are likely to have a much lower response rate than other types of data-collection methods because people tend to ignore them.

Telephone interviews usually consist of a brief phone conversation in which an interviewer reads a short list of questions to the respondent. One problem with this method is that the growth of telemarketing, in which businesses sell directly to consumers over the phone, has eroded consumers’ willingness to participate in phone surveys. Increasing numbers of people use voice mail and caller ID to screen calls, which further reduces the response rate.

Exhibit: Unscrupulous telemarketing Using face-to-face interviews, a live interviewer asks questions of techniques one respondent at a time. Typically, today’s face-to-face interviews occur in an intercept research study in which researchers recruit shoppers in malls or other public areas.

p. 130

p. 131

Online questionnaires are growing in popularity, but the use of such questionnaires is not without concerns. Many researchers question the quality of responses they will receive—particularly because (as with mail and phone interviews) no one can be sure who is typing in the responses on the computer. In addition, it is uncertain whether savvy online consumers are truly representative of the general population.

3.3.2 Observational Methods The second major primary data-collection method is observation.

When researchers use personal observation, they simply watch consumers in action to understand how they react to marketing activities. When they suspect that subjects will probably alter their behavior if they know someone is watching them, researchers may use unobtrusive measures to record traces of physical evidence that remain after people have consumed something. Mechanical observation is a primary-data–collection method that relies on nonhuman devices to record behavior.

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Table 4.4: Common Mechanical Observation Techniques Used

by Marketers

Part 2: Determine the Value Propositions Different Customers Want

►Marketing Moment In-Class Activity Suppose you were hired to study teenagers and develop a new product that would appeal to the teen market. Where might you go to observe teenagers? (e.g., school, fast-food restaurant, mall).

What challenges might you or another researcher have in conducting this observation? (You may not look like a teenager and the sample would behave differently.)

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Chapter 4: Market Research

p. 132

p. 133

3.3.3 Online Methods The COVID-19 pandemic obviously had a profound impact on marketers’ ability to collect data face-to-face. But fortunately, most firms realized a good while ago that an online approach is a superior way to collect data—it is fast, it is relatively cheap, and it lends itself well to forms of research from simple questionnaires to online focus groups. There are two major types of online research. One type is information we gather by tracking consumers while they are surfing. The second type is information we gather through questionnaires on websites, through email, or from focus groups virtual moderators conduct in chat rooms.

Netnography is a form of qualitative research that tracks the consumption patterns and conversations of online consumers.

p. 134

Catfish is someone who pretends to be someone else online.

p. 133

p. 134

Cookies are text files a website sponsor inserts into a user’s hard drive when the user connects with the site. Cookies remember Exhibit: Nike details of a visit to a website, typically tracking which pages the brand user visits. This technology allows websites to customize services, such as when Amazon.com recommends new books to users based on what books they have ordered in the past. These surprising connections will happen more often as e-marketers adopt newer generations of predictive technology that use shopping patterns of large numbers of people to determine which products are likely to be purchased if others are. Much discussion is afoot at all levels of government regarding online privacy rights. Proponents advocate: Exhibit: Netflix • Information about a consumer belongs to the consumer.

• Consumers should be made aware of information collection.

• Consumers should know how information about them will be used.

• Consumers should be able to refuse to allow information collection.

• Information about a consumer should never be sold or given to another party without the permission of the consumer.

One potential problem of online research is the representativeness of the respondents. Although the number of Internet users continues to grow, many segments of the consumer population, mainly the poor and elderly, do not have equal access to the Internet. In addition, in many studies (just as with mail surveys or mall intercepts), there is a self-selection bias in the sample. That is, because respondents have agreed to receive invitations to take 4-11 Copyright © 2025 Pearson Education, Inc.

Part 2: Determine the Value Propositions Different Customers Want

part in online studies, by definition they tend to be the kind of people who like to participate in surveys. As with other kinds of research such as live focus groups, it is not unusual to encounter “professional respondents.” These are people who enjoy taking part in studies and being paid for it.

Hackers can actually try to influence research results.

Competitors can learn about a firm’s marketing plans, products, advertising, and so forth when they intercept information from these studies (though this can occur in offline studies just as easily). Because cheating has become so rampant, some companies today use fraud-busting software that creates a digital fingerprint of each computer involved in a survey to identify respondents who fake responses or professionals who game the industry by doing as many surveys as possible. p. 134 A new technology called cross-browser digital fingerprinting identifies a specific computer even when that machine is using a different browser to access the same website.

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p. 135

p. 135

3.4 Step 4: Collect the Data At this point, the researcher has determined the nature of the problem to address. They chose a research strategy that will specify how to investigate the problem and what kinds of information (data) they will need. Now the researcher has to select the data collection and sampling methods before ultimately collecting the data. Sampling is the process of selecting respondents for a study. Researchers collect most of their data from a small proportion or sample of the population of interest. Based on the answers from this sample, researchers hope to generalize to the larger population. Whether such inferences are accurate or inaccurate depends on the type and quality of the study sample. There are two main types of samples: probability and nonprobability samples.

3.4.1 Probability Sampling In a probability sample, each member of the population has some known chance of being included. Using a probability sample ensures that the sample represents the population and that inferences we make about the population from what members of the sample say or do are justified.

The most basic type of probability sample is a simple random sample in which every member of a population has a known and equal chance of being included in the study.

Sometimes researchers use a systematic sampling procedure to select members of a population; they select the nth member of a population after a random start.

p. 135

Yet, another type of probability sample is a stratified sample, in which a researcher divides the population into segments that relate to the study’s topic.

3.4.2 Nonprobability Sampling A nonprobability sample entails the use of personal judgment in selecting respondents—in some cases they just ask whomever they can find. With a nonprobability sample, some members of the population have no chance at all of being included. Thus, there is no way to ensure that the sample is representative of the population.

A convenience sample is a nonprobability sample composed of individuals who just happen to be available when and where the data are being collected. Researchers may also use a quota sample that includes the same proportion of individuals with certain characteristics as in the population.

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p. 136

3.4.3 Considerations When Gathering Data in Global Markets Conducting market research around the world is big business for U.S. firms. However, market conditions and consumer preferences vary worldwide, and there are major differences in the sophistication of market research operations and the amount of data available to global marketers.

Choosing an appropriate data-collection method is difficult. In many developing countries, infrastructure is an impediment to executing phone or mail surveys, and lack of online connectivity blocks web-based research. Local customs can be a problem as well. Cultural differences also affect responses to survey items.

Another problem with conducting marketing research in global markets is language. Sometimes translations just do not come out right. In some cases, entire subcultures within a country might be excluded from the research sample.

To overcome language difficulties, researchers use a process of back-translation, which requires two steps. First, a native speaker translates the questionnaire into the language of the targeted respondents. Then they translate this new version back into the original language to ensure that the correct meanings survive the process.

p. 136

3.4.4 Data Quality: Revisiting GIGO---Garbage In, Garbage Out All too often, marketers who commission a study assume that because the researchers give them a massive report full of impressive-looking numbers and tables, they must be looking at the “truth.” Unfortunately, there are times when this “truth” is really just one person’s interpretation of the facts. At other times, the data researchers use to generate recommendations are flawed.

Typically, three factors influence the quality of research results— validity, reliability, and representativeness.

Validity is the extent to which the research actually measures what it was intended to measure. Internal validity is the extent to which the results of a research study accurately measure what the study intended to measure by ensuring proper research design, including efforts to ensure that any potentially confounding factors were not included or introduced at any point during the execution of the research study. External validity is the extent to which the results of a research study can be generalized to the population its sample was intended to

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Exhibit: International Market Research

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represent.

Reliability is the extent to which the research measurement techniques are free of errors. Sometimes, for example, the way a researcher asks a question creates error by biasing people’s responses.

Figure 4.4 Snapshot: Completion Test

Representativeness is the extent to which consumers in the study are similar to a larger group in which the organization has an interest. This criterion for evaluating research underscores the Exhibit: Cartoon importance of sampling, the process of selecting respondents for visual a study.

The quality of research results is only as good as the poorest interviewer in the study. When interviews are involved, the researcher must train and supervise the interviewers.

Discussion question: Describe in your own words and examples why you think that validity, reliability, and representativeness are crucial for a marketing research study. p. 138 3.5 Step 5: Analyze and Interpret the Data Data need interpretation if the results are going to be useful.

Table 4.5 Examples of Typically, marketers first tabulate the data as Table 4.3 shows— Data Tabulation that is, they arrange the data in a table or other summary form so and Crossthey can get a broad picture of the overall responses. In addition, Tabulation there may be a desire to cross-classify or cross-tabulate the Tables answers to questions by other variables. Cross-tabulation means that we examine the data we break down into subgroups to see how results vary between categories. p. 139 3.6 Step 6: Prepare the Research Report In general, a research report must clearly and concisely tell the readers—top management, clients, creative departments, and many others—what they need to know in a way that they can easily understand. A research report will include these sections: an executive summary that covers the high points, an understandable description of the research methodology, a complete discussion of the results of the study, limitations of the study, and conclusions/recommendations drawn. p. 139

3.7 Step 7: Implement Data-Driven Strategies The final step in the market research process is to take all the insights gleaned from the process and apply them to create and implement evidence-based marketing strategies. You must now develop actionable plans that incorporate your findings; this could involve developing brand-new strategies or improving existing ones.

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p. 139 4. BRAND YOU: CAREER AND INTERNSHIP INFORMATION AND RESEARCH Success in marketing yourself for a great internship or your dream job requires that you have information. And the more information you have, the better decisions about your marketing strategy you can make.

4.1 Good Research Strategies 4.1.1 Focus on the Big Picture Focus on industries and professions instead of specific job titles.

4.1.2 Investigate Your Assumptions Research should provide you with facts that can either support or challenge assumptions about what a job is.

p. 140

4.1.3 Ask the Right Questions Helpful questions might include characteristics of people who do well in the field, projects people in the job like to do, factors that influence advancement, and how technology is changing the field.

4.2 How to Begin and End Your Search A good research strategy is to search from the general to the specific. Begin searching industries, then companies, and finally specific jobs. You should also gather information from different sources to get different opinions from different perspectives.

4.3 Gathering Information Online and Offline Use the Internet to get information. Also use offline sources like the career center, library, alumni association, networking events, and professional organizations.

p. 141

Here’s My Choice……

Stephanie went with Option 2 and decided to create an entirely new program and phase out NPS. The NPS metric just did not capture what LinkedIn wanted to measure. LinkedIn phased out all of the current NPS programs per business unit and embarked on a journey to create a new metric and an updated program that would capture and track perceived customer value over time. To capture perceived customer value, Stephanie created two metrics.

The first is a direct value question, which essentially asks how valuable LinkedIn’s solutions are to the customer. The second is around the ease of doing business with LinkedIn. Together, these 4-16 Copyright © 2025 Pearson Education, Inc.

Exhibit: Online sources of information

Exhibit: LinkedIn’s new metric to replace NPS

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provide both sides of the value equation because they are driven by different factors. By combining these two metrics, Stephanie’s team identified those who find high benefit and low effort as “healthy customers.”

IV. END-OF-CHAPTER ANSWER GUIDE CHAPTER QUESTIONS AND ACTIVITIES CONCEPTS: TEST YOUR KNOWLEDGE 4-1.

Identify and describe the four data sources for a marketing information system (MIS).

The four data sources for a marketing information system (MIS) are: 1. Internal company data: Information from within the organization used to produce reports on the results of sales and marketing activities. It includes sales records, inventory levels, shipping details, and customer purchase histories.

2. Market intelligence: Data about what’s happening in the company’s external environment and is relevant to business operations. It includes information from everyday sources like company websites, industry publications, and direct observations of the marketplace.

3. Market research: The process of collecting, analyzing, and interpreting data about customers, competitors, and the business environment. Market research can be primary (collected directly by the company) or secondary (gathered from external sources).

4. Acquired databases: Databases that companies purchase or access from external sources. They can include demographic, economic, and consumer behavior data collected by other businesses or government agencies.

4-2.

What is a marketing dashboard? What is marketing intelligence? Explain how each of these help in marketing decision making.

A marketing dashboard is a comprehensive display and access system providing company personnel with up-to-the minute information necessary and databases. It helps in marketing decision making by helping decision makers access information from the intranet and the MIS system. Marketing intelligence is a method by which marketers get information about what’s going on in a world that is relevant to their business. It helps in marketing decision making by compiling information.

4-3.

Why is defining the problem to be researched critical to ultimate success with the research project?

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The first phase (defining the research problem) is critical to the research project. Defining the research issue as precisely as possible allows researchers to set objectives that will result in the right answers to the right questions. It also ensures that the questions are asked of the right consumers and that they focus on the right factors in the problem/solution.

4-4.

Explain the difference between primary data and secondary data.

Primary data refers to data from research conducted to help make a specific decision.

Secondary data refers to data that have been collected for some purpose other than the problem at hand.

4-5.

Describe the difference between qualitative and quantitative methods of exploratory research.

The textbook distinguishes between qualitative and quantitative methods of exploratory research as follows: Qualitative research is primarily about generating insights through nonnumeric data. It involves detailed verbal or visual information about consumers’ attitudes, feelings, and buying behaviors. Qualitative methods, such as in-depth interviews and focus groups, provide rich, deep insights into consumer motivations and behaviors, allowing researchers to understand the underlying reasons behind consumer choices.

Quantitative research produces numeric results that can be analyzed statistically. This method is useful for quantifying data and determining patterns that can be generalized across larger populations. Quantitative research typically involves structured methods such as surveys with predefined answers that allow for statistical analysis to test hypotheses or predictions.

4-6.

What is syndicated research? What is custom research? What are the benefits of each?

Syndicated research is general information that specialized firms collect on a regular basis and subsequently sell to other firms. Nielsen’s Scarborough, for instance, surveys local consumers across the United States in over 100 media markets to understand media trends, shopping habits, consumer attitudes, healthcare behaviors, and more. INC/The Q Scores Company reports on consumers’ perceptions of more than 1,800 celebrity performers for companies that want to feature a well-known person in their advertising.

These insights assist clients in media planning, brand strategy, and market development.

Custom research offers targeted insights tailored to the specific questions and needs of the firm. This makes it particularly valuable for addressing complex or unique problems that cannot be answered through generalized research. Custom research can dive deep into particular areas of interest, providing detailed and specific findings that are directly applicable to the firm’s strategic questions.

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4-7.

What are some of the advantages and disadvantages of using online questionnaires as a survey data collection method?

Online questionnaires offer significant advantages, such as instantaneous data collection and analysis, flexibility in question formats, cost-effectiveness, and the ability to reach a geographically dispersed audience. They also allow the integration of multimedia elements and reduce interviewer bias. However, they come with challenges like the difficulty of verifying respondent identities and ensuring their honesty. The limitations of online interaction can lead to shorter questionnaires, potential misunderstandings of questions, and self-selected samples that may not be representative of the target population.

4-8.

What is correlational research, and how is it different than descriptive research?

Correlational research focuses on uncovering and explaining relationships between two or more variables, helping researchers understand associations that exist within the data.

Unlike descriptive research, which aims to systematically probe into a marketing problem and is often expressed in quantitative terms like averages or percentages, correlational research goes further by identifying and interpreting associations between variables without necessarily determining causality.

4-9.

GIGO—garbage in, garbage out—is mentioned in the chapter. What is the significance of this concept to market research?

All too often, marketers who commission a study assume that because the researchers give them a massive report full of impressive-looking numbers and tables, they must be looking at the “truth.” Unfortunately, there are times when this “truth” is really just one person’s interpretation of the facts. At other times, the data researchers use to generate recommendations are flawed. Typically, three factors influence the quality of research results—validity, reliability, and representativeness.

4-10. What are the seven steps in the market research process? Provide a short description of each.

The research process begins by defining the problem and determining the research design or type of study. Next, researchers choose the data collection method—that is, whether there are secondary data available or whether primary research with a communication study or through observation is necessary. Then, researchers determine what type of sample is to be used for the study and collect the data. The final steps in the research are to analyze and interpret the data and prepare a research report.

4-11. What unique issues must researchers consider when they plan to collect data online?

No perfect data collection method exists. Although the number of Internet users continues to grow, many segments of the consumer population, mainly the poor and elderly, do not have equal access to the Internet. In addition, in many studies, there is a self-selection bias in the sample in that respondents have agreed to receive invitations to 4-19 Copyright © 2025 Pearson Education, Inc.

Part 2: Determine the Value Propositions Different Customers Want

take part in online studies, which means they tend to be the kind of people who like to participate in surveys. As with other kinds of research such as live focus groups, it is common to encounter “professional respondents,” people who just enjoy taking part in studies and being paid for it. Hackers can try to influence research results. Competitors, who can learn about a firm’s marketing plans, products, and so forth, can intercept information used in the research.

4-12. When we consider data quality, what are the differences among validity, reliability, and representativeness? How can you know the data have high levels of these characteristics?

Reliability is the extent to which the research measurement techniques are free of errors.

Validity is the extent to which the research actually measures what it was intended to measure. Representativeness is the extent to which consumers in the study are similar to a larger group in which the organization has an interest. This criterion for evaluating research underscores the importance of sampling. All three affect the quality of research results.

4-13. What are some ethical problems associated with marketing research?

Internet-based research accounts for a rapidly growing proportion of market research.

Online tracking uses cookies to record where consumers go on a website. Consumers have become increasingly concerned about privacy and how this information is used and made available to others. To date, the Federal Trade Commission has relied primarily on firms and industries to develop and maintain their own standards instead of developing its own extensive privacy regulations, but many would like to see that situation changed, and much discussion is afoot at all levels of government regarding online privacy rights.

Proponents advocate the following guiding principles: • • • • •

Information about a consumer belongs to the consumer.

Consumers should be made aware of information collection.

Consumers should know how information about them will be used.

Consumers should be able to refuse to allow information collection.

Information about a consumer should never be sold or given to another party without the permission of the consumer.

4-14. What is a cross-tabulation? How are cross-tabulations useful to analyze and interpret data?

Cross-tabulation means that the data are examined by subgroups to see how results vary between categories. Based on the tabulation and cross-tabulations, the researcher must interpret or draw conclusions from the results and make recommendations. ACTIVITIES: APPLY WHAT YOU’VE LEARNED 4-15. In Class, 10–25 Minutes for Teams Your firm has developed a new energy drink that has proven to be successful among American athletes. The next step for your company is to expand internationally. Identify which country you would choose for international 4-20 Copyright © 2025 Pearson Education, Inc.

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expansion and describe some of the research approaches you would implement to ensure success in that country.

Student answers will vary. Students should first select a country where they believe the new energy drink could succeed, considering factors such as popularity of energy drinks, presence of target demographics (such as athletes), and cultural openness to foreign products. Once a country is chosen, students should delve into the specific market research approaches they would employ to maximize the likelihood of the product’s success in the international market.

Encourage students to consider different types of market research methods that would be effective in their chosen country, such as surveys to understand local consumer preferences, focus groups to gauge reactions to the product, or observational studies to understand consumption patterns of energy drinks among athletes. Additionally, students can address potential challenges like language barriers, cultural nuances in marketing and consumption, and local regulations regarding beverage sales.

4-16. Creative Homework/Short Project Your company recently launched a new “dry” shampoo. Although initial sales were strong, they have steadily declined over the last year and a half. You have decided to conduct further market research, but first you have to define the research problem. What are your research objectives? What is the population of interest? How does the problem fit within the environmental context?

Prepare a short report that clearly and fully defines the research problem for your product.

This question can be assigned as an out-of-class assignment for small groups. Students can present their findings to the class. Students should review the steps in market research, starting with defining the research problem. They should establish objectives, define the population, and explain how the problem fits within the environmental context.

4-17. Creative Homework/Short Project As an account executive with a marketing research firm, you are responsible for deciding on the type of research to be used in various studies conducted for your clients. For each of the following client questions, list your choices of research approaches:

a. Will TV or online advertising be more effective for a local bank to use in its marketing communication plan? b. Should a California winemaker operating on a national scale switch from bottling its mid-tier wine ($9 to $15 per bottle) with corks to bottling it with screwcaps? c. Should a regional coffee shop chain replace its traditional plastic lids with biodegradable lids? d. Should a women’s fashion retailer expand its assortment of extended-size apparel options?

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Students can suggest different types of research to be used in each of the client questions presented above. They should explain why a specific type of research was selected.

4-18. Creative Homework/Short Project Assume you are the marketing director for a regional library system. What types of information would you include in your organization’s marketing dashboard? How would you engage all employees—especially those outside the marketing department—to ensure the dashboard becomes a relevant and utilized component of the system’s overall market research strategy?

Answers will vary. Encourage students to think critically about the types of information a regional library system’s marketing dashboard might include, considering both the operational and customer engagement aspects of library management. Possible dashboard elements could include user engagement metrics, such as visitation rates, loan frequencies, program attendance, digital resource access stats, and community feedback scores. Additionally, financial metrics like funding sources, expenditure rates, and marketing/PR campaign ROI could be relevant. Guide discussions regarding how to make the dashboard relevant and useful to all employees, not just those within the marketing department. For example, the library system could integrate data that reflects the entire organization’s performance and impacts, such as circulation statistics, new registrations, and event participation rates.

4-19. In Class, 10–25 Minutes for Teams Your market research firm is planning to conduct surveys to gather information for a number of clients. Your boss has asked you and a few other new employees to do some preliminary work. She has asked each of you to choose three of the topics (from among the following six listed) that will be included in the project and to prepare an analysis of the advantages and disadvantages of each of these communication methods of collecting primary data: mail questionnaires, telephone interviews, face-to-face interviews, and online questionnaires. a. The amount of sports nutrition drinks consumed in a city b. Why a local bank has been losing customers c. Whether a well-known local band should stop producing compact discs to sell at its concerts d. The amount of money being spent “over the state line” for lottery tickets e. What local doctors would like to see changed in the city’s hospitals f. Consumers’ attitudes toward several professional athletes The approach to this question is similar to that of the preceding question. Instructions become important. This question can be used in conjunction with Table 4.2. It will probably save time if one or more of the subjects are assigned to small groups. Because there is no right or wrong answer to the question, reaching consensus among the group members would be a good learning device. Note that in responding to several of the question areas, data (or the acquisition of that data) might be in sensitive or private areas for the consumer. For example, how many people would truthfully tell you how much they drink each week or how much they spend on lottery tickets? Therefore, the selection 4-22 Copyright © 2025 Pearson Education, Inc.

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of the data collection method must also include some appreciation of the psychology and behavior of the individual being questioned.

4-20. For Further Research (Individual) Although market research typically is utilized to help companies increase sales, sometimes the process doesn’t work as intended. There are many examples of products that were specifically designed according to consumer feedback collected in market research studies, yet when they were put on the market, consumers rejected the very same products. Search for a failed or discontinued product and assess ways in which different research design approaches could have better predicted consumers’ reactions.

Guide students to explore the complexities and potential pitfalls of market research by examining real-world cases of product failures. To facilitate this exploration, students can be assigned to small groups, with each group tasked with researching a different failed or discontinued product. Some historical examples include New Coke, Crystal Pepsi, Microsoft Zune, Google Glass, Segway, Amazon Fire Phone, Juicero, and MoviePass.

After they review this history of the product, guide students to suggest alternative research approaches that might have yielded more accurate predictions of consumer reactions. The class could conclude with presentations or a roundtable discussion where each group shares their findings and recommendations. Emphasize the importance of a diverse approach to market research that includes multiple methodologies to capture a wide range of consumer perspectives and behaviors.

4-21. For Further Research (Individual) Many different types of syndicated research are important to marketers. Use online company resources to learn about the methodology for three of the following syndicated research studies. After you have become familiar with the methodologies, write a report with your thoughts about the pros and cons of the data. a. Arbitron ratings b. Nielsen ratings c. Claritas PRIZM d. Q Scores or Q-ratings e. Simmons National Survey This research could be assigned as a term paper or extra-credit project.  CONCEPTS: APPLY MARKETING METRICS In our discussion of research designs, we mentioned causal research using experiments allows marketers to study the effect of changes in an independent variable on one or more dependent variables. Although most experiments are complex and expensive to implement, the web provides digital marketers with the opportunity to conduct dozens or even thousands of microexperiments at little to no cost using a method called A/B testing. With A/B testing, marketers can modify one element of a web asset (e.g., ad, web page, email), randomly expose people to the original (A) or the experimental (B) version, and then measure the response to each version.

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In the digital advertising space, click-through rate (CTR) is a metric that indicates the percentage of people who saw an ad who clicked to visit the website or web page associated with it.

Technically, click-through rate is the number of times a click is made on the advertisement divided by the total impressions (the number of times the ad was served up to potential customers on various websites): Click-through rate (%) =

Number of click-throughs Number of impressions

To illustrate, an online retailer of pet products uses a search ad with “10% off your first order” in the headline. They want to test other offers, so they create a second copy of the ad and replace the discount offer with “Free shipping on your first order.” The ad server randomly shows one of the versions to people who search for various pet products. After 30 days, the advertiser learns that the “10% off” generated 320 clicks on 6,000 impressions and the “Free shipping” offer was shown to 5,500 people and resulted in 290 clicks.

4-22. Calculate the CTR for both offers. Which offer is better at motivating people to click on the ad?

CTR (10% off) = 320 / 6,000 = 5.33% CTR (Free shipping) = 290 / 5,500 = 5.27% The 10% off offer was slightly better at motivating people to click the ad.

4-23. When advertisers are paying for each click on an ad, what are the dangers of relying solely on CTR as a measure of advertising effectiveness? What other metrics could marketers use as the dependent measure in an A/B test?

CTR measures the effectiveness of the ad at motivating people to click the ad for more information. If the goal of the ad is brand awareness only, then CTR may be a suitable metric because the ad motivated people to learn more about the brand/company.

However, if the goal of the ad is to increase sales (or to motivate consumers to take some other action like signing up for a mailing list or downloading a coupon), then a high CTR would only be beneficial if the people who clicked the ad actually completed the desired action (e.g., they made a purchase). With advertisers paying for each click, a high CTR may increase advertising expenditures but may not result in financial gain for the company.

Adding conversion rate (the percentage of people who click the ad and who completed the desired action) would allow the advertiser to evaluate the effectiveness of the ad relative to the goal. Advertisers could also measure the amount of time people spent on the site after clicking or the total dollar amount of purchases (revenue per click) to differentiate between ads that are effective at generating clicks and ads that are effective at generating high-value clicks.

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 CHOICES: WHAT DO YOU THINK? 4-24. Critical Thinking This chapter introduces Q Scores (also known as Q-ratings), which are used to track the way that the public perceives different celebrities. A positive (and ideally high) Q Score indicates a positive perception, whereas a negative Q Score indicates a negative perception of a celebrity. Is it possible for a celebrity to have a particular type of image or reputation for which a negative Q Score might be beneficial from a commercial standpoint? Explain your answer and provide examples.

This question could be used as a small group exercise.

4-25. Ethics Some focus group moderators facilitate discussions without providing participants with the name of the company sponsoring the session or the intent behind the research.

Market researchers often say that revealing such information may unintentionally bias participant responses. To what extent do you think consumers should be involved in knowing the identity and intent of a focus group sponsor?

Student answers will vary. Consider guiding students to incorporate the ethical and practical implications of concealing or revealing the sponsor’s identity in focus group research. Encourage debate on the potential bias that might be introduced by disclosing the sponsor's identity versus the ethical obligation to maintain transparency with participants. Discussing examples from different industries can help illustrate how consumer awareness of the sponsor might alter their feedback.

4-26. Critical Thinking Do you believe that there could be a relationship between the amount of compensation received for actively participating in a research study and the level of effort put forth by a participant in that study? Are there forms of research that are more or less susceptible to such a relationship?

Answers will vary. Students can discuss this question in small groups, giving their opinions about the ethical issues involved.

4-27. Critical Thinking The use of loyalty and rewards programs in the marketplace allow companies to collect more and more data on customers. Some consumers do not realize this information is being compiled and used to market to them. Do you think there any privacy or ethical concerns with this practice? Why or why not?

Students can share their opinions on the use of loyalty and rewards programs that collect data on members. They can discuss the privacy issues raised by these programs.

4-28. Ethics Consider a situation in which a retail employee circles a survey invitation on the bottom of a printed receipt and asks a customer for positive feedback regarding their experience. Is such an action ethical? How might it impact decisions the company may make after reviewing all survey results?

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Student answers will vary. Discussion should focus on how this practice might lead to biased decision making within the company, potentially leading to misguided business strategies based on inaccurate customer satisfaction metrics.

4-29 . Ethics Sometimes firms use data to determine a segment of customers that is unprofitable and work to prune out these customers. Do you think this is an acceptable practice? Why or why not?

In small groups, students can discuss whether or not it is ethical to turn away certain unprofitable customers.

4-30. Critical Thinking It’s not uncommon for surveys and focus groups to be used together.

Assume you’ve been hired by a car dealership that recently conducted a survey with quantitative results indicating that 67 percent of its customers are unhappy with its buying process. The dealership doesn’t know how to use this figure to make improvements. Develop five questions that could be used in a follow-up focus group to better understand consumer expectations.

Student answers will vary. Guide students to develop questions that delve deeper into the reasons behind the dissatisfaction highlighted by the survey. These questions should aim to uncover specific aspects of the buying process that customers find unsatisfactory and identify potential areas for improvement. Possible examples include: • • • • •

What specific aspects of our buying process did you find frustrating or unsatisfactory, and why?

Can you describe a particular instance or interaction during the buying process that did not meet your expectations?

What changes or improvements would you suggest to enhance your buying experience with us?

Compared to other car buying experiences you have had, what did you feel was lacking in our process?

How important are transparency and communication during the buying process to you, and how well do you feel we managed these aspects?

4-31. Ethics One of the potential opportunities offered by neuromarketing is the capability to look at patterns in brain activity and identify (a) how the presence of different product attributes and variations of those attributes can help to predict what choices a consumer considers prior to their actually making those choices and (b) how those attributes can be manipulated to influence other choices without the consumer realizing the impact that those changes are having on their choices. Do you believe that marketers should be able to use this type of knowledge to their advantage? Would you have any personal qualms with doing so?

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4-32. With a group of three other students in your class, select a small retail business or quickservice restaurant to use as a “client” for your project. (Be sure to get the manager’s permission before you conduct your research.) Then, choose one topic from among the following possibilities to develop a study problem: • • • • • • • • •

Employee–customer interactions The busiest periods of customer activity Customer perceptions of service Customer likes and dislikes about the menu Customer likes and dislikes about the environment in the place of business The benefits customers perceive to be important The age groups that frequent the place of business The buying habits of a particular age group How customer complaints are handled

1. Develop a plan for the research. a. Define the research question as you will study it. b. Choose the type of research approach you will use. c. Select the techniques you will use to gather data. d. Develop the mode and format for data collection.

2. Conduct the research.

3. Write a report (or develop a class presentation) that includes the five parts shown in step 7 of the market research process covered in the chapter.

This project will help the students learn practical, realistic marketing research techniques.

They should be reminded of the garbage-in, garbage-out theory. They will learn observation methods, sampling, collection, and other research techniques.

V. MARKETING IN ACTION CASE: REAL CHOICES AT LEGO Summary of Case LEGO Group, renowned for its plastic brick toys, has also established itself as a global data powerhouse. Originating in Denmark in 1932, LEGO has evolved beyond traditional market research methods by incorporating advanced techniques such as MRI scans and anthropological studies, enabling deeper insights into customer behaviors. This approach fueled a significant revenue increase, growing to $6 billion by 2016. However, challenges arose in 2017, including a failure to adapt to digital trends and the closure of Toys ‘R’ Us, leading to a revenue decline— the first in 13 years. Responding swiftly, LEGO expanded its digital presence and introduced company-owned stores.

A notable step in LEGO’s digital innovation was its adoption of IBM’s Watson Ads Omni in 2018, which transformed online advertisements into interactive chatbot experiences, enhancing customer engagement through AI. That was followed by LEGO’s internal digital transformation 4-27 Copyright © 2025 Pearson Education, Inc.

Part 2: Determine the Value Propositions Different Customers Want

in 2021. This shift involved decentralizing LEGO’s data management and enhancing employee skills in data analysis and application, encouraging the perception of data as a crucial, standalone product. By March 2023, LEGO had developed over 600 internal data products, supporting various business functions from product development to marketing strategies. Moving forward, LEGO plans to integrate even more AI tools into its data operations.

Suggestions for Presentation This case could be assigned for various online or in-class discussion activities.

Online Suggestions Spend some time browsing the LEGO website at https://www.lego.com/en-us. After exploring multiple pages within the site, determine how market research and data analytics strategies described in the case study may have influenced some of the products and content you viewed.

In-Class Suggestions The case description implies some questions that LEGO was able to answer using its research techniques. Articulate the probable research questions the company sought to answer and come up with a few more questions that these methods could additionally answer.

Brainstorm alternative research technologies or “old school” approaches that LEGO could use.

Questions for Discussion 4-33. Given the fact that LEGO operates globally, how might its employees use market research to further test ideas that originated from its data platform to ensure that they are appropriate for specific geographic markets and cultures?

Student answers will vary. Guide students to consider how LEGO, as a global company, can leverage market research to ensure the ideas generated from its data platform are culturally and regionally appropriate. Encourage students to discuss different market research techniques such as focus groups and surveys that can be employed to capture localized consumer insights. Discuss the importance of pilot testing in various markets and engaging local stakeholders to understand market dynamics.

Alternatively, instructors can give each student/group a different country and ask them how they would conduct market research for LEGO in that country. Have students identify trends and issues that may make research in that country differ from the United States.

4-34. What are some of the ethical skills necessary for LEGO employees who use its market research information, especially considering that the company’s primary consumers are children?

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Chapter 4: Market Research

Student answers may vary. Guide students to discuss the ethical considerations necessary when LEGO employees handle market research data, especially given their primary consumer base of children. Encourage an exploration of topics such as data privacy, informed consent, and the protection of vulnerable populations in market research. Consider the responsibilities of LEGO employees to ensure that data is used ethically and transparently.

Alternatively, instructors can facilitate a debate or discussion regarding how ethical practices in data handling can affect brand trust and consumer relationships, particularly when targeting younger audiences. Further, discuss the importance of adhering to international laws and guidelines concerning data privacy and the ethical use of consumer information.

4-35. How aware of and involved in its market research and data collection processes should LEGO’s customers be? How might LEGO communicate this information to consumers?

Student answers will vary. Discuss the importance of transparency in LEGO’s market research and data collection, especially considering the company’s young audiences.

Discuss the balance between privacy and the need for data, and the impact of transparency on consumer trust and brand loyalty. Encourage exploration of how LEGO could communicate its data practices effectively to all demographics, particularly to parents and guardians, through methods like privacy policies, direct communications, and educational content on its website. Review what approaches are most likely to be well-received by LEGO’s stakeholders.

WEB RESOURCE LEGO.com

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Chapter 5: Marketing Analytics: Welcome to the Era of Data-Driven Insights!

Chapter 5 Marketing Analytics: Welcome to the Era of Data-Driven Insights!

I. CHAPTER OVERVIEW In this chapter students learn that companies use CRM programs to establish relationships and differentiate their behavior toward individual customers on a one-to-one basis through dialogue and feedback. Success is often measured one customer at a time using the concepts of share of customer, lifetime value of the customer, and customer equity. Big Data refers to data that are growing in terms of both volume and velocity. It comes from a wider range of sources within different functions within organizations as well as society at large. Marketing analytics offer marketers the means of better understanding and analyzing the wealth of data that are now at their disposal. With the proliferation of digital marketing and the speed at which data can be captured and analyzed, marketers are able to gain insights at or near real time in regard to the performance of their marketing investments. Marketing metrics provide marketers with the means to further understand the performance of their marketing campaigns and channels and a means of identifying potential red flags or opportunities as they arise.

II. CHAPTER OBJECTIVES 5-1.

5-2.

5-3.

5-4.

Explain how marketers increase long-term success and profits by practicing customer relationship management (CRM).

Understand Big Data and data mining, and how marketers can put these techniques to good use.

Describe what marketing analytics include and how organizations can leverage both marketing analytics and predictive analytics to improve marketing performance.

Understand how to create and use a personal database to manage your career.

III. CHAPTER OUTLINE p. 150

REAL PEOPLE, REAL CHOICES─HERE’S MY PROBLEM AT THE PHILADELPHIA PHILLIES Josh Barbieri has a Business Analytics team that assists the Phillies in transforming structured and unstructured data into meaningful information that the team can easily access and analyze. Josh had a vision for a new system that would provide insights to different team stakeholders (e.g., ticket office personnel, concessions managers, etc.). Josh and his team considered three options: 1) Build an enterprise data warehouse internally.

2) Outsource the data enterprise platform.

3) Wait for a vendor to deliver this as a packaged service.

5-1 Copyright © 2025 Pearson Education, Inc.

Exhibit: Josh Barbieri photo

Part 2: Determine the Value Propositions Different Customers Want

The vignette ends by asking the student which option he/she would choose.

p. 153

p. 153

Josh chose option #1.

1.

CUSTOMER RELATIONSHIP MANAGEMENT (CRM): A KEY DECISION TOOL FOR MARKETERS Many highly successful marketing firms embrace customer relationship management (CRM) programs that involve systematically tracking consumers’ preferences and behaviors over time in order to tailor the value proposition as closely as possible to each individual’s unique wants and needs.

MarTech, a short term for “marketing technology,” is commonly used to denote the blending of marketing and technology, especially digital technologies.

C-suite executives now include a chief customer officer.

p. 153

1.1 Why Is CRM So Effective?

CRM allows firms to talk to individual customers and to adjust elements of their marketing programs in light of how each customer reacts. The CRM trend facilitates one-to-one marketing, which includes several steps.

1. Identify customers and get to know them in as much detail as possible.

2. Differentiate among these customers in terms of both their needs and their value to the company.

3. Interact with customers and find ways to improve cost efficiency and the effectiveness of the interaction.

4. Customize some aspect of the goods or services that you offer to each customer.

A CRM strategy allows a company to identify its best customers, stay on top of their needs, and increase their satisfaction.

p. 153

CRM systems are applications that use computers, specialized computer software, databases, and often the Internet to capture information at each touchpoint.

p. 153

1.1.1 Marketing automation is a group of systems and technologies that can be used to establish a set of rules for handling different marketing-related processes in an automated fashion.

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Chapter 5: Marketing Analytics: Welcome to the Era of Data-Driven Insights!

CRM enables employees to maximize high-touch and personal relationships with customers. It has become a driving philosophy in many successful firms. p. 154 Sales processes can use CRM to track leads, which are people or entities that are interested in buying the product. A CRM also tracks where customers are in the sales funnel. Part of the sales funnel may include lead nurturing, which is an automated process of sending personalized and relevant content to a prospect to build their trust. p. 155

1.1.2 Connecting with Customers CRM enables employees to maximize high-touch and personal relationships with customers. USAA, Amazon.com, Adidas, and Disney use CRM.

p. 156

1.2. Measuring Marketing Success

p. 156

CRM facilitates the capability for users to look at marketing metrics, measures that help marketers watch the performance of their marketing campaigns, initiatives, and channels, and serve as a control mechanism.

p. 156

1.2.1. SMART Goals Goals are distinguished from objectives by the timeframe (longerterm), concreteness (micro), and impact on the organization (lasting). SMART goals are specific, measurable, achievable, relevant, and timely.

Figure 5.1: SMART Goals

1.2.2. CRM Metrics and Key Performance Indicators (KPIs) There are three main categories of CRM metrics: user adoption metrics, customer perception metrics, and business performance metrics.

Firms identify their key performance indicators (KPIs) that they consider important to their success.

p. 158

2. Big Data: Zettabytes Rule Big Data is a popular term to describe the exponential growth of data – both structured and unstructured – in massive amounts that are hard or impossible to process using traditional database techniques.

Big Data has the potential to provide competitive advantages in three main areas: 5-3 Copyright © 2025 Pearson Education, Inc.

Table 5.1: Examples of CRM Business Performance Metrics

Table 5.2: Examples of

Part 2: Determine the Value Propositions Different Customers Want

p. 159

1) Identifying new opportunities through analytics that yield greater return on investment on marketing efforts 2) Turning insights gained into products and services that are better aligned with the desires of consumers 3) Delivering communications on products and services to the marketplace more efficiently and effectively

p. 159

The Internet of Things (IoT) describes a system in which everyday objects are connected to the Internet and are able to communicate information throughout an interconnected system.

p. 160

2.1 Big Data Creation, Sources, and Usage

p. 160

Social media sources are valuable. Companies engage in web scraping and sentiment analysis.

Corporate IT sources include CRM databases, web analytic databases, enterprise resource planning databases, and accounting-related databases.

p.161

Government and nongovernmental organization sources include data from U.S. Census results.

Data Created on Digital Platforms p. 155 Exhibit: Wednesday

Exhibit: Tesla

Figure 5.2 Snapshot: Sources of Big Data for Marketers

Commercial entity sources sell data to organizations. Scanner data is derived from items you scan at the cash register. p. 161

Partner database sources come from channel partners. Channel partner models include a two-way exchange of information between purchasing organizations and their vendors through shared or integrated IT systems.

p. 162

2.2. Data Mining Big Data can easily exacerbate the problem of information overload, in which the marketer is buried in so much data that it becomes nearly paralyzing. Data mining is a process in which analysts sift through data (often measured in terabytes—much larger than kilobytes or even gigabytes) to identify unique patterns of behavior among different customer groups.

p. 162

Data mining uses computers that run sophisticated programs so that analysts can combine different databases to understand relationships among buying decisions, exposure to marketing messages, and in-store promotions. These operations are so complex that often companies need to build a data warehouse

5-4 Copyright © 2025 Pearson Education, Inc.

Exhibit: Walmart’s Retail Link

Chapter 5: Marketing Analytics: Welcome to the Era of Data-Driven Insights!

(sometimes costing more than $10 million) simply to store and process the data.

As the IoT continues to grow and household products become increasingly interconnected, the need for edge computing is evolving.

2.3 Primary Data Types for Data Mining Structured data are what you might find in an Excel spreadsheet or in a statistics table on a sports website (e.g., ESPN.com). p. 162 Unstructured data contain nonnumeric information that is typically formatted in a way that is meant for human eyes and not easily understood by computers (e.g., an email).

Emotion analysis is a sophisticated process for identifying and categorizing the emotions a follower possesses in relation to a product or brand by assessing the content of that communication. p. 164 2.4.

Data Mining: Applications for Marketers Data mining has four important applications for marketers: • Customer acquisition: Many firms include demographic and other information about customers in their database.

• Customer retention and loyalty: The firm identifies bigspending customers and then targets them for special offers and inducements other customers will not receive.

• Customer abandonment: Strange as it may sound, sometimes a firm wants customers to take their business elsewhere because servicing them actually costs the firm too much. Today, this is popularly called “firing a customer.”

• Market basket analysis: Develops focused promotional strategies based on the records of which customers have bought certain products. p. 165 2.5.

Data Scientists: Transforming Big Data into Winning Information Being able to transform data into insights and leveraging data to enhance the way that organizations interact with consumers is a really challenging proposition.

A data scientist is an individual who searches through multiple, disparate data sources to discover hidden insights that will provide a competitive advantage.

5-5 Copyright © 2025 Pearson Education, Inc.

Exhibit: Data warehouse Figure 5.3 Process: Structured and Unstructured Data Examples

Figure 5.4 Snapshot: Uses of Data Mining

Part 2: Determine the Value Propositions Different Customers Want

p. 165

p. 165

2.6. Augmented Intelligence: Enhancing Consumer Experiences with Big Data Artificial intelligence (AI) is the broad concept of machines being able to carry out tasks in a way that humans would consider “smart.” Machine learning is the application of AI based on the idea that machines can and should have access to data and engage in learning for themselves.

Augmented intelligence seeks to create systems that make humans better, smarter, and happier by being more efficient with automatization.

p. 166

2.7.

Reality Check for Marketers: Ethical Considerations in Using Big Data

Figure 5.5 Snapshot: Key Types of Desired Results of AI Applications

Marketers must be diligent that a very high level of cybersecurity is maintained at all times. This means a strong commitment by firms to protect digital data, such as those in a database, from destructive forces and from the unwanted actions of unauthorized users, such as a cyberattack by a hacker or some other type of data breach. A hacker is a person who illegally gains access and sometimes tampers with information in a computer system. p. 167

2.7.1. Data Security Ethicists make a strong case that marketers and their organizations have a high ethical and moral obligation to exhibit full transparency with customers about how, when, and why data are being collected from them as well as the intended uses of those data.

2.7.2. Deep Learning and Misinformation Recent advancements in AI and deep learning make deepfake videos a very real and potentially dangerous phenomenon based on coding that’s freely available online. Critics anticipate that deepfakes will be indistinguishable from real images in the near future.

p. 168

2.7.3. Blockchain and Big Data Challenges The task of storing so much data in a secure manner, cleaning the data, and detecting fraud in the data has become extremely difficult and labor-inducive. Blockchain is a type of database that exists on multiple computers simultaneously, containing blocks of data that are linked together as chains of immutable data.

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Exhibit: Deep learning algorithms

Chapter 5: Marketing Analytics: Welcome to the Era of Data-Driven Insights!

p. 168

p. 169

3.

A PRIMER ON ANALYTICS Marketing analytics comprises technologies and processes that enable marketers to collect, measure, analyze, and assess the effectiveness of marketing efforts.

3.1.

Connect Digital Marketing Channels to Marketing Analytics Digital marketing channels are the paths of distribution through which a company’s digital marketing communications can be delivered to reach their respective audiences.

Figure 5.6 illustrates the relationship between the specific data created and the data’s potential analytics-related applications.

p. 169

An A/B test is a method to test the effectiveness of altering one characteristic of a marketing asset (e.g., a web page, a banner advertisement, or an email).

p. 171

3.2. Connect with Consumers across Digital Marketing Channels Today’s consumer gets information from computers, tablets, and phones, and moves from one to another.

With more individuals on the Internet, digital marketing has become an important element of the marketer’s toolbox. Figure 5.7 illustrates six major groupings of different digital marketing channels.

p. 180

3.2.1. Business Models for Digital Marketing Cost-per-click is an online ad purchase in which the cost of the advertisement is charged only when an individual clicks on the ad and is directed to the web page in the advertisement.

Cost-per-impression is an online ad purchase in which the cost of the ad is charged each time the advertisement shows up on a page that the user views.

3.3.

Marketing Accountability with Digital Marketing Channels: A Specialty Headphones Example Search engine optimization (SEO) is a systematic process of ensuring that your firm comes up at or near the top of lists of typical search phrases related to your business.

Marketing analytics help analyze the performance of all channels to help you make the best investment of your marketing dollars.

5-7 Copyright © 2025 Pearson Education, Inc.

Figure 5.6 Process: Digital Marketing Channel Example Figure 5.7 Snapshot: Major Digital Marketing Channels Exhibit: Imgur

Part 2: Determine the Value Propositions Different Customers Want

Understanding each customer’s full story enables marketers to better understand how to weave their own actions and communications into the fabric of that story in a way that is meaningful and compelling.

p. 174

Marketing Accountability within Nondigital Marketing Channels Marketing analytics generates insights related to nondigital marketing channels, especially direct mail. A landing page is a single page on a website that is built for a particular direct marketing opportunity.

3.4.

Campaign-specific identifiers like unique promotional codes, URLs, QR codes, or phone numbers allow direct marketers to tie efforts to responses. p. 175

3.5.

Predictive Analytics An intriguing area for a marketer is the ability to predict the future and better understand the value of marketing campaigns even before implementing them.

Predictive analytics uses large quantities of data and variables that the analysts know relate to one another to more accurately predict specific future outcomes (the key with “predictive” analytics is this focus on the future, not just the present).

Amazon uses anticipatory shipping to deliver products to customers before they place an order.

p. 176

4.

BRAND YOU: CREATING, ORGANIZING, AND MINING YOUR PERSONAL CAREER BIG DATA – FOR THE LIFETIME OF YOUR CAREER Just as marketers use databases to maximize sales of their products now and in the future, you need to develop a personal database of people, companies, and job opportunities for the life of your career.

4.1. Customer Acquisition Customer acquisition is getting a new job or acquiring a new job contact.

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Table 5.3: Marketing Performance Calculation and Comparison: Specialty Headphones Example

Chapter 5: Marketing Analytics: Welcome to the Era of Data-Driven Insights!

4.2. Customer Retention Contacts and potential employers should have top-of-mind awareness. Maintain a relationship with a prospective employer or contacts by sending them something of value. p. 178

Here’s My Choice……

Josh went with Option 1 and decided to build an enterprise data warehouse internally. It’s based on conversational artificial intelligence (AI) with an Alexa integration so that users can actually ask it questions and get detailed answers based on the reams of data stored within. The new system allows stakeholders to query the system themselves in order to get answers to their questions, so these users are more engaged with the process as opposed to having to submit endless requests to our team for information.

Exhibit: Phillies data

IV. END-OF-CHAPTER ANSWER GUIDE CHAPTER QUESTIONS AND ACTIVITIES CONCEPTS: TEST YOUR KNOWLEDGE 5-1.

What is CRM? Why is CRM effective? What is one-to-one marketing? What are touchpoints?

Customer relationship management is programs that allow companies to talk to the individual customers and adjust elements of their marketing programs in light of how each customer reacts to elements of the marketing mix. Firms practice CRM by communicating with customers and customers being able to communicate with the company one-to-one.

There are four steps in one-to-one marketing: • Identify customers and get to know them in as much detail as possible.

• Differentiate these customers in terms of both their needs and their value to the company.

• Interact with customers to find ways to improve cost efficiency and the effectiveness of the interaction.

• Customize some aspect of the products or services they offer to each customer.

Touchpoints are any point of direct interface between customers and a company (online, by phone, or in person).

5-2.

What is marketing automation and how is it used in marketing?

Marketing automation is a group of systems and technologies that can be used to establish a set of rules for handling different marketing-related processes without human 5-9 Copyright © 2025 Pearson Education, Inc.

Part 2: Determine the Value Propositions Different Customers Want

intervention. Marketers use automation to personalize communications to consumers who express interest in their products, which can increase the likelihood of customer followthrough.

5-3.

Explain the term SMART goals. What are key performance indicators (KPIs)? Under which SMART component are KPIs likely to fall?

SMART goals are specific, measurable, achievable, relevant, and timely. Firms identify key performance indicators (KPIs) that are critical indicators of progress toward an intended result. KPIs are most closely associated with the “measurable” component of SMART goals, because they provide quantifiable data to evaluate the effectiveness of marketing strategies.

5-10 Copyright © 2025 Pearson Education, Inc.

Chapter 5: Marketing Analytics: Welcome to the Era of Data-Driven Insights!

5-4.

Describe the various sources of Big Data for marketers. Explain the three ways that Big Data can help firms create competitive advantages.

The millions of pieces of information that make up Big Data originate from both direct and indirect paths. Big Data can come from many sources within and outside of the organization and created and compiled from different groups: •

Social media sources: Web scraping uses computer software to extract large amounts of data from websites. Sentiment analysis is a process of identifying a follower’s attitude toward a brand by assessing the context or emotion of comments provided, and other techniques that analyze and map posts on Facebook, Twitter, and other platforms to track comments about experiences with products and services.

•

Corporate information technology sources: Different places and tools are used to store corporate data.

•

Government and nongovernmental organization sources: Ever-increasing types and amounts of government-generated data are accessible and provide opportunities for marketers.

•

Commercial entity sources: Many companies today collect data in large quantities to sell to organizations.

•

Partner database sources: Many firms have a two-way exchange of information between purchasing organizations and vendors.

Big Data has the potential to provide competitive advantages in three main areas: identifying new opportunities through analytics that yield greater return on investment on marketing efforts; turning insights gained into products and services that are better aligned with the desires of consumers; and delivering communications on products and services to the marketplace more efficiently and effectively.

5-5.

Explain customer acquisition cost (CAC). Explain customer lifetime value (CLV). What are marketing-originated customers? Explain share of wallet. (See the Supplement at the end of this chapter.)

Customer acquisition cost is the cost of convincing a potential customer to buy a product or service. In addition to telling you the price per lead (potential customer), the metric helps marketers estimate the total amount they should spend for lead generation efforts.

Customer lifetime value is the potential profit generated by a single customer’s purchase of a firm’s products over the customer’s lifetime. With CRM, a customer’s lifetime value is identified and it is the true goal.

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Part 2: Determine the Value Propositions Different Customers Want

A marketing-generated lead is an inbound sales lead in which a potential customer contacts a company with an interest in their products or services, resulting from their marketing efforts.

Share of wallet is the percentage of an individual customer’s purchase of a product that is a single brand.

5-6.

Explain the churn rate. Explain net promoter score (NPS). What is marketing ROI? What is marketing ROX? Why is ROX a better measure than ROI? How do marketers measure ROX? (See the Supplement at the end of this chapter.)

The customer churn rate is the percentage of a company’s customers (for a given span of time) who by the end of that time span can no longer be considered customers of the company (e.g., because they have canceled their contract for a service or they have stopped shopping at the related retail location).

Net promoter score (NPS) is a metric used to measure customer loyalty and satisfaction.

It is calculated by asking customers how likely they are to recommend a company, product, or service to others on a scale of 0 to 10. Respondents are categorized as Promoters (9–10), Passives (7–8), or Detractors (0–6). A higher NPS indicates a higher level of customer loyalty and satisfaction.

ROI is the return on investment. Return on experience (ROX) is a metric used to measure the real value of personalized customer experiences. It follows the customer journey. It identifies touchpoints and discover factors that impact customers the most. The focus turns to improving those experiences for a more positive business outcome.

5-7.

Explain information overload and why it has become a growing challenge for many firms.

Information overload occurs when marketers are inundated with so much data that it becomes nearly paralyzing to decide which information is useful and which is not. This challenge has intensified due to the vast amounts of Big Data now available to firms, encompassing a wide array of structured and unstructured data that is difficult to process using traditional techniques. The sheer volume, variety, and velocity of data can exacerbate the problem of information overload, making it challenging for firms to extract actionable insights without becoming overwhelmed.

5-8.

Explain the Internet of Things (IoT). Give two examples of the IoT. What opportunities does IoT bring to marketers?

The Internet of Things (IoT) describes a system in which everyday objects are connected to the Internet and, in turn, are able to communicate information throughout an interconnected system. Light bulbs, doorbells, and electrical outlets can have an Internet connection. The information gets transmitted via an Internet connection at or near real time. Tesla made significant changes in how it communicates with customers based on IoT information. IoT provides marketers with extensive opportunities by connecting 5-12 Copyright © 2025 Pearson Education, Inc.

Chapter 5: Marketing Analytics: Welcome to the Era of Data-Driven Insights!

everyday objects to the Internet for enhanced data collection. This connectivity allows marketers to gain detailed insights into consumer behaviors and product usage, leading to improved automation and efficiency. Additionally, IoT data supports product innovation and personalized marketing strategies, enabling companies to better meet consumer needs and preferences.

5-9.

Explain the four applications for data mining. What is a data warehouse?

The four applications for data mining are customer acquisition, customer retention and loyalty, customer abandonment, and market basket analysis.

A data warehouse is a system used to store and process large quantities of data that result from data mining. It is designed to handle complex queries and data analysis, enabling businesses to organize, understand, and utilize vast amounts of data more effectively.

5-10. Explain the meaning of blockchain. What is artificial intelligence? What is machine learning? What is augmented intelligence?

Blockchain is a type of database that exists on multiple computers simultaneously, containing “blocks” of data that are linked together as “chains” of immutable data.

Artificial intelligence (AI) refers to the capability of machines to perform tasks that typically require human intelligence.

Machine learning is a subset of AI that involves systems learning from data, improving their accuracy over time without being explicitly programmed.

Augmented intelligence is an application of AI that enhances human decision making and efficiency rather than replacing human input.

5-11. Explain marketing analytics. How do marketing analytics connect with digital marketing channels?

Marketing analytics encompass technologies and processes that allow marketers to collect, measure, analyze, and assess the effectiveness of their marketing efforts.

Marketing analytics directly connect with digital marketing channels by enabling marketers to understand the impact of specific actions within those channels on consumer behavior and sales. This insight allows businesses to optimize their marketing strategies and investments based on concrete performance data from their digital channels.

5-12. Explain the importance of cybersecurity and data security. What is a data breach?

Cybersecurity is crucial for protecting digital data from destructive forces and unauthorized access, ensuring the integrity and confidentiality of customer information.

A data breach involves the unintentional or intentional release of secure or private/confidential information to an untrusted environment, potentially causing 5-13 Copyright © 2025 Pearson Education, Inc.

Part 2: Determine the Value Propositions Different Customers Want

significant harm to the organization and its customers by exposing sensitive data to hackers or other malicious entities.

5-13. What are predictive analytics? What are some examples of how a firm might use predictive analytics to improve its efficiency?

Predictive analytics use large quantities of data within variables that have identified relationships to more accurately predict specific future outcomes. A firm might use predictive analytics to trigger actions based on past actions, improve investments, ship things in advance, and forecast sales. ACTIVITIES: APPLY WHAT YOU’VE LEARNED 5-14. For Further Research (Individual) For this assignment you are going to act as a manual version of a software program that conducts sentiment analysis. First, you must locate a Facebook or Instagram page for a popular brand you use or know of. You must make sure that the site includes comments from consumers. Select a sample of comments (between five and seven that do not contain any explicit words or expressions) created by users in response to a specific brand’s post on its social media page. Copy the comments and categorize the sentiment within each comment as “positive,” “negative,” or “neutral.”

Include what specific elements of each comment most clearly support your categorization of it (e.g., use of punctuation, context, inclusion of specific words, use of slang, etc.).

What insights should a marketing manager responsible for the related brand take away from these comments? Develop a short presentation for your class.

Sentiment analysis is a process of identifying a follower’s attitude toward a product or brand by assessing the context or emotion of comments they post, and other advanced techniques that involve analyzing and mapping millions of posts on Facebook, Instagram, and other social media platforms to track what people say about their experiences with products and services. They depict the themes in these posts visually so that managers can easily see the kinds of words customers use in their posts.

Students can select a brand, read the comments online, and categorize the prevailing sentiment as “positive,” “negative,” or “neutral.” They can present their findings to the class as they offer insights for the brand based on the comments they read.

5-15. Creative Homework/Short Project Many marketers have started utilizing artificial intelligence to assist in search engine optimization. Assume that you are the digital marketing manager for a local accounting firm that specializes in tax preparation. You have decided to implement a search engine optimization campaign to ensure your firm is one of the top listings. First, make a list of at least 10 words and phrases you think are likely to be the most searched by potential customers. Then ask an AI tool (such as ChatGPT) to develop a list of 10 words and phrases for search engine optimization of a website for an accounting firm that specializes in tax preparation. Compare your own results to those created by AI. How are the lists similar and different? Using the results of 5-14 Copyright © 2025 Pearson Education, Inc.

Chapter 5: Marketing Analytics: Welcome to the Era of Data-Driven Insights!

both lists, choose your top 10 keywords and rank them in order (with the most important at the top of the list).

Student answers will vary. Encourage students to reflect on the relevance and selection of keywords in their SEO activity, discussing the capabilities and limitations of AI in generating keywords compared to their own human intuition. Facilitate a comparison of AI-generated and student-created lists to explore strategic insights and adjustments for a more effective SEO strategy. Consider facilitating a discussion on ethical considerations and the importance of human oversight in using AI for digital marketing.

5-16. Creative Homework/Short Project You have been asked by your boss to weigh in on whether Instagram advertising or search engine advertising through Google would be a better use of company funds. Your boss has provided her opinion on the matter: “Pictures on Instagram are just more compelling than little blocks of text in a search engine’s results.” You need to gather data and assess the potential solutions on your own. a. What data and metrics would you need to evaluate Google search engine advertising effectiveness? b. What data and metrics would you need to evaluate Instagram advertising effectiveness? c. Take the time to research the two options and gather some real data. What would you recommend to your boss? Why? This would make an excellent out-of-class team project that gives students the experience of working on a team.

5-17. In Class, 10–25 Minutes for Teams As an admissions manager for a college or university, you are interested in exploring the use of predictive analytics within the admissions process to bring in students with a higher likelihood of graduating from the school and achieving greater levels of success both during and after their studies. With another student who is acting as your boss, the admissions director, discuss the specific reasons that predictive analytics might be of value to making admissions decisions on students. Be sure to discuss any areas where you might need to proceed with caution.

Predictive analytics uses large quantities of data and variables that the analysts know relate to one another to more accurately predict specific future outcomes (the key with “predictive” analytics is this focus on the future, not just the present). If marketers have the ability to actually predict the future, they can better understand the value of their marketing campaigns even before they implement them. However, marketers need to proceed with caution because of unexpected events that could alter the future. These events include natural disasters, political upheavals, and terrorism.

5-18.

Creative Homework/Short Project Assume you are working in the digital marketing unit of a firm that assists companies in offering college tuition coverage as part of their employee benefit packages. Your three primary target audiences are: companies that wish to provide the benefit, colleges that wish to participate in the benefit network, and 5-15 Copyright © 2025 Pearson Education, Inc.

Part 2: Determine the Value Propositions Different Customers Want

covered employees seeking to enroll in participating colleges. Develop a list of content and visuals that you would include on three different landing pages—one for each target audience.

Student answers will vary. Consider guiding students to evaluate the specific needs and preferences of each target audience when it comes to developing targeted content for the landing pages. Encourage discussions on the appropriate tone, messaging, and visuals that would resonate with corporate decision-makers, educational institutions, and employees, respectively. This activity could also focus on how different calls to action, user interface elements, and information types can influence the effectiveness of each page when it comes to converting visitors.

5-19.

Most digital advertising is sold on either a cost-per-click or cost-per-impression basis.

Assume you are assisting a national-level motivational speaker who wants to increase their speaking engagements through social media advertising. How would you use costper-click advertising? How would you use cost-per-impression advertising?

Student answers will vary. Consider guiding students through the decision-making process for choosing between cost-per-click (CPC) and cost-per-impression (CPM) advertising. Emphasize different applications in a campaign that are aimed at increasing speaking engagements for the motivational speaker. The discussion could focus on using CPC advertising to directly drive traffic to a booking or contact page, optimizing for conversions by tracking clicks that signal strong interest. For CPM advertising, the conversation might revolve around building brand awareness and visibility by maximizing the number of times the ad is seen.

CONCEPTS: APPLY MARKETING METRICS You learned in this chapter that one of the main marketing applications of big data is customer retention and loyalty. In retailing, a firm’s loyalty (or rewards) program is often an important source of data for its CRM efforts. Back in 2007, the beauty products retailer Sephora launched its Beauty Insider program, which offers members free luxury product samples as a reward for purchases. Over time, Sephora added tiers offering additional rewards and even exclusive experiences, such as a winery tour, based on annual purchase volume. One of the “most loved perks” of the program is Sephora’s annual birthday gift. Visit https://www.sephora.com/beautyinsider and review the current information about its Beauty Insider loyalty program.

5-20. Review the Chapter 5 supplement on CRM metrics and key performance indicators (KPIs). Which of the key CRM metrics could Sephora track using data collected through the Beauty Insider program?

By offering rewards for every purchase, the Beauty Insider program allows Sephora to collect all the data necessary to calculate CLV (average purchase value, average purchase frequency rate, average customer value, and average customer lifetime).

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Chapter 5: Marketing Analytics: Welcome to the Era of Data-Driven Insights!

Return on experience is also a possible relevant measure of the benefit of the sampling aspect of this program. In this case, Sephora could calculate the total cost for sending a particular sample and compare that to the sales revenue for that product among customers who received that sample.

Students may also mention percentage of marketing-originated customers (what percentage of Beauty Insider members came from marketing activities like online advertising vs. in-store sales activities like a salesperson suggesting the program to a customer at checkout), customer churn rate (what percentage of Beauty Insiders unsubscribed or didn’t purchase last year), or NPS (based on results from satisfaction surveys of program members).

5-21. Select one of the CRM metrics you identified. How could managers at Sephora use data collected through the Beauty Insider program to strengthen customers’ relationship with the firm?

Student answers will vary. Students who choose CLV, for example, may focus on one element such as increasing the average purchase value and suggest strategies such as improving the cross-selling capabilities or the website or training store personnel in suggestion selling and/or trading up techniques. CHOICES: WHAT DO YOU THINK? 5-22. Ethics CRM relies on data collected from customers to create customized or one-to-one experiences for those customers. Data are collected at various touchpoints—places in which the customer interfaces with the firm to provide information, such as at a checkout lane, on the phone, on the website, and so on. Do firms have an obligation to explain to customers that they are collecting information from them to populate and drive their CRM initiative, or is it inherently obvious in today’s world that such practices are routine? In general, what is your personal viewpoint of database-driven positioning strategies? What are the potential pros and cons to the company and to the customer?

Students can have a lively debate about the pros and cons of database-driven positioning strategies. Students can discuss the privacy issues involved and whether it should be legal for companies to collect and sell your personal information without your knowledge.

5-23. Critical Thinking Would any potential challenges arise from companies using predictive analysis as a key marketing strategy? What are some examples? What are the potential benefits to companies that invest in this form of marketing and do it well?

Student answers will vary. Consider facilitating a discussion on the potential challenges and benefits of using predictive analytics as a key marketing strategy. Encourage students to consider issues like data privacy, the accuracy of predictive models, and the potential for data biases that could lead to inaccurate targeting or exclusion of certain customer groups. On the benefits side, highlight how effective predictive analytics can lead to better customer insights, more personalized marketing efforts, and enhanced ability to 5-17 Copyright © 2025 Pearson Education, Inc.

Part 2: Determine the Value Propositions Different Customers Want

anticipate market trends.

5-24. Critical Thinking Transparency and traceability are two key advantages of blockchain.

For example, blockchain can be used in grocery retailing to enable a consumer to view a ledger of a product’s journey from the farm to the store shelf. What impacts could blockchain have on the overall marketing mix? What challenges can be anticipated if consumers embrace the advantages of blockchain?

Student answers will vary. Consider facilitating a discussion on how blockchain’s transparency and traceability could impact the marketing mix. Discuss how this technology could lead to more informed purchasing decisions and potentially shift power dynamics between consumers and brands. Anticipated challenges may include the increased consumer expectations for brand accountability and the technical and organizational hurdles companies might face in implementing blockchain extensively.

5-25. Ethics Many apps that you use are able to remain free to users through the sale of advertising and by monetizing the data of the individuals using the technology. This includes apps for social media, gaming, and news. Do you feel there is a limit to what information these companies are able to share with third parties? What types of information should not be shared? If consumers voluntarily opt for a paid version of the app, should the company still share their data with third parties?

Students can have a lively debate on privacy issues raised by the use of data.

5-26. Critical Thinking Spending on digital marketing has trended upward in recent years, and with so many individuals using the Internet for extended periods of time, it is easy to understand why. Some organizations spend more than half of their budget on digital marketing. How do you think they justify committing such substantial amounts of money to digital efforts? Do you believe that more companies should invest primarily in digital marketing? What groups or factors would indicate to you that digital marketing does not make sense as an investment? Many of these companies have not decreased their budgets for other media advertising in order to increase digital marketing; they have simply increased their total marketing budgets. Does this make sense to you? Why or why not?

Students can have a discussion on the best use of advertising dollars and offer their opinions on whether more companies should invest primarily in digital marketing.

5-27. Critical Thinking Consumer data has never been more valuable to marketers. However, few consumers are compensated for the use of their own personal data. Telly is a company that seeks to provide consumers with free 55-inch televisions in exchange for consumers’ permission to send targeted ads to a second, smaller screen below the primary screen. Telly uses viewing data, as well as user-provided demographics and lifestyle information, to target ads to viewers and households. The company claims its business model is similar to those used by other video streaming services. However, Telly claims that by providing a free TV—valued at $1,000—it is partially compensating viewers for 5-18 Copyright © 2025 Pearson Education, Inc.

Chapter 5: Marketing Analytics: Welcome to the Era of Data-Driven Insights!

use of their consumer data. Which do you think consumers value more: compensation when their data is used or privacy control over when and how their data is used? Explain your answer.

Student answers will vary. Discuss the trade-offs between compensation and privacy control in the context of consumer data usage. Encourage students to consider how Telly’s approach of compensating consumers with a tangible product for their data contrasts with traditional models where consumer data is used without direct compensation. Consider facilitating a debate on whether consumers might prefer direct compensation, as offered by Telly, or greater control over their personal data. Discuss the implications of each preference on consumer trust and brand loyalty.

5-28. Ethics Data breaches have become commonplace as more companies collect and compile consumer data. Many governments have minimum requirements companies must follow when consumer information is leaked or stolen. However, these steps may not be enough to maintain consumer trust and loyalty. Not considering necessary legal requirements, what steps do you think companies should take when consumer data is exposed? When and how would you relay this information to customers? How can companies best regain consumer trust after a data breach?

Student answers will vary. Consider proactive and transparent responses that companies could adopt when a data breach occurs. Encourage a discussion on the importance of timely and clear communication with affected customers, detailing what information was compromised and how the breach might affect them. Discuss the value of offering remedies such as credit monitoring services and if these actions help restore consumer trust. Explore strategies for enhancing data security post-breach and the role of ongoing communication in rebuilding trust. MINIPROJECT: LEARN BY DOING Different types of businesses use different approaches to engaging with both current and potential consumers online. A company’s website is usually a key source of information for potential and current customers. The purpose of this project is to gain a deeper understanding of how marketing analytics can be implemented in order to gain greater insights into and enable more effective control of marketing efforts. a. Select three company websites. These should include one e-commerce site (e.g., Amazon), one consulting company (e.g., IBM Global Services), and one consumerpackaged-goods company or brand (e.g., Procter & Gamble’s Tide). b. For each company’s website, list what you believe the objectives of the organization are as communicated through the website and identify specific conversion actions on the website that would most closely align with these goals. For example, customer acquisition might be supported and ultimately achieved by getting users to sign up for an email newsletter, which would be defined as a conversion action.

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Part 2: Determine the Value Propositions Different Customers Want

5-29. Rank the conversion actions in order of importance and include an explanation of why you have ordered them as such. Identify whether they are short-term oriented as they relate to the organization’s objectives or long term-oriented (or, in some cases, both) and why.

Answers will vary in terms of ranking conversion actions: •

The purchase of a product or a service (or multiple purchases in one sitting): This is the most important action because a consumer is actually using the product or service.

Based on the consumer’s satisfaction level, they could make future purchases and tell other potential consumers about the benefits received.

•

The decision to become a follower of the company via social media: This option is less desirable than a purchase, but indicates a strong interest in the company and its products and services. This level of interest could very well convert an onlooker into a customer and allow questions to be answered. Social media is very powerful because a potential customer can find out the satisfaction level of others.

•

The choice to sign up for a mailing list: This option shows some interest that might develop into a purchase, but it is only a beginning of a possible customer relationship.

It is a weaker relationship than the other two options.

5-30. If you could choose only two marketing metrics (remember metrics, not conversions) to track for each of these websites, identify which two you would select for each website and explain why.

Answers will vary.

•

Share of customer: The percentage of an individual customer’s purchase of a product that is a single brand. Amazon identifies an author or a brand that a customer has purchased frequently and uses one-on-one marketing to inform a customer about a new work by the same author or a new offering from the same brand. This activity increases customer loyalty and frequency of purchase. Tide also uses CRM to develop a customer and offer opportunities for frequency of purchase as well as the purchase of new offerings.

•

Lifetime value of a customer: The potential profit a single customer’s purchase of a firm’s products generates over the customer’s lifetime. Amazon has the potential of selling many books by the same author or the same genre (e.g., mystery, historical fiction) or new products offered by the same brand over time. Over time, customers use a large quantity of laundry detergent, which represents a substantial amount of money for the company.

5-31. Some of the websites visited should have a request-for-information form on them. Often, this is one of the ways that marketers begin to collect information on a customer to place within their CRM system. Locate this form and identify what information it is asking for.

Write down the different potential uses of this information for the organization and in 5-20 Copyright © 2025 Pearson Education, Inc.

Chapter 5: Marketing Analytics: Welcome to the Era of Data-Driven Insights!

what ways it might be used by marketers to further engage with the customer. What are some creative ways that you would recommend leveraging these data for each website analyzed in terms of future communications? Develop a presentation about your project and the results for your class.

Using the Internet, students can gather information from websites and identify the information being sought. They can offer creative ways to use the data for each website.

V. MARKETING IN ACTION CASE: REAL CHOICES AT SPOTIFY Summary of Case Spotify, the undisputed leader in music streaming with a 31 percent market share, leverages its extensive data analytics to enhance user experience and engage artists. Founded in 2006, Spotify offers a “freemium” model, allowing users to choose between ad-supported free listening and a premium ad-free subscription with extra features. Although this model has been a hit with users, artists have been less enthusiastic due to small royalties after label distributions. Spotify addresses these concerns with tools like Spotify for Artists, which provides data about fan engagement and allows artists to control their platform presence. The company’s sophisticated use of data refines user experiences with features like personalized playlists and Spotify Wrapped, while also bolstering marketing efforts through targeted advertising. Despite its data prowess, Spotify faces challenges like regulatory fines for data privacy violations and rising competition from new entrants like ByteDance. As it continues to innovate, Spotify aims to expand beyond music streaming to become a major player in all audio content, leveraging its data-driven insights to maintain its competitive edge.

Suggestions for Presentation This case could be assigned for various online or in-class discussion activities.

Online Suggestions Research Spotify via the company’s website. Identify its current strategy and describe how Spotify has implemented it.

Brainstorm on potential expansion opportunities for services Spotify could add and additional uses of the data for marketing purposes.

In-Class Suggestions Apple Music is a major competitor of Spotify. Evaluate Apple Music and Spotify, comparing the strengths and weaknesses of each service.

Spotify has stated that TikTok could pose a threat to its business model. Ask students which of the two services they would prefer for music, and use that information to guide a discussion about how Spotify can best compete with TikTok.

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Part 2: Determine the Value Propositions Different Customers Want

Conduct a brainstorming session to identify the key characteristics of potential advertising clients that could use Spotify.

Questions for Discussion 5-32. Review the four steps in one-to-one marketing. How is Spotify doing each of these to support its marketing efforts?

1. Identify customers and get to know them in as much detail as possible. Spotify tracks users’ listening habits, which gives them some indication of their interests and likely demographic profile.

2. Differentiate among these customers in terms of both their needs and their value to the company. By identifying demographics, Spotify can make inferences about a customer’s income and buying power. They may also use a matching service that matches the customer’s name with a rich set of information about that customer contained in databases like those maintained by the company Acxiom.

3. Interact with customers and find ways to improve cost efficiency and the effectiveness of the interaction. Spotify likely interacts with artists regarding ways to make Spotify for Artists more useful to them.

4. Customize some aspect of the goods or services that you offer to each customer.

Spotify shines in this regard with its Discovery Weekly feature, which provides a personalized playlist each week. It is intended to be songs you haven’t heard before, composed of tunes that Spotify’s algorithms (enabled by AI) believe you will like.

5-33. What are some examples of unstructured data that Spotify is probably using in its analysis?

Potential types include artwork from albums, artist photos, and comments that listeners and artist’s post.

5-34. Through its DJ platform, Spotify has started to incorporate AI into its service. What other AI opportunities and innovations may exist for Spotify?

Student answers will vary. Because AI is probably a top priority for Spotify, consider guiding students through a discussion on AI opportunities for Spotify. Encourage them to explore the intersection of technology and user engagement. Consider how AI can enhance personalized music experiences, such as generating custom tracks or adjusting music based on the listener’s mood. Prompt students to think about how AI can analyze user data to improve music recommendations or create dynamic advertising strategies tailored to individual emotional responses. Additionally, explore how AI could be leveraged for logistical purposes, like optimizing tour schedules for artists based on streaming data. Encourage students to think critically about the corresponding ethical considerations, such as privacy concerns and data security.

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Chapter 5: Marketing Analytics: Welcome to the Era of Data-Driven Insights!

WEB RESOURCES Spotify: www.spotify.com Teradata Inc.: www.teradata.com Iconoclast: www.iconocast.com Amazon.com: www.amazon.com Coca-Cola: www.cocacola.com Nike: www.nike.com Google: www.google.com Pew Research: www.pewinternet.org

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Chapter 6: Understand Consumer and Business Markets

Chapter 6 Understand Consumer Markets I. CHAPTER OVERVIEW In this chapter, consumer behavior is defined and reasons for purchasing studied. Students learn about the process of purchase, beginning with prepurchase behavior and ending with postpurchase behavior. Students will understand how situational factors at the time and place of purchase can influence consumer behavior. Students begin to think about how consumers’ relationships with other people influence their decision-making process.

Although consumer marketing is an important area in marketing, so is business-to-business marketing (B2B). In this chapter, students learn that the fortunes of business buyers and sellers can hinge on a single transaction. Students learn how marketers categorize businesses and other organizations to develop effective business marketing strategies. Business buying behavior and the business buying decision process is evaluated. Finally, the important world of business-to-business e-commerce is explored.

II. CHAPTER OBJECTIVES 6-1.

6-2.

6-3.

6-4.

Define consumer behavior, and explain the purchase decision-making process.

Explain how internal factors influence consumers’ decision-making processes.

Show how situational factors and consumers’ relationships with other people influence consumer behavior.

Understand what prospective employers are looking for in an employee and how you can meet their needs, thus increasing your chances that the employer will “buy” or hire you.

III. CHAPTER OUTLINE p. 195

REAL PEOPLE, REAL CHOICES—HERE’S MY PROBLEM AT PRIZEPICKS Adam Wexler is the founder and CEO of PrizePicks, the leading privately held daily fantasy sports operator and the fastest-growing sports company in the United States according to Inc. magazines’ 2022 rankings. With an increase in the number of states in which sports betting is legal, more consumers are facing the decision of whether to engage in sports betting. As PrizePicks has grown, Adam’s team has looked for social proof opportunities to showcase PrizePicks’ legitimacy as an emerging gaming operator In a space where there is a lot of available market demand to capitalize on. Coming out of the pandemic, PrizePicks had opportunities to do cost-effective partnerships with Major League Baseball (MLB) teams like the Atlanta Braves and Miami Marlins.

6-1 Copyright © 2025 Pearson Education, Inc.

Exhibit: Adam Wexler

Part 2: Determine the Value Propositions Different Customers Want

Adam had to make the decision of whether to trust my judgment and make a deal with an MLB team that would help grow our brand and reputation or continue to follow the current growth strategy set in place by the marketing team that focused on quantifiable metrics.

Adam considered his options: Option 1. Forego the opportunity.

Option 2. Do a deal at their minimum spend threshold.

Option 3. Strike a deal that would include big awareness opportunities.

p. 197

The vignette ends by asking the student which option he/she would choose.

• Adam selected option #2.

1.

THE CONSUMER DECISION-MAKING PROCESS Consumer behavior is the process individuals or groups go through to select, purchase, use, and dispose of goods, services, ideas, or experiences to satisfy their needs and desires. Consumer decision making is an ongoing process—it’s more than what happens at the moment a consumer pays for a product.

Marketers need to understand the many factors that influence each step in the consumer-behavior process—internal factors unique to each of us, situational factors at the time of purchase, and the social influences of people around us.

p. 198

1.1. Not All Decisions Are the Same Decision makers employ a set of approaches that range from painstaking analysis to pure whim, depending on the importance of what they are buying and how much effort they choose to put into the decision. Researchers find it convenient to think in terms of an “effort” continuum that is anchored on one end by habitual decision making, such as deciding to purchase a box of cereal, and at the other end by extensive problem solving, such as deciding to purchase a new car.

Figure 6.1 Snapshot: The Consumer DecisionMaking Continuum

Habitual decision making, limited problem solving, and extensive problem solving are not discrete categories. Each purchase we Figure 6.2 make is at a slightly different point on the continuum.

Process: The Consumer DecisionMaking Process With habitual decision making, consumers make little or no p. 200 conscious effort. Many decisions fall somewhere in the middle 6-2 Copyright © 2025 Pearson Education, Inc.

Chapter 6: Understand Consumer and Business Markets

and are characterized by limited problem solving. This means that consumers do some work to make a decision but not a great deal.

The effort we put into decisions depends on our level of involvement, or the importance of the perceived consequences of the purchase to the person. We tend to be more involved in the decision-making process for products when perceived risk, or uncertainty about a product due to factors like complexity or social risk, is high.

Low-risk purchases are associated with low-involvement processing, where the consumer’s decision is often a response to environmental cues. With higher-risk, high-involvement purchases, such as when we buy a house or a car, we are more likely to carefully process all the available information and to have thought about the decision well before we buy the item.

Discussion: Explain habitual decision making, limited problem solving, and extended problem solving. What is the role of perceived risk in the decision process? ► In-Class Activity Have students break into small groups that are composed of both men and women. Ask them to determine which type of decision process—extensive, limited, or habitual—is likely to be used for the following products: a house, toothpaste, a pair of shoes, a bathing suit. Do all members of the group agree on the decision process for each product category? Why not? p. 200 1.2.

Step 1: Problem Recognition Problem recognition occurs whenever a consumer sees a significant difference between her current state and some desired or ideal state.

Most problem recognition occurs spontaneously. However, marketers can develop creative advertising messages that stimulate consumers to recognize that their current state just doesn’t equal their desired state. p. 202

1.3.

Step 2: Information Search

Information search is the step of the decision-making process in

which the consumer checks his or her memory and surveys the environment to identify what options might solve his or her problem. Advertisements on TV, information we “google” on the Internet, and videos provide guidance.

The information search step includes discovering what alternatives are available. The evoked set includes all alternatives a consumer is aware of when making the decision, while the consideration set only includes the ones the consumer seriously considers.

6-3 Copyright © 2025 Pearson Education, Inc.

Figure 6.3 Process: Responses to DecisionProcess Stages p. 201

Part 2: Determine the Value Propositions Different Customers Want

Comparison-shopping agents (shopbots) such as Bizrate.com are web

applications that can help online shoppers find what they are looking for at the lowest price. p. 202

1.4.

Step 3: Evaluation of Alternatives First, a consumer identifies a small number of products of interest and then focuses on determinant attributes, the most important features, or evaluative criteria, to differentiate and compare among products. In reality, consumers search for information and evaluation of alternatives simultaneously.

p. 203

1.5.

Step 4: Product Choice Deciding on one product and acting on this choice is the next step in the decision-making process.

Compensatory decision rules refer to the methods for making decisions that allow information about attributes of competing products to be averaged in some way.

Consumers often rely on decision guidelines when weighing the claims that companies make. These heuristics, or mental rules of thumb, help simplify the decision-making process. One such heuristic is “price = quality.” Many people willingly buy the more expensive brand because they assume that if it costs more, it must be better.

p. 203

Perhaps the most common heuristic is brand loyalty; this occurs when we buy the same brand repeatedly. Another heuristic is based on country of origin. We assume that a product has certain characteristics if it comes from a certain country.

1.6.

Step 5: Postpurchase Evaluation In the last step of the decision-making process, the consumer evaluates his or her choice. The evaluation of the product results in a level of consumer satisfaction/dissatisfaction, which is determined by the overall feelings, or attitude, a person has about a product after purchasing it.

How well a product meets or exceeds expectations determines customer satisfaction. Consumers assess product quality by comparing what they have bought to a performance standard created by a mixture of information from marketing communications, informal information sources such as friends and family, and their own experience with the product category.

It is very important that marketers create accurate expectations of their product in advertising and other communications.

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Chapter 6: Understand Consumer and Business Markets

p.204

Even when a product performs to expectations, consumers may suffer anxiety or regret, or buyer’s remorse, after we make a purchase. When we reject product alternatives with attractive features, we may second-guess our decision.

p. 204

There are three types of buying conflicts that can lead to buyer’s remorse: 1.

2.

3.

Approach-approach conflicts occur when the consumer must choose between two desirable alternatives.

Approach-avoidance conflicts occur when the consumer desires a goal but at the same time wishes to avoid it.

Avoidance-avoidance conflicts are decisions with two equally undesirable alternatives.

1.7.

Cognitive Dissonance Cognitive dissonance is mental distress that results from holding two conflicting beliefs, values, or attitudes. Because people prefer to have consistency in their attitudes and perceptions, this conflict causes unpleasant feelings of unease or discomfort. This discomfort can manifest itself in a variety of ways.

A number of different situations can create conflicts that lead to cognitive dissonance: ■ Forced compliance: Sometimes you might find yourself engaging in behaviors that are opposed to your own beliefs due to external expectations at work, at school, or in a social situation.

■ New information: Sometimes gaining new information can create cognitive dissonance.

■ Similar choice decisions: People make decisions, both large and small, on a daily basis. p. 204

p. 205

1.8.

The Hive Mind: Consumer Decision Making in the Digital Age The moment the consumer decides to make a purchase is called ZMOT—zero moment of truth. ZMOT occurs on mobile phones, laptops, and other wired devices. Consumers have changed how they make decisions.

Consumers spend hours seeking information, even for small purchases. The “always on” consumer makes decisions collectively by seeking advice from her social network. The traditional steps in the consumer decision-making process are changing as well.

Hyperchoice is a term used to describe the condition in which consumers have too many choices, leading them to make poorer decisions and experience greater frustration.

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Part 2: Determine the Value Propositions Different Customers Want

The pandemic changed purchase behavior, shifting spending to online retailers but resulting in an overall decline in retail spending.

Consumers share their purchases on social media and get feedback on their decisions, which includes pictures of food porn.

1.9.

Search Advertising Information search is big business! Brands spend more and more on search advertising each year. Statista Market Insights projects that total U.S. search advertising will reach $188.56 billion in 2028. Search advertising, also called search engine advertising (SEA) or paid search advertising, refers to advertisements displayed on search results pages above or next to the search results.

Brands create search advertising campaigns on one or more of the more popular search engines.

1.10. Changes in Consumer Decision Making: Welcome to AI Artificial intelligence (AI) is rapidly moving forward in its influence on both consumer and B2B behavior. AI is intelligence demonstrated by machines which enables computer systems to perform such tasks as visual perception, speech recognition, decision making, and language translation. Chatbots are computer programs that use voice or text to allow consumers to talk with a computer.

1.11. Brand Responses Matter, Too! In a study, business students wrote complaint letters to companies. The companies responded with a free sample, a letter of apology, or no response at all. When the company sent a free sample, attitudes toward the company improved significantly; when the company sent a letter of apology, there was no change in attitude; and when the company did not respond, the attitude was more negative than before. p. 207

2.

INTERNAL INFLUENCES ON CONSUMERS’ DECISIONS We can attribute much of these differences to internal influences on consumer behavior—those things that cause each of us to interpret information about the outside world differently from one another.

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Figure 6.4 Process: Influences on Consumer Decision Making

Chapter 6: Understand Consumer and Business Markets

p. 207 2.1.

Perception

Perception is the process by which people select, organize, and interpret information from the outside world. We receive information in the form of sensations, the immediate response of our sensory receptors—eyes, ears, nose, mouth, and fingers—to such basic stimuli as light, color, and sound. We try to make sense of the sensations we receive by interpreting them in light of our past experiences.

p. 207

The perception process has implications for marketers because, as consumers absorb and make sense of the vast quantities of information competing for their attention, the odds are that any single message will get lost in the clutter. To help understand this process, marketers need to understand exposure, attention, and interpretation.

2.1.1. Exposure The stimulus must be within range of people’s sensory receptors to be noticed. Exposure is the extent to which a person’s sensory receptors are capable of registering a stimulus. Many people believe that even messages they can’t see will persuade them to buy advertised products.

p. 208

Claims about subliminal advertising of messages surface frequently. However, there is little evidence to support this technique and it is generally believed that it has no effect on our perception of products.

2.1.2. Attention Attention is the extent to which mental processing activity is devoted to a particular stimulus. Consumers are more likely to pay attention to messages that speak to their current needs.

Multitasking, flitting back and forth between our emails, TV, IMs, and so on, is now considered the norm. As a result, advertisers have to be more creative by mixing up the types of messages they send. Rich media, a digital advertising term for an ad that includes advanced features, like video and audio elements, encourage viewers to interact and engage with the content.

p. 208

2.1.3. Interpretation Interpretation is the process of assigning meaning to a stimulus based on prior associations we have with it and assumptions we make about it.

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Figure 6.5 Process: An Overview of the Perceptual Process Sensory Stimuli

Part 2: Determine the Value Propositions Different Customers Want

p. 209 2.2.

p. 209

Motivation

Motivation is an internal state that drives us to satisfy needs.

Once we activate a need, a state of tension exists that drives the consumer toward some goal that will reduce this tension by eliminating the need.

Hierarchy of needs categorizes motives according to the five levels of importance, the more basic needs being on the bottom of the hierarchy and the higher needs at the top. The hierarchy suggests that before a person can meet needs at a given level, she must first meet the lower level’s needs. Figure 6.6 shows the category of needs. Later Maslow added a sixth level to the hierarchy, self-transcendence. Consumers seeking to achieve this level focus on some higher goal outside themselves through altruistic endeavors or spiritual awakening.

Exhibit: Bathtub Figure 6.6 Snapshot: Maslow’s Hierarchy of Needs and Related Products p. 255

p. 209 Gamification is a strategy in which marketers apply game design techniques, often by awarding points, badges, or levels to nongame experiences in order to drive consumer behavior. p. 210

p. 210

p. 220

2.3.

Learning Learning is a change in behavior caused by information or experience. Learning can occur deliberately or when we are not trying. Psychologists have many theories explaining the learning process. The following is a discussion of some of those theories.

2.3.1. Behavioral Learning Behavioral learning theories assume that learning takes place as the result of connections that form between events that we perceive. In one type of behavioral learning, classical conditioning, a person perceives two stimuli at about the same time. After a while, the person transfers his response from one stimulus to the other.

Another common form of behavioral learning is called operant conditioning, which occurs when people learn that their actions result in rewards or punishments. This feedback influences how they will respond in similar situations in the future.

Data brokers are companies that collect information on consumers, use it to create detailed profiles of individuals, and sell or share the information with others.

2.3.2. Cognitive Learning The cognitive learning theory views people as problem solvers who do more than passively react to associations between stimuli.

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Figure 6.7 Snapshot: Consumers Learn in Many Ways p. 210

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Supporters of this viewpoint stress the role of creativity and insight during the learning process. Cognitive learning occurs when consumers make a connection between ideas or by observing things in their environment. Observational learning occurs when people watch the actions of others and note what happens to them as a result. p. 211 2.4.

Attitudes

An attitude is a lasting evaluation of a person, object, or issue.

Consumers have attitudes about brands. According to the ABC Theory of Attitudes, a person’s attitude has three components: affect, cognition, and behavior.

Affect is the feeling component of attitudes. Affect refers to the overall emotional response a person has to a product. Affect is usually dominant for expressive products. Sadvertising refers to advertising designed to arouse more negative emotions to get our attention and create a bond with their products.

p. 211

Cognition, the knowing component, is the belief or knowledge a person has about a product and its important characteristics.

Behavior, the doing component, involves a consumer’s intention to do something, such as the intention to purchase or use a certain product.

p. 212 2.5.

Personality and the Self: Are You What You Buy?

Personality is the set of unique psychological characteristics that consistently influences the way a person responds to situations in the environment.

It makes sense to assume that consumers buy products that are extensions of their personalities. That’s why marketers try to create brand personalities that will appeal to different types of people.

A person’s self-concept is his attitude toward himself. The selfconcept is composed of a mixture of beliefs about one’s abilities and observations of one’s own behavior and feelings (both positive and negative) about one’s personal attributes, such as body type or facial features. The extent to which a person’s selfconcept is positive or negative can influence the products he buys and even the extent to which he fantasizes about changing his life.

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Exhibit: Travel

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The “selfie” epidemic is an artifact of society’s obsession with themselves.

Use website here: www.colorquiz.com ‘personality’ assessment based on color preferences

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p. 212

2.6.

Age A person’s age is another internal influence on purchasing behavior. Many of us feel we have more in common with those of our own age because we share a common set of experiences and memories about cultural events. Goods and services often appeal to a specific age group.

p. 212

Age is important, but actually regardless of how old we are, Exhibit: Family what we buy often depends more on our current position in the life cycle family life cycle—the stages through which family members pass as they grow older. Marketers know that the family life cycle is often a better predictor of purchasing behavior than simple demographics alone.

In-Class Activity Using the product categories of dining out and automobiles, have students identify the types of restaurants and cars that are likely to be purchased in the various stages of the family life cycle (e.g., fine dining and sports cars when dating/McDonald’s and mini-vans with full nest children/nice restaurants and a Harley when the kids leave for college). Can they see examples within their own family? p. 213 2.7.

Lifestyle A lifestyle is a pattern of living that determines how people choose to spend their time, money, and energy and that reflects their values, tastes, and preferences. Consumers often choose goods, services, and activities that are associated with a certain lifestyle.

p. 213

Demographic characteristics, such as age and income, tell marketers what products people buy, but they don’t reveal why.

To breathe life into demographic analyses, marketers turn to psychographics, which groups consumers according to psychological and behavioral similarities. One way to do this is to describe people in terms of their activities, interests, and opinions (AIOs). These dimensions are based on preferences for vacation destinations, club memberships, hobbies, political and social attitudes, tastes in food and fashion, and so on.

p. 214 3.

SITUATIONAL AND SOCIAL INFLUENCES ON CONSUMERS’ DECISIONS

p. 214

Situational and social influences—factors external to the consumer—have a big impact on the choices consumers make and how they make them.

3.1.

Situational Influences When, where, and how consumers shop—what we call situational influences—shape their purchase choices. Some 6-11 Copyright © 2025 Pearson Education, Inc.

Exhibit: Pickleball

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important situational cues are our physical surroundings and time pressures.

3.1.1. The Physical Environment People’s moods and behaviors are strongly influenced by their physical surroundings. The store environment influences many purchases.

3.1.2. The Purchase Setting Arousal and pleasure determine whether a shopper will react positively or negatively to a store environment. The importance of these surroundings explains why many retailers focus on packing as much entertainment as possible into their stores.

p. 215

Marketers know that dimensions of the physical environment, including factors such as decor, smells, lighting, music, and even temperature, can significantly influence consumption.

Sensory marketing is becoming big business.

Retailers have purchased custom scents to appeal to their customers and enhance their brand. Marketers term this strategy sensory branding.

3.1.3. Time Marketers know that the time of day, the season of the year, and how much time one has to make a purchase affects decision making. Time is one of consumers’ most limited resources.

Indeed, many consumers believe that they are more pressed for time than ever before. This sense of time poverty makes consumers responsive to marketing innovations that allow them to save time. Consumers browse products on mobile devices while in brick-and-mortar stores (known as showrooming) and 71 percent say they are searching for the lowest product prices online from any smart device (known as webrooming).

3.1.4. Disruption in Consumer Behavior: New Trends in Technology In 2020, consumers’ lives were changed by the pandemic. Some of the top technology trends that are already changing how consumers behave or will be in the near future include the following: • •

Generative AI: Generative AI works to create models capable of generating new content.

Web3/Blockchain: Web3 refers to the next stage of the

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Exhibit: Bass Pro Shops

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p. 216 •

• • •

p. 216 3.2.

p. 217

p. 217

p. 217

Internet, with the potential for decentralized technologies and protocols that aim to provide more open, user-centric, and secure online experiences.

Metaverse: The metaverse is a dynamic digital universe where augmented reality (AR), virtual reality (VR), and immersive technologies converge, enabling real-time interactions and blurring the boundaries between physical and digital realms.

5G technology: 5G technology provides significantly faster data speeds and increased capacity to handle a large number of connected devices.

Quantum computing: Quantum computing modifies data processing and storage and promises to make computers thousands of times faster than today’s processors.

Sustainable/Climate tech: This includes both technology meant to remedy or offset carbonization and environmental problems and technology produced using green or ecologically responsible materials and processes.

Social Influences on Consumers’ Decisions

Family, friends, and classmates often influence our decisions, as do larger groups with which we identify, such as ethnic groups and political parties.

3.3. Values (Again) Cultural values are deeply held beliefs about right and wrong ways to live. Marketers who understand a culture’s values can tailor their product offerings accordingly.

3.3.1. Trends Personal values of consumers are shared by many members of the culture and they change over time. Major trends include: • The sharing economy • Authenticity and personalization • Blurring of gender roles • Diversity and multiculturalism • Healthy and ethical living • Interconnection and the Internet of Things 3.3.2. Culture Culture is society’s personality. It is values, beliefs, customs, and tastes, produced or practiced by a group of people. A consumer’s culture influences his buying decisions.

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3.3.3. Subcultures A subculture is a group that coexists with other groups in a larger culture but whose members share a distinctive set of beliefs or characteristics—such as members of a religious organization or an ethnic group. Microcultures are groups of consumers who identify with a specific activity or art form.

p. 218

For marketers, some of the most important subcultures are racial and ethnic groups because many consumers identify strongly with their heritage, and products that appeal to this aspect of their identities appeal to them. Social media have been a real boom to subcultures and microcultures; they provide an opportunity for like-minded consumers to share their thoughts, photos, and videos.

3.3.4. Conscientious Consumerism: An Emerging Lifestyle Trend Powerful new social movements within a society also contribute to how we decide what we want and what we don’t. One such influence is consumerism, the social movement directed toward protecting consumers from harmful business practices.

Many consumers are becoming very aware of the social and environmental consequences of their purchases—and making their decisions accordingly.

Conscientious consumerism is a movement in which consumers are more mindful of environmental issues and marketers support consumerism issues.

p. 218 3.3.5. Social Class Social class is the overall rank of people in a society. People who are within the same class work in similar occupations, have similar income levels, and usually share taste in clothing, decorating styles, and leisure activities.

p. 218

Luxury goods often serve as status symbols; visible markers that provide a way for people to flaunt their membership in higher social classes (or at least to make others believe they are members). Mass class term refers to the hundreds of millions of global consumers who now enjoy a level of purchasing power that’s sufficient to let them afford high-quality products offered by well-known multinational companies.

3.3.6. Group Membership People act differently in groups than they do on their own. With more people in a group, it becomes less likely that any one 6-14 Copyright © 2025 Pearson Education, Inc.

Exhibit: Red bottom shoes

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member will be singled out for attention, and normal restraints on behavior may be reduced. In many cases, group members show a greater willingness to consider riskier alternatives than they would if each member made the decision alone.

p. 219

A reference group is a set of people a consumer wants to please or imitate. Consumers “refer to” these groups when they decide what to wear, where they hang out, and what brands they buy.

Exhibit: Star Wars 3.3.7. Opinion Leaders An opinion leader is a person who influences others’ attitudes or behaviors because they believe that he possesses expertise about the product. Opinion leaders usually exhibit high levels of interest in the product category. They continuously update their knowledge as they read blogs, talk to salespeople, or subscribe to podcasts about the topic.

p. 219 3.3.8. Gender Roles Some of the strongest pressures to conform come from our gender roles, society’s expectations regarding the appropriate attitudes, behaviors, and appearance for men and women. These assumptions about the proper roles of men and women, flattering or not, are deeply ingrained in marketing communications.

Men’s sex roles are changing too. For one, men are concerned as never before with their appearance. In fact, appearance ranks as their second-biggest worry (topped only by money worries and weighing on them more than worries about their family and their health).

p. 220

4. BRAND YOU: WHY EMPLOYERS BUY 4.1 Step 1: Understand the Employer’s Decision Process

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Exhibit: Men’s cosmetics

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p. 221

Getting a job is about the company’s needs. Companies may go through the same decision process as consumers.

1. Problem recognition: Someone retires or the company’s growth creates needs for more employees.

2. Information search: The hiring manager posts the position.

3. Evaluation of alternatives: The hiring manager reviews résumés, interviews some candidates, and conducts background checks.

4. Product choice: The hiring manager makes the decision to extend an offer to one of the qualified candidates.

5. Postpurchase evaluation: Most organizations have a probationary time frame, normally three to six months, after which they evaluate the employee, provide feedback, and make a decision whether to keep the new employee.

4.2 Step 2: Understand the Process of Creating Brand You Branding is a process of determining who you are and how you can differentiate yourself from other college grads who are looking for a job. Understand the ways in which you can add value to an organization and be able to verbalize them.

Review your mission statement and your SWOT analysis.

Identify your core competency. What is the thing you do best that will add value to the organization?

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• p. 221

Here’s My Choice……

Adam went with Option 2 and decided to do a deal at the minimum threshold. He believed that Option 2 struck a good balance between growing the brand and not imposing his will on the marketing team.

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Exhibit: Atlanta Braves

Part 2: Determine the Value Propositions Different Customers Want

IV. END-OF-CHAPTER ANSWER GUIDE CHAPTER QUESTIONS AND ACTIVITIES CONCEPTS: TEST YOUR KNOWLEDGE 6-1.

What is consumer behavior and why is it important for marketers to understand consumer behavior?

Consumer behavior is the process involved when individuals or groups select, purchase, use, and dispose of goods, services, ideas, or experiences. It is important that marketers understand consumer behavior because wants and needs are satisfied best when marketers understand the behaviors of consumers.

6-2. Explain and briefly define the five steps in the consumer decision-making process.

The five steps in the consumer decision-making process are: 1. Problem recognition: When a consumer identifies a difference between their current state and their desired state, which creates a perceived need.

2. Information search: After recognizing the problem, the consumer seeks information to resolve the issue. This can involve internal sources (recalling past experiences) or external sources (seeking input from others, researching online).

3. Evaluation of alternatives: Consumers assess different products or services that could satisfy their need. This involves comparing the features, benefits, prices, and other attributes of each alternative.

4. Product choice: Based on the evaluation, the consumer selects the product or service that best meets their needs from the available alternatives.

5. Postpurchase evaluation: After purchasing, the consumer assesses the product or service to determine if it meets their expectations. This evaluation influences future purchase decisions and can lead to either satisfaction or dissatisfaction.

6-3.

What is brand loyalty? Explain consumer satisfaction/dissatisfaction. What is buyer’s remorse?

Brand loyalty refers to a pattern of repeat product purchases, accompanied by an underlying positive attitude toward the brand. It is based on the belief that the brand makes products superior to those of its competition. Consumers develop a preference for a brand and consistently choose it over others.

Consumer satisfaction/dissatisfaction refers to the overall feeling or attitude a person has about a product after purchasing it. Consumer satisfaction occurs when the product meets or exceeds the expectations set by the consumer, leading to potential repeat purchases and positive word-of-mouth. Dissatisfaction arises when the product falls short of expectations, which can deter future purchases and damage the brand’s reputation.

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Buyer’s remorse refers to the regret a consumer may feel after making a purchase decision.

This anxiety or second-guessing often occurs when a consumer questions whether they made the right choice, especially after foregoing other possible alternatives. Buyer’s remorse can be influenced by the perceived risk associated with a product, its cost, and the consumer’s emotional response to the purchase.

6-4.

Explain ZMOT. In what ways are the steps in the consumer decision-making process changing?

ZMOT refers to zero moment of truth. This is the moment a consumer decides to proceed with a purchase. It is often influenced by digital searches on devices like smartphones or laptops.

The consumer decision-making process is evolving due to digital technology. Continuous access to information changes how consumers evaluate alternatives, leading to “hyperchoice,” which can make decision making more complex and potentially frustrating.

The process is increasingly non-linear, with consumers often revisiting earlier steps multiple times due to new information from online reviews and social media posts.

6-5.In what ways are new technology trends changing consumer behavior?

New technology trends are reshaping consumer behavior through advancements in several areas: • Generative AI is revolutionizing content creation, offering personalized and innovative interactions.

• Web3 and blockchain technologies enhance security and decentralization, altering digital interactions and ensuring data privacy.

• The metaverse blends physical and virtual realities, transforming how consumers engage with shopping, entertainment, and social activities.

• 5G technology is accelerating data speeds and connectivity, supporting the Internet of Things and advancing services like health care and autonomous vehicles.

6-6.

What is perception? What is exposure? Explain subliminal advertising.

Perception refers to the process by which consumers select, organize, and interpret information from the outside world. It involves the immediate responses of sensory receptors—eyes, ears, nose, mouth, and skin—to various stimuli, and how these sensations are interpreted based on past experiences and current needs.

Exposure is the first step in the perceptual process, where a stimulus comes within range of someone’s sensory receptors. For exposure to be effective, the stimulus must be noticed by the person; for example, a billboard must be large enough and clear enough for passing motorists to read.

Subliminal advertising refers to embedding messages in media that are not consciously seen or heard by consumers but are intended to influence their behavior. Although widely 6-21 Copyright © 2025 Pearson Education, Inc.

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discussed and often controversial, there is little evidence to suggest that subliminal advertising effectively impacts consumer behavior.

6-7.

Explain attention. What are some factors that influence consumer attention?

Attention refers to the degree to which individuals focus on specific stimuli. This often is crucial for the effectiveness of marketing efforts. Factors influencing consumer attention include: • Personal needs and goals, where consumers are more likely to notice advertisements that relate directly to their immediate requirements • The size of the advertisement, with larger or longer ads capturing greater attention • The novelty of the stimulus—unique or unexpected ads tend to stand out and engage consumers more effectively

6-8.

What is gamification, and why do marketers engage in it?

Gamification is a marketing strategy where game design techniques are applied to nongame contexts, such as consumer interactions and purchases. Marketers use gamification because it leverages the psychological predisposition toward gaming to generate engagement and increase consumer loyalty. By integrating elements like points, levels, challenges, and rewards into marketing activities, gamification makes the experience more interactive and enjoyable. This can encourage repeated interactions and deeper connection to the brand.

6-9.

What is behavioral learning? What is cognitive learning?

Behavioral learning theories suggest that learning comes from experiences and the connections consumers make between different events.

Cognitive learning theory views individuals as active problem solvers who engage with and process information from their surroundings. This approach emphasizes internal mental processes and the importance of insights, where individuals learn by understanding relationships and observing outcomes in their environment.

The family life cycle concept outlines the various stages a family goes through, each influencing consumer behavior in specific ways. This model helps marketers anticipate changes in purchasing patterns as families evolve, from singles spending on entertainment to older couples investing in travel. It highlights shifting needs based on family structures.

6-10. What is an attitude? Explain the ABC Theory of Attitudes. What is affect? What is sadvertising?

Attitude refers to a lasting evaluation that individuals hold about people, objects, or issues.

It influences how they feel, think, and behave towards these subjects.

The ABC Theory of Attitudes breaks down attitudes into three components: affect, behavior, and cognition.

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Affect refers to the emotional response an individual has towards a product, often determining their initial reaction or feeling.

Sadvertising involves creating advertisements designed to evoke strong emotional responses such as sadness or nostalgia to create a bond between the consumer and the brand. These ads aim to grab attention and be memorable by triggering emotional reactions.

6-11. How do marketers define personality? What is meant by self-concept?

Marketers define personality as the set of unique psychological characteristics that consistently influence the way a person responds to situations in their environment.

Self-concept refers to an individual’s perception of themselves, encompassing a mixture of beliefs about one’s abilities, observations of one’s own behavior, and feelings about one’s personal attributes.

6-12. What is the family life cycle? How does it impact specific purchases?

The family life cycle is a concept that describes the different stages through which families pass as they grow older. These stages include events such as marriage, the birth of children, the children growing up and leaving home, and retirement. This concept helps marketers understand how a family’s needs and behaviors change over time.

The family life cycle impacts specific purchases because the needs of a family vary greatly with each stage. For example, couples with small children may prioritize purchasing baby furniture, life insurance, and a larger house to accommodate their growing family. In contrast, older couples whose children have left home are more likely to purchase leisure items, luxury goods, or retirement homes.

6-13. Explain sensory marketing and sensory branding.

Sensory marketing refers to strategies that engage consumers’ senses to influence their perception of a brand or product. Sensory marketing often involves using sensory experiences such as taste, sight, touch, smell, and hearing to create a distinctive and memorable interaction with the product or service.

Sensory branding embeds a sensory experience that is directly associated with the brand itself. This approach ensures that specific sensory cues, like a unique fragrance or sound, become intrinsically linked to the brand, enhancing brand recognition and emotional connections.

6-14.

Explain the concept of time poverty. What is showrooming? What is webrooming?

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Time poverty refers to the perception that individuals have less free time available, making them more receptive to marketing strategies that save time. Common examples include online shopping and same-day delivery services.

Showrooming is when consumers examine products in a physical store but make their purchase online, often where they find lower prices.

Webrooming involves consumers researching products online but buying them in a physical store so that they can immediately acquire the product, verify its quality, or avoid shipping costs.

6-15. What is generative AI? What is the metaverse?

Generative AI refers to a field of artificial intelligence that creates models capable of generating new content. This can include images, text, and music. Generative AI has the potential to transform various industries by automating creative processes and generating innovative solutions.

The metaverse is a dynamic digital universe where augmented reality (AR), virtual reality (VR), and other immersive technologies converge. The metaverse enables real-time interactions, while blurring the boundaries between physical and digital worlds. It offers new opportunities for commerce and engagement, potentially revolutionizing how brands interact with consumers.

6-16.

Identify and explain six major trends that can be used to help predict consumers’ personal values.

The six major trends that can be used to help predict consumers’ personal values are: 1. The sharing economy: A blend of producer and consumer roles, with platforms like Airbnb and Uber that allow individuals to provide services.

2. Authenticity and personalization: A preference for unique, personalized experiences and products over mass-market options.

3. Blurring of gender roles: A shift from traditional gender roles to more inclusive identities.

4. Diversity and multiculturalism: Catering to diverse cultural, ethnic, and racial backgrounds in marketing strategies.

5. Healthy and ethical living: Consumers increasingly prefer products that promote wellness and are ethically produced.

6. Interconnection and the Internet of Things (IoT): The growth of connected devices is changing consumer interactions with products, leading to smarter and more integrated user experiences.

6-17.

is the business process of obtaining outside vendors to produce goods or services that otherwise might be supplied “in house.” Explain the term culture. What is a subculture?

What is a microculture?

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Culture is defined as the values, beliefs, customs, and tastes produced or practiced by a group of people, effectively forming its personality.

Subculture is a subset within a larger culture, where members share distinctive sets of beliefs or characteristics that distinguish them from the broader culture. Subcultures often form around shared experiences or interests.

Microculture refers to even smaller groups that may share an interest in specific hobbies, arts, or social activities, further segmenting from subcultures. Microcultures often form around specific activities like a particular game, a type of music, or other focused interests.

6-18. What is a reference group? What is an opinion leader?

A reference group is a set of people that an individual uses as a standard for guiding or evaluating their own behavior, attitudes, or values. These groups can include family, friends, co-workers, or celebrities. Reference groups often influence decisions, such as what to wear, where to go, and what to buy.

An opinion leader is someone within a reference group who influences others because of their specific expertise, knowledge, or personality traits. Opinion leaders are often seen as authoritative or knowledgeable in particular areas, leading others in their circles to look to them for advice, recommendations, and guidance.  ACTIVITIES: APPLY WHAT YOU’VE LEARNED 6-19. Creative Homework/Short Project This chapter indicated that consumers go through a series of steps (from problem recognition to postpurchase evaluation) as they make purchases. Write a detailed report describing what you as a consumer would do in each of these steps when deciding to purchase one of the following products: a. A new suit for a job interview b. A new smartphone c. Tickets for a movie for you and a date d. A bottle of shampoo e. A new lamp for your desk where you study Then, make suggestions for what marketers might do to make sure that consumers like you, who are going through each step in the consumer decision process, move toward the purchase of their brand. (Hint: Think about product, place, price, and promotion strategies.)

Students should review the steps (from problem recognition to postpurchase evaluation) in making a purchase and then share their suggestions for marketers with the class.

6-20. In Class, 10–25 Minutes for Teams During the last week of class, your professor explains how she wants to employ a gamification strategy next semester to further motivate and 6-25 Copyright © 2025 Pearson Education, Inc.

Part 2: Determine the Value Propositions Different Customers Want

engage students, and she is asking for your help. Develop a simple gamification strategy that she can use in the classroom. Describe what the goals should be, how progress will be measured, and what the reward system will be.

Students are typically very familiar with computer games and will enjoy using their creativity to develop a gamification strategy. Gamification applies game design techniques, by awarding points or badges to nongame experiences in order to drive consumer behavior.

Many believe that gamification will become an even more significant trend in the future.

Students can discuss whether they would study more if they could collect badges for their efforts.

6-21. Creative Homework/Short Project Discuss the role of peer influence in determining your participation in specific sports, clubs, and other extracurricular activities in either high school or college. Describe how—either intentionally or unintentionally—your peers influenced your decisions to engage in certain activities over others. Are there examples that demonstrate how your friends’ choices impacted your own choices? Are there times when you actively avoided peer influence and made your own decision?

Student answers will vary. Consider asking students to reflect on how peer influences shaped their participation in sports, clubs, and extracurricular activities during high school or college. Ask them to share examples where peers directly influenced their choices or where the general popularity of an activity among their friends swayed their decisions.

Encourage them to also explore instances where they resisted peer pressure, opting for activities that were less popular or personally more meaningful. Consider concluding by asking them to think about how this awareness might impact their future decisions in both personal and professional decision making.

6-22. For Further Research (Individual) You work for a firm that sells high-end digital cameras.

You are concerned about the effects of current consumer trends, including improved quality of in-phone cameras and the decrease in photo printing. Others in your firm do not share your concerns—they think “business as usual” will be adequate. Develop a memo for upper management that outlines your concerns, the impact you think the trends could have on the business, and what the company could do to help decrease the chance of negative results.

Students can develop memos and share them with the class.

6-23. For Further Research (Groups) We learned in this chapter that when considering a product need, consumers have an evoked set of brands and a consideration set of brands.

With some of your classmates, conduct a simple research study and explain your results using the following steps. a. Select a product that students in college might purchase. b. Develop a questionnaire that you will ask student participants to complete. The questionnaire should ask students to list all of the brands of the product you have selected that they are aware of. Give them at least five minutes to complete this question. c. Then ask them to tell you which ones they would seriously consider buying if they 6-26 Copyright © 2025 Pearson Education, Inc.

Chapter 6: Understand Consumer and Business Markets

were going to make a purchase today. d. Develop a report using the results of the survey. What conclusions can you draw from the research?

This question can be assigned as an out-of-class research project. Students can present their findings to the class.

6-24. Critical Thinking You’ve been asked to serve on a marketing team to support the launch of a new holistic wellness resort. The resort offers weeklong retreats focusing on mindfulness, stress relief, and healthy eating. Consider the family life cycle stages and how they impact marketing decisions. Identify three different life cycle stages and what factors come into consideration when marketing to each of them.

Student answers will vary. Consider asking student to reflect on how the family life cycle stages influence marketing strategies for a new holistic wellness resort. Ask them to identify three distinct life cycle stages—such as young singles, full nest families, and retired couples—and discuss the unique marketing considerations for each. For young singles, focus might be on the social and networking aspects of the retreat. For families, emphasize activities that support family bonding and cater to children’s entertainment. For retired couples, highlight tranquility, health benefits, and accessibility. Encourage students to think about how the needs and desires at each stage can shape the resort’s promotional messages, package deals/promotions, and overall guest experiences.

6-25. In Class, 10-25 Minutes for Teams With your team members, make a list of the ways in which the values of your age subculture, the values of your parents’ age subculture, and the values of your grandparents’ age subculture differ and are alike. You might want to think of this in terms of categories, e.g., values regarding money or values regarding different purchases. Next, develop your assumptions as to why these differences exist. Make a brief presentation to your class.

Student responses will vary. Encourage them to analyze the reasons for the similarities and differences given different external factors and trends that impact(ed) both groups.  CONCEPTS: APPLY MARKETING METRICS In this chapter, you learned about the steps consumers and businesses go through when purchasing a product and the factors that may influence their decision. Both processes focused on the “buyer’s journey” to purchase. In Chapter 5, you learned about the importance of customer relationship management (CRM), especially for firms involved in digital marketing. The term customer journey reflects the CRM perspective by focusing on the buyer’s relationship with a specific company, brand, or product and identifying what marketers need to do to help customers move through the five-stage process summarized in the following list: • Awareness: The customer realizes they have a problem or are experiencing a “pain point,” but they may not know that they need a product to solve the problem. Marketers need to provide educational content that helps the customer understand the problem without

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•

• •

•

encouraging a purchase solution. For example, they may post a how-to article or video or offer a free online course to learn about a topic.

Consideration: The customer has explored the problem enough to know that they need a product and have started comparing brand offerings. Marketers need to provide “product marketing content” to make it easy for customers to compare offerings. For example, they may post comparison guides, publish case studies or customer stories, or share articles explaining product usage.

Decision: The customer is ready to make a purchase from you. Marketers need to focus on providing a transparent and efficient buying process. For example, they may offer free trials or demos, detailed pricing information, and promotional offers.

Retention: The customer has purchased the product and decides to continue using it.

Marketers need to focus on providing a good “onboarding experience” to help them begin using the product and strong customer service to solve any problems with the product. For example, they may provide online user guides and videos, provide a chat support option, or create a “knowledge base” of customer problems and solutions.

Loyalty: The customer becomes an advocate, actively recommending the product to others.

Marketers need to focus on providing an excellent experience from start to finish to reach this stage. Maintaining loyal customers may involve using a referral program or offering perks to continuing customers.

6-26. Select one of the stages of the buyer’s journey described above. What metrics could a company use to evaluate its efforts to build a relationship with customers in this stage of their journey? What indicators could they track to identify customers who are ready to move to the next stage?

Student answers will vary depending on the stage they selected. For example, in the Awareness stage, students may suggest the number of unique views/reads for a piece of educational content, number of likes/shares/positive comments on that content, or the number of people who complete an online course to learn about a topic. They would likely suggest that the primary indicator that a customer is ready to move to the Consideration stage is when they start searching for product-specific information such as clicking a link for more information about your product in a blog post or video.  CHOICES: WHAT DO YOU THINK? 6-27. Critical Thinking You have been hired by a large retailer that is considering adopting a gender-neutral approach for its children’s clothing and toy departments. Identify some of the reasons that support this change. Identify any risks that may be associated with this change. What process would you use to help the retailer determine if this change should be implemented?

Student answers will vary. Consider discussing the reasons supporting this change, such as changing societal shifts towards inclusivity and reducing gender stereotypes. Highlight the potential to attract customers who value such inclusivity. Then, shift to the risks, which might include alienating other customer segments or experiencing backlash on social 6-28 Copyright © 2025 Pearson Education, Inc.

Chapter 6: Understand Consumer and Business Markets

media. To evaluate whether to implement this change, suggest a structured process: first, conduct market research to gauge consumer attitudes and competitor approaches; second, initiate small-scale testing in select stores to gather direct feedback and measure performance; third, analyze sales data and customer satisfaction from the test to decide on a broader rollout.

6-28. Critical Thinking Consumers often buy products because they feel pressure from reference groups to conform. Does conformity exert a positive or a negative influence on consumers? With what types of products is conformity more likely to occur?

Most students will probably say that conformity has no effect on them (only on others).

This is very normal because most believe that conformity is negative (even though we all do it daily). What if we all chose to drive on any side of the road, could cut in line at any time, or didn’t have to pay for something if we didn’t want to? Have students follow this line of thinking about when conformity is good. Is conformity necessary to have a wellfunctioning society? Next, talk about the negative aspects of conformity or peer pressure.

Is all peer pressure bad? What if your peers (friends) encouraged you to brush your teeth because your breath smelled? Would this be bad? The need to conform seems to lessen as we grow older and more mature. However, most adults feel that conformity is necessary to make sense out of things and feel that youth should conform more (even though they did not want to when they were young). Make a list of conformity products and have the class judge the list.

6-29. Ethics Marketers have been shelling out the bucks on sensory marketing techniques for years to appeal to your subconscious mind. And studies show that it works. But is sensory marketing fair? Some say it’s a way to enhance the purchasing process, while others say marketers are unethically manipulating consumers. What are some of the pros and cons associated with sensory marketing? What is your position?

Students can share their views on sensory marketing techniques that appeal to a consumer’s subconscious mind.

6-30. Critical Thinking Mobile commerce (m-commerce) takes place via a smartphone or tablet instead of a desktop or laptop computer. How has m-commerce changed the way consumers shop? What do marketers need to do now and in the future to better support their mcommerce customers? What do you think the future of m-commerce will be?

Students can share their experiences in m-commerce via their smartphone or tablet. Mcommerce has definitely changed the way consumers shop because many people have their smartphones with them most of the time, so their shopping opportunities are expanded.

Marketers need to make m-commerce as convenient as possible by designing user-friendly websites, easy check-out and payment capabilities, easy-to-understand shipping information, and a quick purchase confirmation. Students can share their thoughts on the future of m-commerce.

6-31. Critical Thinking Showrooming continues to be a challenge for many brick-and-mortar retailers. Consumers will frequently browse merchandise in person and then order the same 6-29 Copyright © 2025 Pearson Education, Inc.

Part 2: Determine the Value Propositions Different Customers Want

merchandise online, often from a different retailer. What are some strategies that traditional retailers can implement to minimize showrooming among customers in their physical stores?

Student answers will vary. Consider exploring strategies that traditional brick-and-mortar retailers can employ to minimize showrooming, where customers browse in-store but purchase online from competitors. First, discuss enhancing the in-store experience by providing exceptional customer service, exclusive in-store discounts, and unique product demonstrations that cannot be replicated online. Next, consider the integration of technology, such as mobile apps that offer in-store navigation, personalized promotions, and the ability to check out via smartphone to streamline the shopping experience.

Additionally, discuss the potential for price matching policies that assure customers they will not find lower prices online, thereby incentivizing immediate in-store purchases.

6-32. Critical Thinking How are the different levels in Maslow’s hierarchy of needs visible in consumer marketing? Do you see differences in the ways that basic necessities are marketed versus products that align with the higher levels? Why or why not?

Student answers will vary. Consider outlining Maslow’s hierarchy and then examine the different marketing approaches for products at various levels. Discuss how basic necessities, corresponding to physiological and safety needs, are marketed with emphasis on affordability, availability, and essential benefits. Contrast this with products aimed at fulfilling higher-level needs like social belonging, esteem, and self-actualization, which are often marketed through lifestyle appeals, emotional connections, and aspirational messaging. Encourage students to consider the differences in advertising language, imagery, and channels used for these products.

6-33. Ethics Consider the following list of environments designed specifically for customer target audiences. For each, identify possible accessibility issues for individuals with disabilities or sensory concerns. Explain how each item may be modified to maintain its intended effect while also still being welcoming to those who may need accommodations: • A dimly lit steakhouse • An intentionally disorganized and cluttered “closeout” retailer • A hotel that pumps a signature scent into its lobby • A fitness bootcamp class with loud music • A music concert with intense strobe lights Student answers will vary. Encourage students to think about how modifications can be implemented in a way that maintains the original intended experience and functionality of the environment, making it welcoming for all users.

6-34. Critical Thinking Do you think that subliminal advertising is illegal? Do you think it should be illegal if it is not? Do you believe it exists and is being used by marketers today?

Do you think most people agree with you? Why do you think it is discussed so much?

Student answers will vary.

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Chapter 6: Understand Consumer and Business Markets

 MINIPROJECT: LEARN BY DOING The purpose of this miniproject is to increase your understanding of the process that consumers go through when making a purchase decision. First, select one of the following products (or some other product of your choice) that now or in the future you might be in the market for: • New or used car • Spring break vacation • Apartment • Computer or smartphone 6-35. Problem Recognition Describe the situation or event that might lead you to purchase this product.

Students should refer to the steps in the consumer decision-making process as they select a product and go through the steps of the buying process.

Problem recognition occurs whenever a consumer sees a significant difference between their current state of affairs and some desired or ideal state.

6-36. Information Search Use the Internet to gather some initial information about the product you chose. Visit at least two stores or locations where the product may be purchased to gather further information.

Students can use the Internet to gather information. Comparison shopping agents (or ShopBots) such as Shopzilla.com and NexTag.com are web applications that can help online shoppers to find what they are looking for at the lowest price.

6-37. Evaluation of Alternatives Identify at least five alternative product options that you are interested in. Narrow down your selection to two or three choices. Which are the most feasible? What are the pros and cons of each?

There are two components to this stage of the decision-making process. First, a consumer armed with information identifies a small number of products in which they are interested.

Then they narrow down their choices by deciding which of all the possibilities are feasible and by comparing the pros and cons of each remaining option. As a buyer begins to look systematically at different possibilities, they will also identify important characteristics or evaluative criteria that they will use to decide among them.

6-38. Product Choice Make a final decision about which product you will purchase. Describe the heuristics that aided in your decision making.

Deciding on one product and acting on this choice is the next step in the decision-making process. Consumers often rely on decision guidelines when weighing the claims that companies make. These heuristics, or mental rules of thumb, help simplify the decision-

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Part 2: Determine the Value Propositions Different Customers Want

making process. One such heuristic is “price = quality.” Many people willingly buy the more expensive brand because they assume that if it costs more, it must be better.

Perhaps the most common heuristic is brand loyalty; this occurs when we buy the same brand repeatedly Another heuristic is based on country of origin. We assume that a product has certain characteristics if it comes from a certain country. Sometimes a marketer wants to encourage a country association even when none exists.

6-39. Postpurchase Evaluation If this is a product you have actually purchased, explain the reasoning behind your current satisfaction or dissatisfaction with the product. If not, develop several reasons you might be satisfied or dissatisfied with the product.

In the last step of the decision-making process, the consumer evaluates just how good a choice it was. The evaluation of the product results in a level of consumer satisfaction/dissatisfaction, which is determined by the overall feelings, or attitude, a person has about a product after purchasing it.

6-40. Prepare a report that explains in detail the decision-making process for the product in your purchase scenario.

Students can present their decision-making process to the class and compare their purchase scenarios.

V. MARKETING IN ACTION CASE: REAL CHOICES AT HASBRO Summary of Case The trend of adults buying toys for themselves, dubbed the “kiddults” market, has seen a remarkable surge, with sales soaring by 26 percent to $5.6 billion in just one year. This market boom has been fueled by millennials who, driven by nostalgia and a need for comfort during tough economic times and the pandemic, are reconnecting with the toys of their youth. Leading toymaker Hasbro has strategically tapped into this trend with the launch of Hasbro Pulse, an online platform that blends nostalgia with modern tech. Here, fans find reissues of classic toys alongside new versions and exclusive member benefits. This move not only caters to the preferences of adult consumers but also acts as a crucial market research tool, helping Hasbro identify popular products and potentially transition successful concepts into full-fledged product launches. As the kiddult market continues to grow, companies like Hasbro are carefully planning ways to sustain and expand this unique consumer segment.

Suggestions for Presentation This case could be assigned for various out-of-class or in-class discussion activities.

Out-of-Class Suggestions

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Chapter 6: Understand Consumer and Business Markets

Ask students to create a social media campaign for Hasbro’s kiddult products. The target audience is millennials. In addition to content, ask students to share which social media network they chose and why they feel it is the best platform to reach the target audience.

In-Class Suggestions Review the website for Hasbro Pulse (https://hasbropulse.com). Discuss the product positioning used and contrast it with Hasbro’s general consumer site (https://shop.hasbro.com/en-us). Ask students to identify how the differentiated content on these two sites reinforce the chapter content on consumer and business markets.

Questions for Discussion 6-41. Analyze the potential challenges Hasbro and other toy manufacturers may face in sustaining the kiddult market over the long term. How can these companies continue to keep these brands relevant and prevent consumer fatigue?

Student responses will vary. Guide students to consider both internal and external factors affecting the longevity of the kiddult market. Encourage them to think about the cyclical nature of trends and consumer interests, and how economic factors could influence spending habits on non-essential goods like collectible toys. Discuss strategies Hasbro and its competitors might use to keep their brands relevant. These ideas could include limitededition releases, collaborations with other popular brands, and leveraging digital technology to enhance the collectability and interactive aspects of toys. Encourage debate on how constant innovation and engagement via social media platforms can help prevent consumer fatigue in the kiddult market.

6-42. Discuss the implications of incorporating unconventional marketing tactics, such as serving alcoholic beverages or launching an Adult Happy Meal, in the toy industry.

How can toy manufacturers like Hasbro clearly distinguish toys for adults and not be accused of marketing such products to children?

Student responses will vary. Consider asking students to evaluate the ethical considerations and potential public reactions to using adult-oriented marketing tactics in the toy industry.

Discuss how companies can balance innovative marketing while ensuring that they maintain a clear separation in their targeting of adult consumers versus children. Factors to explore could include product placements, advertising channels, and the messaging in promotions.

6-43. Today’s children are tomorrow’s kiddults. Are there any tactics that Hasbro should take with popular children’s brands today to intentionally have toy lines grow up with their current target audiences?

Student responses will vary. Encourage discussion about the long-term strategies Hasbro might consider for creating toys that can grow alongside their audience. Discuss what factors are necessary to create products that appeal across generations. Invite students to explore ideas where Hasbro could introduce modular toys that adapt over time with add6-33 Copyright © 2025 Pearson Education, Inc.

Part 2: Determine the Value Propositions Different Customers Want

ons or updates that maintain interest from childhood into adulthood, potentially nurturing a lifelong brand loyalty.

WEB RESOURCES https://hasbropulse.com/ https://shop.hasbro.com/en-us

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Chapter 7: Segmentation, Target Marketing, and Positioning

Chapter 7 Segmentation, Target Marketing, and Positioning I. CHAPTER OVERVIEW As small children, we are often taught to treat everyone alike. However, after reading this chapter, students will quickly learn that this strategy does not work in marketing. The goal of marketing is to create value and satisfy needs. However, everyone’s needs are not the same.

Understanding needs is a complex task.

In this chapter, students learn why segmentation is important and the different dimensions used by marketers to segment the population. How marketers evaluate and select potential market segments is explained, as is the development of a targeting strategy. Students understand how a firm develops and implements a positioning strategy.

II. CHAPTER OBJECTIVES 7-1.

7-2.

7-3.

7-4.

7-5.

Identify the steps in the target marketing process.

Understand the need for market segmentation and the approaches available to do it.

Explain how marketers evaluate segments and choose a targeting strategy.

Recognize how marketers develop and implement a positioning strategy.

Understand the importance of target marketing and the three steps—segmentation, targeting, and positioning—for managing a successful career.

III. CHAPTER OUTLINE p. 231

REAL PEOPLE, REAL CHOICES─HERE’S MY PROBLEM AT MICROSOFT Christina Mallon is head of inclusive design at Microsoft. She is an inclusive designer with dual arm paralysis and ADHD. When we talk about the word “adaptive,” it is in relation to a disability.

You are adapting a product so that it works for more people. In 2022, Microsoft launched a suite of products called Microsoft Adaptive Accessories to address the overlooked needs of the large number of individuals with disabilities. The objective of these accessories (such as an adaptive mouse) is to greatly enhance the experience that individuals with different disabilities have with their computers. I knew from my career in inclusive design that communication is everything. If end users aren’t aware of these adaptive solutions or if they find them too confusing to master, then Microsoft’s efforts would be fruitless. So, the question I faced was, how should the company inform members of the 8-1 Copyright © 2025 Pearson Education, Inc.

Part 2: Determine the Value Propositions Different Customers Want

disability community about the new adaptive accessories to maximize the likelihood that they would become aware of—and hopefully start to use—some of the innovative devices in Microsoft’s portfolio?

Christina Mallon considered her options: Option 1: Launch the products, and let the community learn how to use them by tinkering and trying them out.

Option 2: Create a webpage featuring disabled influencers.

p. 233

Option 3: Create a large marketing campaign around the product launch for everybody to see, regardless of whether they are disabled..

The vignette ends by asking the student which option he/she would choose.

•

Christina chose option #2.

Use website here: https://www.microsoft.com/en-us/search/explore?q=disability p. 233 1.

TARGET MARKETING STRATEGY: SELECT AND ENTER A MARKET An inclusivity mindset in marketing is not something that marketers practice simply because diversity, equity, and inclusion (DEI) standards in their firm say they should, but rather because creating, promoting, and distributing products and services of value to customers of all types who can gain value from the offering form the path to business success!

p. 234

Understanding people’s needs is an even more complex task today because technological and cultural advances in modern society have created a condition of market fragmentation. This means that people’s diverse interests and backgrounds divide them into numerous groups with distinct needs and wants.

Because of this diversity, the same good or service will not appeal to everyone.

Marketers must balance the efficiency of mass marketing where they serve the same items to everyone, with effectiveness that comes when they offer each individual exactly what she wants.

p. 235

Marketers select a target marketing strategy in which they divide the total market into different segments based on customer characteristics, select one or more segments, and develop products to meet the needs of those specific segments.

2.

STEP 1: SEGMENTATION

8-2 Copyright © 2025 Pearson Education, Inc.

Exhibit: Chickfil-A

Figure 7.1 Process: Steps in the Target Marketing Process p. 292

Chapter 7: Segmentation, Target Marketing, and Positioning

Segmentation is the process of dividing a larger market into smaller pieces based on one or more meaningfully shared characteristics.

Oversegmentation occurs when consumers become confused if an organization offers too many choices. p. 235 Segmentation is often necessary in both consumer and industrial markets. The marketer must decide on one or more useful segmentation variables—that is, dimensions that divide the total market into homogeneous groups, each with different needs and preferences. p. 235 2.1 Segment Consumer Markets We can slice the larger consumer “pie” into smaller pieces in a number of ways, including demographic, psychographic, and behavioral differences. In the case of demographic segmentation there are several key sub-categories of demographics: age (including generational differences), gender, family life cycle, income and social class, ethnicity, and place of residence— sometimes referred to separately as geographic segmentation.

One other caveat is needed before we jump into our discussion of different market segments. Identifying segments is not, repeat not, intended by marketers as a form of stereotyping. The idea of segmenting markets is to identify groups of consumers with similar needs so that marketing to them can be done more efficiently and effectively versus a mass-market approach.

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Figure 7.2 Snapshot: Segmenting Consumer Markets

Part 2: Determine the Value Propositions Different Customers Want

p. 236

2.1.1. Demographic Segmentation by Age Demographics are statistics that measure observable aspects of a population, including size, age, gender, ethnic group, income, education, occupation, and family structure. These descriptors are vital to identify the best potential customers for a good or service.

Because they represent objective characteristics, they usually are easy to identify, and then it is just a matter of tailoring messages and products to relevant groups.

p. 236

Consumers of different age groups have different needs and wants. Members of a generation tend to share the same outlook and priorities. We call such a focus generational marketing.

p. 236

p. 237

p. 237

2.1.1.1 Generation Alpha. This post-Generation Z group has recently been labeled Generation Alpha since they represent individuals born from 2010 forward. They are primarily children of Millennials and recently have begun to be dubbed “mini-Millennials.” Gen Alpha began using technology at an earlier age than any other generation in history! Apple clearly loves the fact that this bunch has the nickname “iPad kids.” However, a wide range of ethical issues come into play when marketing to children.

2.1.1.2. Generation Z. This is the first generation of the 21st century and it’s the most diverse: 55 percent are White, 24 percent are Latino/a, 14 percent are Black, and 4 percent are Asian. They are accustomed to responsibilities that don’t split along traditional gender lines. They are digital natives who spend time online, so they expect brands to engage them in two-way digital conversations. Generation Z has $360 billion in spending power when influence on other household purchases is considered.

2.1.1.3. Generation Y, often also called millennials or “Echo Boomers,” consists of people born between the years 1979 and 1994.

They are the first generation to grow up online and are more ethnically diverse than earlier generations. Generation Y is an attractive market for a host of consumer products because of its size (approximately 22 percent of the population) and freespending nature.

2.1.1.4. Generation X. The group of consumers born between 1965 and 1978 consists of 66 million Americans known as Generation X. They have developed an identity for being an entrepreneurial group. Many people in this segment seem to be determined to have stable families after being latchkey children 8-4 Copyright © 2025 Pearson Education, Inc.

Exhibit: MrBeast

Chapter 7: Segmentation, Target Marketing, and Positioning

p. 238

themselves. Seven out of ten regularly save some portion of their income, a rate comparable to that of their parents. Xers tend to view the home as an expression of individuality rather than material success.

2.1.1.5. Baby boomers, consumers born between 1946 and 1964 and who are now in their 60s to 80s and are an important segment to many marketers—if for no other reason than that there are so many of them who make a lot of money. Boomers are willing to invest a ton of money, time, and energy to maintain their youthful image.

p. 238

Exhibit: President Barack Obama

2.1.2. Demographic Segmentation: By Gender Many products, from fragrances to footwear, specifically appeal to men or women. Traditional segmenting by gender starts at a very early age—even diapers come in pink for girls and blue for boys.

Society’s perspective on gender has changed in recent years.

There’s been a shift toward less rigid and binary definitions of gender. However, marketing continues to categorize products for men or for women.

Gender identity is the personal sense of one’s own gender which may or may not correlate with one’s assigned sex at birth.

Androgyny is the possession of both masculine and feminine traits.

p. 239

Gender-bending products are traditionally sex-types items that are adapted to the opposite gender.

The MeToo movement against sexual harassment and sexual abuse of women gained momentum on social media. It motivated marketers to step back and make sure gender biases do not creep into their messaging. Care must be taken to ensure messaging to different segments is not misinterpreted.

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Exhibit: MeUndies

Part 2: Determine the Value Propositions Different Customers Want

p. 239

p. 240

p. 240

2.1.3. Demographic Segmentation: By Family Life Cycle Because family needs and expenditures change over time, one way to segment consumers is to consider the stage of the family life cycle they occupy. Consumers in different life cycle segments are unlikely to need the same products, or at least they may not need these things in the same quantities. As families age and move into new life stages, different product categories ascend and descend in importance.

2.1.4. Demographic Segmentation: By Income and Social Class The distribution of wealth is of great interest to marketers because it determines which groups have the greatest buying power.

Marketers, obviously, are often more interested in high-income consumers. In the past, it was popular for marketers to consider social class segments, such as upper class, middle class, and lower class. However, many consumers buy not according to where they may fall in the schema but rather according to the image they wish to portray.

2.1.5. Demographic Segmentation: By Race and Ethnicity A consumer’s national origin is often a strong indicator of his preferences for specific magazines or TV shows, foods, apparel, and choice of leisure activities. Marketers need to be aware of these differences and sensitivities—especially when they invoke outmoded stereotypes to appeal to consumers of diverse races and ethnic groups.

Black, Asian, and Latino/a individuals are the largest racial and ethnic groups in the United States. The Census Bureau projects that by the year 2050, Whites will make up just 47 percent of the population (compared to 74 percent in 1995) as these other groups grow.

Black individuals comprise more than 13 percent of the U.S. population. Marketers are realizing the huge purchasing power of different racial and ethnic groups.

Asian Americans are the fastest growing minority group in the U.S. By 2060, Asian Americans will total 46 million individuals.

Their buying power is estimated to be $1 trillion.

The Latino/a population’s GDP has grown 2.6 times faster than the non-Latino/a population since 2010. Their real consumption grew three times faster than other non-Latino/a groups. Latino/a buying power in the U.S. is projected to reach an amazing $2.6 trillion by 2025.

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Exhibit: Movie Everything, Everywhere, All at Once

Chapter 7: Segmentation, Target Marketing, and Positioning

A recent research study confirms that a growing number of Latino/a individuals within the U.S. in both younger and older age groups tend toward identifying as bicultural, which means belonging to, representing, or understanding two different cultures. p. 241

An important outcome of the increase in U.S. multiethnicity is the opportunity for increased cultural diversity in the workplace and elsewhere. Cultural diversity, a management practice that actively seeks to include people of different sexes, races, ethnic groups, and religions in an organization’s employees, customers, suppliers, and distribution channel partners, is today business as usual rather than an exception. Marketing organizations benefit from employing people of all kinds because they bring different backgrounds, experiences, and points of view that help the firm develop strategies for its brands that will appeal to diverse customer groups.

p. 241

2.1.6. Geographic Segmentation Geographic segmentation is an approach in which marketers tailor their offerings to specific geographic areas because people’s preferences often vary depending on where they live. A geographic information system (GIS) is a system that combines a geographic map with digitally stored data about the consumers in a particular geographic area.

p. 241

When marketers want to segment regional markets even more precisely, they sometimes combine geography with demographics by using a technique called geodemography. A basic premise of geodemography is that people who live near one another share similar characteristics.

p. 242

Geotargeting refers to determining the geographic location of a website visitor and delivering different content to that visitor based on his or her location. Micromarketing is the ability to identify and target very small geographic segments that sometimes amount to individuals.

p. 242

2.1.7. Segment by Psychographics Psychographics is the use of psychological, sociological, and anthropological factors to construct market segments.

Psychographics segments consumers in terms of shared activities, interests, and opinions, or AIOs.

p. 242

VALS™ (Values and Lifestyles) is based on psychological traits that correlate with consumer behavior. VALS™ divides U.S. adults into eight groups according to what drives them psychologically as well as by their economic resources.

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Exhibit: Domino’s

Part 2: Determine the Value Propositions Different Customers Want

One segment that combines a psychographic/lifestyle component with a heavy dose of generational marketing is the gamer segment, sometimes referred to as the gamer generation— “gamer” as in “video games.” A badge is a milestone or reward earned for progressing through a video game. p. 243

Exhibit: E-sports

2.1.8. Segment by Behavior Behavioral segmentation slices consumers based on how they act toward, feel about, or use a product.

One way to segment based on behavior is to divide the market into users and nonusers of a product. In addition to distinguishing between users and nonusers, marketers can describe current customers as heavy, moderate, and light users. They often do this according to a rule of thumb we call the 80/20 rule: 20 percent of purchasers account for 80 percent of the product’s sales (the ratio is an approximation, not gospel). This rule means that it often makes more sense to focus on the smaller number of people who are really into a product rather than on the larger number who are just casual users.

p. 243

Customer loyalty refers to a customer’s low likelihood of switching to a competitor’s offering, especially because of being highly engaged and connected with their current brand.

Customer stickiness refers to highly cultivated customers that are likely to follow through on an intended purchase, buy the product repeatedly, and recommend it to others.

p. 243

Experiential loyalty refers to customer loyalty that results not just in increased purchases but also in an enhanced broader experience for the customer.

p. 244

Usage rate reflects the quantity purchased or frequency of use among consumers of a particular product or service.

An approach called the long tail turns traditional thinking about the virtues of selling in high volume on its head. The basic idea is that we need no longer rely solely on big hits (like blockbuster movies or best-selling books) to find profits. Companies can also make money when they sell small amounts of items that only a few people want—if they sell enough different items.

p. 244

Another way to segment a market based on behavior is to look at usage occasions, or when consumers use the product most. We 8-8 Copyright © 2025 Pearson Education, Inc.

Exhibit: Biltmore photo

Chapter 7: Segmentation, Target Marketing, and Positioning

p. 244

p. 245

p. 245

associate many products with specific occasions, whether time of day, holidays, business functions, or casual get-togethers.

Businesses often divide their markets according to when and how their offerings are in demand.

2.2 Segment B2B Markets Organizational demographics also help a business-to-business marketer to understand the needs and characteristics of its potential customers. These classification dimensions include the size of the firms either in total sales or number of employees, the number of facilities, whether they are a domestic or a multinational company, purchasing policies, and the type of business they are in. Business-to-business markets may also be segmented based on the production technology they use and whether the customer is a user or a nonuser of the product.

2.3 Disruption in Segmentation: When Everybody’s a Segment of One CRM, marketing analytics, and advancements on the science side of the marketing field are impacting market segmentation.

Predictive analytics and anticipatory shipping focus on individual consumers’ needs, which facilitate the concept of a segment of one. Capabilities to execute against a segment of one are getting stronger.

3.

STEP 2: TARGETING The next step is targeting, in which marketers evaluate the attractiveness of each potential segment and decide in which of these groups they will invest resources to try to turn them into customers. The customer group or groups they select are the firm’s target market.

3.1 Phases of Targeting The three phases of targeting are: evaluate market segments, develop segment profiles, and choose a targeting strategy.

p. 246

3.1.1. Phase 1: Evaluate Market Segments Just because a marketer identifies a segment does not necessarily mean that it is a useful one to target. A viable target segment should satisfy the following requirements: • Are members of the segment similar to each other in their product needs and wants and, at the same time, different from consumers in other segments?

• Can marketers measure the segment?

• Is the segment large enough to be profitable now and in the future?

• Can marketing communications reach the segment?

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Figure 7.3 Process: Phases of Targeting

Part 2: Determine the Value Propositions Different Customers Want

•

Can the marketer adequately serve the needs of the segment?

p. 246 3.1.2. Phase 2: Develop Segment Profiles Once a marketer identifies a set of usable segments, it is helpful to generate a profile of each to really understand segment members’ needs and to look for business opportunities. This segment profile is a description of the “typical” customer in that segment. For example, a segment profile includes customer demographics, location, lifestyle information, and a description of how frequently the customer buys the product. p. 246

p. 247

Personas are a useful tool in profiling market segments. Personas are fictional characters created by marketers that represent different key potential user types for an offering. They represent different needs, experiences, behaviors, and goals of different individuals.

3.1.3. Phase 3: Choose a Targeting Strategy A basic targeting decision is how finely tuned the target should be.

p. 247

An undifferentiated targeting strategy is one that appeals to a wide spectrum of people. If successful, this type of operation can be very efficient, especially because production, research, and promotion costs benefit from economies of scale—it’s cheaper to develop one product or one advertising campaign than to choose several targets and create separate products or messages for each.

The company must be willing to bet that people have similar needs or differences among them that are trivial.

p. 247

A company that chooses a differentiated targeting strategy develops one or more products for each of several customer groups with different product needs. A differentiated strategy is called for when consumers are choosing among brands that are well known in which each has a distinctive image in the marketplace and in which it is possible to identify one or more segments that have distinct needs for different types of products.

Differentiated marketing can also involve connecting one product with different segments by communicating differently to appeal to those segments.

p. 248

When a firm offers one or more products to a single segment, it uses a concentrated targeting strategy. Smaller firms that do not have the resources or the desire to be all things to all people often do this.

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Exhibit: Buyer Personas p. 247

Exhibit: Volvo and Subaru

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Ideally, marketers should be able to define segments so precisely that they can offer products and services that exactly meet the unique needs of each individual or firm. A customized marketing strategy is common in industrial contexts in which a manufacturer often works with one or a few large clients and develops products and services that only these clients will use.

Advances in computer technology, coupled with the new emphasis on building solid relationships with customers, have focused managers’ attention on devising new ways to tailor specific products and the messages about them to individual customers. Thus, some forward-looking, consumer-oriented companies are moving toward mass customization in which they modify a basic good or service to meet the needs of an individual.

4.

STEP 3: POSITIONING The final stage of developing a target marketing strategy is to provide consumers who belong to a targeted market segment with a good or service that meets their unique needs and expectations.

Positioning means developing a marketing strategy to influence how a particular market segment perceives a good or service in comparison to the competition. To position a brand, marketers have to clearly understand the criteria target consumers use to evaluate competing products and then convince them that their product, service, or organization will meet those needs.

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4.1 Steps in Positioning Marketers use four steps to decide just how to position their product or service:

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4.1.1. Step 1: Analyze Competitors’ Positions The first stage is to analyze competitors’ positions in the marketplace. To develop an effective positioning strategy, marketers must understand the current lay of the land.

Competitors include direct competitors and indirect competitors.

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4.1.2. Step 2: Define Your Competitive Advantage The second stage is to offer a good or service with a competitive advantage to provide a reason to perceive the product as better than that of the competition. A positioning statement can frame how a product is positioned so that marketing communication remains focused on articulating the specific value offered.

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Figure 7.4 Process: Steps in Positioning

Part 2: Determine the Value Propositions Different Customers Want

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Once they settle on a positioning strategy, the third stage is to finalize the marketing mix as they put all the pieces into place.

The elements of the marketing mix must match the selected segment. The good or service must deliver benefits that the segment values, such as convenience or status.

4.1.4. Step 4: Evaluate Responses and Modify as Needed In the fourth and final stage, marketers evaluate the target market’s responses so they can modify strategies. The firm may need to change which segments it targets or alter a product’s position to respond to marketplace changes.

A change strategy is repositioning, and it is common to see a company try to modify its brand image to keep up with changing times. Repositioning also occurs when a marketer revises a brand thought to be dead or at least near death. Sometimes these products arise from their deathbeds to ride a wave of nostalgia and return to the marketplace as retro brands—venerable brands like Oxydol laundry detergent, Breck Shampoo, Ovaltine cereal, and Tab cola have gotten a new lease on life in recent years.

Exhibit: Hai Karate

4.2. Perceptual Maps One solution is to ask consumers what characteristics are important, and how competing alternatives would rate on these attributes, too. Marketers use this information to construct a perceptual map, which is a vivid way to construct a picture of where products or brands are “located” in consumers’ minds.

Perceptual mapping allows marketers to identify consumers’ perceptions of their brand in relation to the competition.

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4.2.1. A neglected segment is an unserved or underserved market segment for which opportunity may exist for a new product entry.

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5. BRAND YOU: SHARPENING YOUR FOCUS WITH TARGET MARKETING Using a target marketing strategy can make the job search easier, faster, and more successful.

5.1 Target Marketing A target market strategy helps you develop a clear message about your value and what skills and experiences to emphasize in order to write a résumé that will target one or a few types of businesses.

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Figure 7.5 Snapshot: Perceptual Map p. 318

Chapter 7: Segmentation, Target Marketing, and Positioning

Segmentation is the process of dividing the market to decide which segments or business sectors you want to pursue.

Targeting is the process of evaluating the attractiveness of each segment and deciding which are worth spending resources. You will want to adapt your message for each market you choose to pursue.

Positioning is placing your personal brand in the minds of consumers in relation to other job candidates.

5.1.1. Choosing a Targeting Strategy You may choose to target more than one segment if a single sector has limited potential employers.

5.2 Bringing Your Personal Brand to Life Build on your own personality to bring your brand to life. Make a list of personality traits and adjectives you want to incorporate into your brand identity. Your brand identity includes your personality characteristics, your skills, and behaviors that demonstrate what you can accomplish. p. 252

Here’s My Choice……

Christina went with Option 2 and decided to build a website with product videos and connections with influencers in the disability community. This approach allowed people with different learning styles to access the information in their preferred format.

IV. END-OF-CHAPTER ANSWER GUIDE CHAPTER QUESTIONS AND ACTIVITIES CONCEPTS: TEST YOUR KNOWLEDGE 7-1.

What is an inclusivity mindset in marketing? Why do marketers practice it?

An inclusivity mindset in marketing is an overarching approach that allows marketers to focus on creating, promoting, and distributing products and services that are valuable to customers of all types. This approach ensures that everyone who can benefit from the offering feels included. It leads to business success by satisfying the unique needs of diverse market segments while also fostering a broader customer base.

7-2

What is a target marketing strategy? What is market segmentation, and why is it an important strategy in today’s marketplace? What is market fragmentation, and what are its consequences for marketers?

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Instead of trying to sell the same thing to everyone, marketers select a target marketing strategy in which they divide the total market into different segments based on customer characteristics, select one or more segments, and develop products to meet the needs of those specific segments.

Segmentation is the process of dividing a larger market into smaller pieces based on one or more meaningfully shared characteristics. Segmentation is often necessary in both consumer and industrial markets. The marketer must decide on one or more useful segmentation variables—that is, dimensions that divide the total market into homogeneous groups, each with different needs and preferences.

It’s a complex task to understand people’s differing needs because technological and cultural advances create a condition of market fragmentation. This means that people’s diverse interests and backgrounds naturally divide them into numerous groups with distinct needs and wants. Because of this diversity, the same good or service will not appeal to everyone.

Marketers must balance the efficiency of mass marketing, where they serve the same items to everyone, with the effectiveness that comes when they offer each individual exactly what they want. From the consumer perspective, the best strategy would be to offer the perfect product just for them.

7-3.

What is oversegmentation? What are segmentation variables?

Oversegmentation occurs when an organization offers too many choices, potentially confusing consumers due to an excessive number of options available. Segmentation variables are dimensions that divide the total market into fairly homogeneous groups, each with different needs and preferences.

7-4.

List and explain the major demographic characteristics frequently used in segmenting consumer markets.

• • • •

•

Generational: Consumers of different age groups have very different needs and wants.

Gender: Segmenting by sex starts at a very early age. Many marketers are looking to gender segmentation as a means of expanding markets. For example, hair dryers sold to men dramatically expanded the industry’s sales.

Family structure: Using the family life cycle, marketers can segment based on family status and position occupied. Newlyweds will have different needs and desires than empty nesters.

Income and social class: The distribution of wealth has great interest to marketers because it determines what groups have the greatest buying power and market potential. Social class designations also affect purchasing patterns based on one’s appreciation of status in their life.

Race and ethnicity: Membership in the various racial and ethnic groups within our country accounts for many changes in the way a consumer receives information, 8-14 Copyright © 2025 Pearson Education, Inc.

Chapter 7: Segmentation, Target Marketing, and Positioning

•

7-5.

develops tastes, and makes purchases. Submarkets (such as the Hispanic market) are receiving increased attention from marketers because of their size and increased affluence.

Geography: Though not as dynamic as the other categories, geography does affect tastes and purchase behavior. Many marketers use geography to tailor their offerings to appeal to different regions of the country.

Explain generational marketing. What is Generation Alpha? Generation Z? Generation Y (Millennials)? Generation X? Baby boomers?

Generational marketing is marketing to members of a generation, who tend to share the same outlook, values, and priorities.

Generation Alpha are those born from 2010 onward. Although still very young, they are beginning to influence market trends. This generation has been interacting with technology from a very young age, earning them the nickname “iPad kids.”

Generation Z (iGen) describes individuals who were born after 1994. It is the most diverse, first generation of the 21st century. This generation is accustomed to blurred gender roles and household roles. They are digital natives.

Millennials are those born between 1979 and 1994. It is the first generation to grow up online. It is approximately 25 percent of the population and spends $1.3 trillion annually.

They are more idealistic and focused on experiences than Generation Z, which tends to be more pragmatic and concerned about spending money and innovation.

Generation X is the group of 46 million American consumers born between 1965 and 1978, who unfortunately came to be called slackers or busters (for the “baby bust” that followed the “baby boom”). This generation includes many entrepreneurs that shaped modern technology. They have a cynical attitude toward marketing.

Baby boomers are consumers born between 1946 and 1964 who are in their 50s to 70s.

They have a lot of money. They can be split into two groups: leading-edge boomers and trailing-edge boomers. These two groups have different spending patterns.

7-6.

Explain the concept of buying power.

Buying power refers to the ability of consumers to purchase goods and services, based on their discretionary and nondiscretionary income. It helps marketers determine how to match different products and versions of products to various consumer groups. By understanding what financial resources consumers are capable of dedicating to products, marketers are able to develop a corresponding marketing mix.

7-7.

What are some of the ways marketers segment B2B markets?

Categories similar to those in the consumer market are frequently used for segmenting business-to-business markets. Organizational demographics include industry and/or 8-15 Copyright © 2025 Pearson Education, Inc.

Part 2: Determine the Value Propositions Different Customers Want

company size (total sales, number of employees, or number of facilities), whether they are domestic or multinational firms, purchase policies, the type of business they are in, and production technology. The North American Industry Classification System (NAICS) is used to obtain information about the size and number of companies in a particular industry.

7-8.

What are personas? Under which phase of targeting are personas developed?

Personas are fictional characters created by marketers that represent different key potential user types for an offering. Personas embody various needs, experiences, behaviors, and goals of different individuals, helping marketers to step outside their own perspectives and better understand diverse customer needs and expectations. Personas are typically developed during the second phase of targeting, which involves developing segment profiles. This phase helps marketers to deeply understand the segment members’ needs and identify corresponding business opportunities.

7-9.

Explain the differences between undifferentiated, differentiated, concentrated, and customized marketing strategies. What is mass customization?

Strategies include: • • • •

Undifferentiated marketing strategy: A marketing strategy that (1) assumes the majority of customers have similar needs and (2) attempts to appeal to a broad spectrum of people Differentiated marketing strategy: A market strategy in which a firm develops one or more products for each of several distinct customer groups Concentrated marketing strategy: A marketing strategy in which a firm focuses its efforts on offering one or more products to a single segment Custom marketing strategy: A marketing strategy in which a firm develops a separate marketing mix for each customer

Mass customization is a marketing strategy in which a firm modifies a basic good or service to meet an individual customer’s needs.

7-10. What is product positioning? What do marketers mean by creating a brand personality?

What examples can you come up with of uses of brand anthropomorphism?

Product positioning is developing a marketing strategy aimed at influencing how a particular market segment perceives a good or service in comparison to the competition.

Marketers can compare brand positions by using such research techniques as perceptual mapping. In developing and implementing the positioning strategy, firms analyze the competitors’ positions, determine the competitive advantage offered by their product, tailor the marketing mix in accordance with the positioning strategy, and evaluate responses to the marketing mix selected. Marketers must continually monitor changes in the market that might indicate a need to reposition the product.

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Chapter 7: Segmentation, Target Marketing, and Positioning

A brand personality is a distinctive image that captures a good or service’s character and benefits. Creating a brand personality means developing an identity for the product that the target market will prefer over competing brands. Brand anthropomorphism is the assignment of human characteristics and qualities to a brand. The Pillsbury Doughboy, who has been active in advertising for more than 50 years, is a prime example of brand anthropomorphism with his friendly demeanor and the trademark giggle he lets out when poked in the belly that help shape consumer perceptions of the brand.

7-11. Explain the difference between direct competitors and indirect competitors.

Direct competitors are companies whose offerings are very similar to another company’s offerings. These businesses directly compete in the same product or service category.

Indirect competitors, on the other hand, offer different products or services but could satisfy the same customer needs or provide similar benefits. The distinction is important in strategy development because indirect competitors can often fulfill consumers’ needs in alternative ways that may not be immediately obvious when considering only direct competition.

7-12. Explain content marketing and geodemography. What is customer loyalty and customer stickiness?

Content marketing is the strategy of establishing thought leadership in the form of bylines, blogs, commenting opportunities, videos, sharable social images, and infographics.

Geodemography is a segmentation technique that combines geography with demographics.

Customer loyalty is the customer’s low likelihood of switching to a competitor’s offering, especially because of being highly engaged and connected with their current brand.

Customer stickiness describes highly cultivated customers who are likely to follow through on an intended purchase, buy the product repeatedly, and recommend it to others.  ACTIVITIES: APPLY WHAT YOU’VE LEARNED 7-13. Creative Homework/Short Project You are an entrepreneur who is designing a new line of boutique hotels located along California’s coastline. Each of the 100 guest rooms in each hotel will offer upscale decor, Wi-Fi, a mini bar stocked with high-end snacks, premium beers, and top-label liquors for a nightly rate of $315. The hotels will have a spa, an onsite restaurant, and a separate full-service bar that features local musicians.

Describe in detail the demographics—age, gender, family life cycle, income and social class, ethnicity, and place of residence—of your target customer.

Students can prepare this question in small groups and share their findings with the class.

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7-14. Creative Homework/Short Project Assume that a small regional microbrewery has hired you to help them with target marketing. They are pretty unsophisticated about marketing—you will need to explain some things to them and provide ideas for their future. In the past, the microbrewery has simply produced and sold a single beer brand to the entire market—a mass-marketing strategy. As you begin your work, you come to believe that the firm could be more successful if it developed a target marketing strategy.

Write a memo to the owner outlining the following: a. The basic reasons for doing target marketing in the first place b. The specific advantages of a target marketing strategy for the microbrewery c. An initial “short list” of possible target segment profiles This project can be used as an out-of-class assignment. Students can share their recommendations with the class.

7-15. In Class, 10–25 Minutes for Teams Assume you are the owner of a local dance studio that offers tap, jazz, ballet, hip-hop, and tumbling classes to children and teens (ages 2– 18). To better market your classes to potential students and families in your town, you are developing a segment profile of a typical dancer at your studio. Write a descriptive segment profile, or “persona,” of the target consumer. Share your description with the class.

This question asks students to review what they have learned about personas, target marketing, and the justifications for target marketing and then apply these concepts to marketing the children’s dance and tumbling classes.

7-16. In Class, 10–25 Minutes for Teams As an account executive for a marketing consulting firm, your newest client is a university—your university. You have been asked to develop a positioning strategy for the university. With your team, develop an outline of your ideas, including the following: a. Who are your competitors? b. What are the competitors’ positions? c. What target markets are most attractive to the university? d. How will you position the university for those segments relative to the competition?

This is an excellent exercise to get the class involved with a real issue. Have students do research on the university by examining documents, literature, brochures, advertisements, and websites, and/or conducting interviews with appropriate university officials. Examine pertinent competitive websites for an idea of what they are doing. Next, students must make an appraisal of potential target markets for the university. The Admissions Office is an excellent place to begin. Recruiters are often even willing to come to class to discuss the issue. Should the university continue its present strategy, reposition, or devise a new strategy? The students should be challenged to find the answer.

7-17. Creative Homework/Short Project When it comes to metrics, good data about the characteristics of the various consumer segments that you may wish to ultimately target is critical because target marketing is ultimately a strategic investment of resources in the 8-18 Copyright © 2025 Pearson Education, Inc.

Chapter 7: Segmentation, Target Marketing, and Positioning

segments that appear to have the best return on investment. In this chapter, we mentioned that VALS™ is a well-known approach to psychographic segmentation.

To make the power of the psychographic technique and resulting information for decision making come alive, let’s find out your own VALS™ category. a.

Go to the VALS™ website (go to www.strategicbusinessinsights.com and click VALS™ on the homepage). b.

Click “Take the VALS™ Survey.” Complete all the questions, and click Submit to view your results. c.

What is your VALS™ type? Review the information on the website that describes it (found under About VALS™/VALS™ Types) along with the other VALS™ types. d.

What is your reaction to learning your own VALS™ type? Are you surprised with the result, or was it consistent with what you would have expected? Why or why not? e.

What insights does the knowledge of your VALS™ type provide relative to your own consumer behavior?

Student answers will vary. Consider starting by facilitating a discussion on psychographic segmentation using VALS™, ensuring that students understand its relevance in understanding consumer behavior. Guide students through the VALS™ survey and encourage them to reflect on their results in terms of how well they align with their initial perceptions of their own consumer behaviors. The class can then engage in a group discussion, comparing their VALS™ types. Ask students to consider real-world applications of psychographic data, discussing how marketers might tailor their campaigns to different consumer segments.

7-18 . Creative Homework Choose a food category that you know well and that has several brands that compete in the marketplace. Develop a perceptual map for that category.

First, you will need to create two dimensions on which you will compare the brands (see Figure 7.5 to see how it was done for the steakhouse industry). Once you have your dimensions, place the brands in the quadrants based on how closely they fit those descriptions. Be prepared to share your results with the class.

Students can work in small groups and develop a perceptual map. Each group can share its results with the class.  CONCEPTS: APPLY MARKETING METRICS As you learned in this chapter, market segmentation involves dividing the total market for a product into discrete segments that have different wants, needs, and characteristics. The next step, selecting a target market, requires marketers to estimate the size of each segment. In some cases, estimating the size of a segment is easy; for example, if a local business identified “college students” as a market segment, management could easily obtain enrollment figures from local colleges to estimate the size of that segment.

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Part 2: Determine the Value Propositions Different Customers Want

In other cases, marketers may need to use the chain ratio method to estimate the size of the segment using data from multiple sources. This method involves multiplying a readily available population number by a series (chain) of adjusting percentages. To illustrate, suppose Amazon identified “middle-class households who are homeschooling at least one child between the ages of 6 and 11 and don’t have broadband Wi-Fi in their home” as a potential market for a new satellite-based tutoring device. To estimate market size, they could start with the U.S. Census Bureau estimate of 16 million households with at least one child in the given age range. From other sources, they could obtain the percentage of middle-class households (50 percent), households that homeschool (4 percent), and households without access to broadband Wi-Fi (11 percent). The size of this segment could then be calculated as 16 million × 0.50 × 0.04 × 0.11 = 35,200 households.

7-19. Shawna operates a local food delivery service in a town with a population of 500,000 people. A recent newspaper article about the food challenges faced by people who are unable to leave their homes to shop or visit a restaurant due to illness, injury, age, or disabilities estimated that 5 percent of the local adult population qualified as homebound and lived alone or with someone who was similarly homebound. Although about 25 percent of this population are senior citizens who are eligible for the city’s Meals on Wheels program, the rest might benefit from a service offering free delivery of reasonably priced meals. Before she starts exploring how to provide such a service, Shawna needs to know if the market is large enough to support it. She estimates that to break even, at least 4,000 people would need to sign up to receive an average of one meal per day. Using the chain ratio method, determine the size of the potential market for this service. What percentage of this potential segment would Shawna need to capture to break even?

Segment size = 500,000 × 0.05 × 0.75 = 18,750 people.

To break even, Shawna would need to capture 4,000 / 18,750 = 21.3% of the market. CHOICES: WHAT DO YOU THINK? 7-20. Ethics More and more businesses are adopting inclusion as a universal corporate value.

However, the practice of audience segmentation—by design—can be viewed as exclusive instead of inclusive. At the same time, many professional marketers frequently state that trying to be everything to everybody is not an effective marketing approach. When a company develops and adopts target segmentation profiles, by default is the business excluding those who do not fall within that segmentation? Why or why not? How do you think organizations should balance best practices for audience segmentation with the growing inclusivity mindset in marketing?

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Student answers will vary. Consider starting by explaining what inclusion and audience segmentation mean and ask if focusing on certain groups means leaving others out.

Encourage debate on whether it’s possible to be both inclusive and effective in marketing, helping students understand how professional marketers balance and/or combine these concepts in business.

7-21. Critical Thinking Generations can be categorized as a form of age-based demographics.

However, there are many psychographics that are frequently associated with the various generations. In some cases, these may be legitimate segmentation factors for marketing.

In other cases, these may be stereotypes that can’t accurately be projected to an entire generation. Identify where you fall on the generational scale. Conduct online research to identify what some marketers consider to be common traits of your generation. Assess whether you think these are accurate or inaccurate statements. Do you think generational segmentation alone is an effective form of segmentation? Why or why not?

Student answers will vary. Consider facilitating a discussion on generational segmentation in marketing by first explaining what generational categories are and how they serve as age-based demographics. Encourage students to identify their own generational category. Using online resources, the class can then look into common traits that marketers attribute to each generation. Students can assess if these traits accurately reflect their own experiences or if they feel these traits are just stereotypes. This can lead to a broader conversation on whether generational segmentation is a reliable method for marketers to target consumers, discussing the balance between accurate targeting and the risk of oversimplification.

7-22. Critical Thinking Companies sometimes find themselves in a situation where they need to reposition to keep up with changing times. Recently, General Motors announced that its Cadillac brand will transition to an all-electric vehicle lineup by 2030. How might this transition impact Cadillac’s current demographics, psychographics, and geographics?

What suggestions would you make to Cadillac on how to reposition its brand to reach a potentially new audience? If you were the CEO of General Motors, would you transition one of your legacy brands, such as Cadillac, to an all-electric lineup, or would you develop an entirely new brand exclusively to serve the EV market? Explain the advantages and disadvantages of both approaches.

Student answers will vary. Consider starting by asking students to analyze the impacts on Cadillac’s demographics, psychographics, and geographic reach. As a class, explore strategies for repositioning Cadillac to appeal to a market focused on sustainability and advanced technology. Discuss the advantages of updating an existing brand versus creating a new one dedicated to electric vehicles. This discussion can focus on factors like market acceptance, brand loyalty, and competitive dynamics.

7-23. Ethics Gamification was discussed in Chapter 6. For specific segments of a market, a gamification approach might help elicit a desired behavior from consumers, and of course in many cases the desired behavior is an increase in consumption of the related product.

When a product is generally associated with potential health problems if consumed in 8-21 Copyright © 2025 Pearson Education, Inc.

Part 2: Determine the Value Propositions Different Customers Want

large quantities (e.g., alcohol, sugar), should a marketer be allowed to engage the consumer in gamification activities or similar “fun” approaches that encourage or induce excessive consumption of the product?

If gamification elicits behavior from consumers that leads to an increase in consumption of unhealthy products such as tobacco, alcohol, or sugar, or acts of violence, should a marketer be allowed to engage the consumer in gamification? This is a good area of discussion and can lead to expression of very different views.

7-24. Critical Thinking Marketers commonly ask celebrities to endorse products, but tying a brand to a celebrity can come with risks. What if that celebrity falls out of favor with the public as the result of something they do or say that is perceived negatively? How would you determine if the signing of a celebrity to an endorsement deal is worth the risk? What would you want to know to make that determination and reduce the risk potential? Think of an example of a celebrity endorsement in recent history that has gone bad—what happened, how did it impact the brand, and did they recover?

Students can discuss the use of celebrities in marketing campaigns and the risks involved. MINIPROJECT: LEARN BY DOING This miniproject will help you to develop a better understanding of how firms make target marketing decisions. The project focuses on the market for premium headphones. a.

b.

c. d. e. f.

Gather ideas about different dimensions useful for segmenting the premium headphones market. You may use your own ideas, but you probably will also want to examine advertising and other marketing communications developed by different premium headphones brands, such as Bose, Sony, and Beats, among others.

Based on the dimensions for market segmentation that you have identified, develop a questionnaire and conduct a survey of consumers. You will have to decide which questions should be asked and which consumers should be surveyed.

Analyze the data from your research and identify the different potential segments.

Develop segment profiles that describe each potential segment.

Generate several ideas for how the marketing strategy might be different for each segment based on the profiles.

Define your competitive advantage that you believe will be important to the segments you have identified.

7-25. Develop a presentation (or write a report) outlining your ideas, your research, your findings, and your marketing strategy recommendations.

There are five specific questions individuals or marketing teams are asked to review: (1) Different dimensions of segmenting the premium headphones market. (2) Develop a questionnaire and conduct a survey of consumers. (3) Analyze data and identify potential segments. (4) Develop segment profiles that describe each potential segment. (5)

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Generate ideas on how marketing strategy might be applied to each segment based on profiles.

Students (or student teams) should research this industry carefully before proceeding with the miniproject. Before conducting any human subject research, students or teams should familiarize themselves with the rules for interviewing and conducting research (see any appropriate university or college guidelines).

Instructors may wish to extend the deadline for this assignment, so students have many opportunities to conduct the research and report the findings.

V. MARKETING IN ACTION CASE: REAL CHOICES AT THIRDLOVE Summary of Case ThirdLove, an innovative online lingerie company, was founded in 2011 by Heidi Zak and David Spector to fill the gap for women who felt neglected by Victoria’s Secret’s youth-centric approach. Leveraging advanced technology, ThirdLove initially used a smartphone app to determine bra sizes via customer-submitted photos. However, privacy concerns led to the creation of a 60-second “Fit Finder” questionnaire, which, along with the introduction of half sizes, revolutionized the fitting process. This shift allowed many customers to discover their true bra sizes, enhancing comfort and satisfaction.

Embracing inclusivity, ThirdLove now offers over 80 sizes and features plus-size models in its advertising—a move that has resonated strongly with consumers. The rapid sellout of larger sizes upon release highlights consumer demand for inclusive sizing. Despite competition from brands like Adore Me and American Eagle’s Aerie, ThirdLove’s growth has been bolstered

by Victoria’s Secret’s declining sales. The company’s expansion into physical retail stores also has complemented its e-commerce operations, attracting new customers and enhancing brand visibility.

Suggestions for Presentation This case could be assigned for various out-of-class or in-class discussion activities.

Out-of-Class Suggestions Conduct a small focus group to see how friends of yours feel about the use of an app designed to assess the right size for clothing. What concerns were expressed and what ideas were shared to mitigate those concerns?

In-Class Suggestions In small groups, conduct a brainstorming session to identify messaging that ThirdLove could use to specifically appeal to members of Gen Z. Questions for Discussion

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7-26. ThirdLove offers a product that customers from teen years through older adulthood can use, but it believes that defining its market based on “inclusivity” eliminates the need to utilize generation-specific marketing strategies. What are the benefits and risks of this approach?

There are products for which the need is so universal that the age of prospective customers is virtually irrelevant. This is usually not the case for fashion marketing. There are several risks to treating all consumers the same: • • • •

Consumers in different generations may have actual differences in product preferences, likely influenced by cultural priorities within their peer groups.

Even if consumers across age groups prefer the same products, they will likely be attracted to the brand by different communication messages and different sources (e.g., different celebrity spokespersons).

To reach consumers in different age groups, different media types will likely be required.

In an effort to “smooth out” these differences, a “least common denominator” effect could result in which the product and messaging does not fully satisfy any particular subsegment based on age.

7-27. Create a brief profile that describes the original customer ThirdLove targeted when the company began. Be sure to include demographic, psychographic, and geographic segmentations in your profile.

Students should be encouraged to create a profile that describes the customer as if they were a specific person, including giving them a name.

Potential characteristics could include: • Knowledge worker or other professional • 25–40 years old • Annual income of $50,000–$200,000 • Dresses in a fashionable, yet somewhat conservative, manner Profiles will likely vary greatly, because the only defining characteristic of the target market as described in the case appears to be people who do not want to shop for lingerie at a store like Victoria’s Secret.

7-28. Other companies, such as Old Navy and Victoria’s Secret, have failed in attempts to use inclusive sizing to gain market share. What is ThirdLove’s competitive advantage? Why has it been so difficult for competitors to copy ThirdLove’s approach?

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and differentiates it from competitors like Victoria’s Secret, which have struggled to adopt similar approaches. One possible reason is that Victoria’s Secret holds a legacy history of marketing that embraced an opposite approach. As a new brand, ThirdLove had the ability to start with a fresh slate for its messaging. Additionally, ThirdLove’s effective use of customer feedback and data helps it to continuously improve products and solidify its market position.

WEB RESOURCE www.thirdlove.com

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Chapter 8: Product I: Innovation and New Product Development

Chapter 8 Product I: Innovation and New Product Development I. CHAPTER OVERVIEW Is the best product a well-made product, one that works better than all others do and the one that will succeed? The answer “yes” seems obvious, but in reality, the correct answer is often “no.” To succeed, products must provide benefits that people seek. Products must satisfy consumer needs and wants better than competitors’ products.

In this chapter, students learn how products are classified, the layers of a product, the importance of new products, and how firms develop new products. In addition, students learn how products are adopted and how innovations are diffused throughout society. After thorough study, students will be much more inclined to answer “no” to the opening question.

II. CHAPTER OBJECTIVES 8-1.

8-2.

8-3.

8-4.

8-5.

8-6.

Explain how value is derived through different product layers.

Describe how marketers classify products.

Understand the importance and types of product innovations.

Show how firms develop new products.

Explain the process of product adoption and the diffusion of innovations.

Be prepared to develop your personal value proposition.

III. CHAPTER OUTLINE p. 264

REAL PEOPLE, REAL CHOICES—HERE’S MY PROBLEM AT MARY KAY Mary Kay was founded more than 55 years ago with three goals: develop rewarding opportunities for women, offer irresistible products, make the world a better place. The multibillion-dollar beauty company has sales force members in nearly 40 countries.

Revenue from China was primarily driven by skin care products, but color makeup started to grow at a double-digit rate in response to the Korean beauty trend. The rapid growth resulted in a revenue opportunity, but Mary Kay needed to act quickly if it wanted to attract new customers. Sheryl’s choices were: 1) Leverage the broad range of color makeup products sold globally under the Mary Kay Brand.

2) Create a new line of color cosmetics specifically developed for the China market.

3) Adapt a successful regional color line, Mary Kay @Play, for the China market.

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Exhibit: Sheryl Adkins-Green

Part 3: Develop the Value Proposition for the Customer

The vignette ends by asking the student which option he/she would choose.

• p. 267

Sheryl and her team chose option #2.

1.

BUILD A BETTER MOUSETRAP—AND ADD VALUE Even if a product is better, there is no guarantee it will succeed.

The marketer’s task is twofold: first, to create a better value than what’s out there already and second, to convince customers that this is true.

A product is a tangible good, service, idea, or some combination of these that satisfies consumer or business customer needs through the exchange process; it is a bundle of attributes including features, functions, benefits, and uses.

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p. 267

Offerings or products can be physical goods, services, ideas, people, or places. A good is a tangible product, something that we can see, touch, smell, hear, taste, or possess. In contrast, intangible products—services, ideas, people, places—are products that we cannot always see, touch, taste, smell, or possess.

A large part of the marketer’s role in creating the value proposition is to develop and market products appropriately.

1.1. Layers of the Product Concept A product is everything that a customer receives in an exchange.

A product is made up of the core product, the actual product, and the augmented product. Marketers need to consider how to satisfy customers’ wants and needs at each of these three levels – that is, how they can create value.

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1.1.1. The Core Product The core product consists of all the benefits the product will provide for consumers or business customers. A benefit is an outcome that the customer receives from owning or using a product. Marketing is about supplying benefits, not just adding features and functionality. Benefits are the foundation of any value proposition. Many products provide multiple benefits.

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1.1.2. The Actual Product The actual product is the physical good or the delivered service that supplies the desired benefit. The actual product also includes

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Figure 8.1 Snapshot: Layers of the Product

Chapter 8: Product I: Innovation and New Product Development

the unique features of the product, such as its appearance or styling, the package, and the brand name.

Exhibit: Spirit Airline

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1.1.3. The Augmented Product The augmented product is the actual product plus other supporting features such as warranty, credit, delivery, installation, and repair service after the sale. Adding these supporting features to a product is an effective way for a company to stand out from the crowd.

2.

HOW MARKETERS CLASSIFY PRODUCTS Marketers classify products into categories because the categories represent differences in how consumers and business customers feel about products and how they purchase different products.

Such an understanding helps marketers develop new products and a marketing mix that satisfies customer needs.

2.1. How Long Do Products Last?

Marketers classify consumer goods as durable or nondurable depending on how long the product lasts. Durable goods are consumer products that provide benefits over a period of months, years, or even decades, such as cars, furniture, and appliances.

Nondurable goods, such as newspapers and food, are consumed in the short term.

We are more likely to purchase durable goods under conditions of high involvement (as we saw in Chapter 5), while nondurable goods are more likely to be low involvement decisions.

2.2. How Do Consumers Buy Products?

Marketers also classify products based on where and how consumers buy the product. We think of both goods and services as convenience products, shopping products, specialty products, or unsought products. Consumer decisions differ in terms of effort they put into habitual decision making to limited problem solving to extended problem solving. We can use this idea when we want to understand why it is important to classify products.

A convenience product typically is a nondurable good or service that consumers purchase frequently with a minimum of comparison and effort. Consumers expect these products to be handy and will buy whatever brands are easy to obtain. In general, convenience products are low priced and widely available.

Consumers generally already know all they need or want to know about a convenience product, devote little effort to purchases, and willingly accept alternative brands if their preferred brand is not available in a convenient location. Most convenience product purchases are the results of habitual consumer decision making.

What is the most important thing for marketers of convenience 8-3 Copyright © 2025 Pearson Education, Inc.

Figure 8.2 Snapshot: Classification of Products

Part 3: Develop the Value Proposition for the Customer

products? You guessed it—make sure the product is easily obtainable in all the places where consumers are likely to look for it. p. 270

Staple products such as milk, bread, and gasoline are basic or necessary items that are available almost everywhere. Most consumers do not perceive big differences among brands.

Marketers must offer staples that consistently meet consumers’ expectations for quality and make sure it is available at a price comparable to the competition’s price. A consumer packaged good (CPG) or fast-moving consumer good (FMCG) is a lowcost good that we consume quickly and replace frequently.

An impulse product is something people buy on the spur of the moment.

p. 271

Geofencing marketing has become prevalent. Marketers use GPS or RFID technology to create a virtual geographic boundary, enabling software to trigger a response when a mobile device enters or leaves a particular area.

p. 271

Emergency products are those products we purchase when we are in dire need. Bandages, umbrellas, and something to unclog the bathroom sink are examples of emergency products. Because we need the product badly and immediately, price and sometimes product quality may be irrelevant to our decision to purchase.

p. 271

Shopping products are goods or services for which consumers will spend time and effort to gather information on price, product attributes, and product quality. For these products, consumers are likely to compare alternatives before they buy.

p. 272

Specialty products have unique characteristics that are important to buyers at almost any price. Consumers usually know a good deal about specialty products, and they tend to be loyal to specific brands. Generally, a specialty product is an extended problemsolving purchase that requires a lot of effort to choose. That means firms that sell these kinds of products need to create marketing strategies that make their product stand apart from the rest.

p. 272

Unsought products are goods or services (other than convenience products) for which a consumer has little awareness or interest until a need arises. It requires a good deal of advertising or personal selling to interest people in these kinds of 8-4 Copyright © 2025 Pearson Education, Inc.

Exhibit: Dog lovers

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products—just ask any life insurance salesperson. It is a challenge to find convincing ways to interest consumers in unsought products.

2.3. How do Businesses Buy Products?

Marketers classify business-to-business products based on how organizational customers use them.

Equipment refers to the products an organization uses in its daily operations. Heavy equipment, sometimes called installations or capital equipment, includes items such as buildings and robotics used to assemble automobiles. Installations are big-ticket items and last for a number of years. Desktop computers, desks, and chairs are examples of light or accessory equipment; they are portable, cost less, and have a shorter life span than capital equipment.

Maintenance, repair, and operating (MRO products) are goods that a business customer consumes in a relatively short time. Maintenance products include light bulbs, mops, and cleaning supplies. Repair products are such items as nuts and bolts. Operating supplies include computer paper and oil to keep machinery running.

Raw materials are products of the fishing, lumber, agricultural, and mining industries that organizational customers purchase to use in their finished products.

p. 272

Processed materials are produced when firms transform raw materials from their original state. Organizations purchase processed materials that become a part of the products they make.

Some business customers purchase specialized services from outside suppliers. Specialized services may be equipment-based, such as repairing a copy machine or fixing an assembly line malfunction, or non-equipment-based, such as market research and legal services.

p. 273

Component parts are manufactured goods or subassemblies of finished items that organizations need to complete their own products. As with processed materials, marketing strategies for component parts usually involve nurturing relationships with customer firms and on-time delivery of a product that meets the buyer’s specifications.

3.

DISRUPTION IN MARKETING: INNOVATION AND DESIGN THINKING NOW DRIVE PRODUCT SUCCESS 8-5 Copyright © 2025 Pearson Education, Inc.

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The Federal Trade Commission says that (1) a product must be entirely new or changed significantly to be called new and (2) a product may be called new for only six months. p. 273

From a marketing perspective, a new product or innovation is anything that customers perceive as new and different. An innovation may be a completely new product that provides benefits never available before, or it may simply be an existing product with a new style, in a different color, or with some new feature. Creativity describes a process that results in something new. Creative outcomes can take on many forms, but most often we experience them as something we can see, hear, smell, touch, or taste. Design thinking is a process that draws upon logic, imagination, intuition, and systemic reasoning to explore possibilities of what could be—and to create desired outcomes that benefit the end user (the consumer).

Figure 8.3 Snapshot: Process Steps in Design Thinking

Ideation is idea generation through a process characterized by the alternation of divergent and convergent thinking, typical of the design-thinking process.

Divergent thinking is coming up with as many new ideas as possible and exploring new, “out-of-the-box” alternatives. p. 273

Convergent thinking is moving toward analyzing the different ideas in order to come to a decision on the best choice.

Design teams use design thinking to tackle ill-defined or unknown problems—ones that cannot be solved successfully by other approaches. Such categories of problems are called wicked problems, a flashy term to denote that these are the sorts of problems that, if not creatively and systematically addressed, can lead to organizational failure.

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p. 275

3.1. Types of Innovations Innovations vary on their degree of newness: continuous innovations, dynamically continuous innovations, and discontinuous innovations. These categories are based on the amount of disruption or change they bring to people’s lives.

3.1.1. Continuous Innovations A continuous innovation is a modification to an existing product. This type of modification can set one brand apart from its competitors. The consumer does not have to learn anything new to use a continuous innovation.

Exhibit: Slide rule and calculator Figure 8.4 Snapshot: Types of Innovations

Exhibit: Sriracha

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Chapter 8: Product I: Innovation and New Product Development

A knockoff is a new product that copies, with slight modification, the design of an original product. p. 275 3.1.2. Dynamically Continuous Innovations A dynamically continuous innovation is a pronounced modification to an existing product that requires a modest amount of learning or change in behavior to use it. p. 276 3.1.3. Discontinuous Innovations To qualify as a discontinuous innovation, the product must create major changes in the way we live. Consumers must learn a great deal to use a discontinuous innovation because no similar product has ever been on the market. Major inventions such as the airplane, the car, and the television radically changed modern lifestyles. Convergence is a type of discontinuous innovation where two or more technologies come together to create new systems. p. 276

Disruptive innovation is an innovation that creates a new market and value chain and eventually disrupts an existing market and value chain, displacing established market-leading firms, products, and alliance.

First-mover advantage in the market is about being the firm that leads disruption, like LinkedIn.

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4.

NEW PRODUCT DEVELOPMENT Research and development (R&D) is a well-defined and systematic approach to how a firm innovates. There are seven phases in the process of new product development (or NPD).

4.1. Phase 1: Ideation (or Idea Generation) In the initial idea generation phase of product development, marketers use a variety of sources to come up with great new product ideas that provide customer benefits and that are compatible with the company mission. Sometimes ideas come from customers, as through value co-creation. Ideas also come from salespeople, service providers, and others who have direct customer contact.

4.2. Phase 2: Product Concept Development and Screening The second phase in developing new products is product concept development and screening. Although ideas for products initially come from a variety of sources, it is up to marketers to expand these ideas into more complete product concepts. Product concepts describe what features the product should have and the benefits those features will provide for consumers.

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Figure 8.5 Process: Phases in New Product Development

Exhibit: Lego

Part 3: Develop the Value Proposition for the Customer

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When screening, marketers and researchers examine the chances that a new product concept might be successful, while they weed out concepts that have little chance to make it in the market. They estimate technical success when they decide whether the new product is technologically feasible—is it possible to actually build this product? Then they estimate commercial success when they decide whether anyone is likely to buy the product.

4.3. Phase 3: Marketing Strategy Development The third phase in new product development is to develop a marketing strategy to introduce the product to the marketplace.

This means that marketers must identify the target market, estimate its size, and determine how they can effectively position the product to address the target market’s needs. In addition, of course, marketing strategy development includes planning for pricing, distribution, and promotion expenditures both for the introduction of the new product and for the long run.

4.4. Phase 4: Business Analysis Exhibit: V8 Even though marketers have evidence that there is a market for the product, they still must conduct business analysis to find out if the product can make a profitable contribution to the organization’s product mix. They will evaluate demand, resources, and impact on existing products (a concept called cannibalization).

4.5. Phase 5: Technical Development In technical development, a firm’s engineers work with marketers in refining the design and production processes. The Exhibit: 3D better a firm understands how customers will react to a new printers product, the better its chances of commercial success. For this reason, a company’s research-and-development (R&D) department usually develops one or more physical versions or prototypes of the product. Prospective customers may evaluate these mockups in focus groups or in field trials at home.

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p. 279

4.6. Phase 6: Market Test In a market test, or test marketing, the firm tries out the complete marketing plan—the distribution, advertising, and sales promotion—but in small geographic areas that are similar to the larger market it hopes to enter.

Test marketing is extremely expensive. A test market also gives the competition a free look at the new product, its introductory price, and the intended promotional strategy—and an opportunity to get to the market first with a competing product. On the positive side, when they offer a new product in a limited area, marketers can evaluate and improve the marketing program.

Because of the potential problems and expense of test marketing, marketers instead may use special computer software to conduct a simulated market test that imitates the introduction of a product into the marketplace.

p. 280

4.7. Phase 7: Commercialization Commercialization means the launching of a new product, and it requires full-scale production, distribution, advertising, and sales promotion. A launch requires planning and careful preparation.

There is an explosive growth of crowdfunding, where innovative websites have raised billions of dollars for entrepreneurs and small companies. Crowdfunding refers to online platforms that allow thousands of individuals to each contribute small amounts of money to fund a new product from a startup company.

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p. 281

5.

ADOPTION AND DIFFUSION OF NEW PRODUCTS Product adoption is the process by which a consumer or business customer begins to buy and use a new good, service, or idea. Diffusion describes how the use of a product spreads throughout a population. At first, only a small number of people buy it, but change happens in a hurry when the process reaches the moment of critical mass. This decisive moment is called the tipping point. After months or years spent developing a new product, the challenge to firms is getting consumers to buy and use the product and to do so quickly to recover the costs of product development and launch.

5.1. Stages in Consumers’ Adoption of a New Product

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Exhibit: Listerine and Scope

Part 3: Develop the Value Proposition for the Customer

Individuals and organizations pass through six stages in the adoption process. At every stage, people drop out of the process, so the proportion of consumers who wind up using the innovation on a consistent basis is a fraction of those who are exposed to it. p. 281 5.1.1. Awareness To educate consumers about a new product, marketers may conduct a massive advertising campaign: a media blitz. This strategy works for new products when consumers see a new product as something they want, need, and cannot live without.

Figure 8.6 Process: Adoption Pyramid

p. 282 5.1.2. Interest Interest means that a prospective adopter begins to see how a new product might satisfy an existing or newly realized need. Interest also means that consumers look for and are open to information about the innovation. Marketers often design teaser advertisements that give prospective customers just enough information about the new product to make them curious and to stimulate their interest. Some consumers drop out of the process at this point.

Exhibit: Apple

p. 282 5.1.3. Evaluation Sometimes little evaluation may occur before someone decides to buy a good or service. A person may do very little thinking before she makes an impulse purchase.

Again, some potential adopters will drop out at this stage.

Exhibit: The Screaming Goat

p. 282 5.1.4. Trial Trial is the stage in the adoption process when potential buyers will actually experience or use the product for the first time. Often marketers stimulate trial when they provide opportunities for consumers to sample the product. p. 283 5.1.5. Adoption In the adoption stage, a prospect actually buys a product. This does not mean that all organizations or individuals who first choose an innovation are permanent customers. Marketers need to provide follow-up contacts and communications with adopters to ensure they are satisfied and remain loyal to the new product over time. p. 283 5.1.6. Confirmation Favorable experiences make it more likely that she will become a loyal adopter as her initially positive opinions result in 8-10 Copyright © 2025 Pearson Education, Inc.

Exhibit: CocaCola

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p. 283

confirmation. Some marketers feel that reselling the customer in the confirmation stage is important.

5.2. Adopter Categories Diffusion describes how the use of a product spreads throughout a population. Based on adopters’ roles in the diffusion process, experts have classified them into five categories.

Many innovative technology products are released as a beta test to allow usage and feedback from a small number of users that are willing to test the product. Innovative technologies commonly beta tested are often called bleeding-edge technology.

p. 284

5.2.1. Innovators Innovators are roughly the first 2.5 percent of adopters. This segment is extremely adventurous and willing to take risks with new products. Innovators are typically well educated, younger, better off financially than others in the population, and worldly.

Innovators pride themselves on trying new products.

p. 284

5.2.2. Early Adopters Early adopters, approximately 13.5 percent of adopters, buy product innovations early in the diffusion process but not as early as innovators. Unlike innovators, early adopters are very concerned about social acceptance, so they tend to gravitate toward products they believe will make others think they are cutting-edge or fashionable.

p. 284

5.2.3. Early Majority The early majority, roughly 34 percent of adopters, avoids being either first or last to try an innovation. They are typically middleclass consumers and are deliberate and cautious. Early majority consumers have slightly above-average education and income levels. When the early majority adopts a product, it is no longer considered new or different—it is, in essence, already established.

p. 284

5.2.4. Late Majority Late majority adopters, about 34 percent of the population, are older, more conservative, and typically have lower-than-average levels of education and income. The late majority adopters avoid trying a new product until it is no longer risky. By that time, the product has become an economic necessity or there is pressure from peer groups to adopt.

p. 284

5.2.5. Laggards Laggards, about 16 percent of adopters, are the last in a population to adopt a new product. Laggards are typically lower 8-11 Copyright © 2025 Pearson Education, Inc.

Figure 8.7 Process: Categories of Adopters

Part 3: Develop the Value Proposition for the Customer

in social class than other adopter categories and are bound by tradition. By the time laggards adopt a product, it may already be superseded by other innovations.

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By understanding these adopter categories, marketers are able to better develop strategies that will speed the diffusion or widespread use of their products.

5.3. Product Factors That Affect the Rate of Adoption Not all products are successful.

Researchers have identified five characteristics of innovations that affect the rate of adoption. Following is a discussion.

Relative advantage describes the degree to which a consumer perceives that a new product provides superior benefits.

Compatibility is the extent to which a new product is consistent with existing cultural values, customs, and practices.

Complexity is the degree to which consumers find a new product or its use difficult to understand.

Trialability is the ease of sampling a new product and its benefits.

Observability is how visible a new product and its benefits are to others who might adopt it.

6.

Brand You: Creating Your Value Proposition Take the time to focus on and develop your features (actual product), benefits (core product), and extras (augmented product).

6.1. Add to Your Product Layers—volunteer for a not-for-profit organization; establish a blog business; develop a social network for joy-hunting students.

p. 286

6.1.1. The Core Product—Your Benefits Benefits are the outcomes or results that occur because of your efforts. Examples of benefits are higher sales, increased, customer satisfaction, improved brand recognition, lower costs, and higher profits.

Involvement in campus organizations, charities, or professional organizations enhances the layers of your brand.

6.1.2. The Actual Product—Your Features Your features are strengths, talents, and skills. Identify attitudes you think are important for employers and things you’ve done to demonstrate those attitudes. Make a good first impression.

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Exhibit: Microwave

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6.1.3. The Augmented Product—Your Extras Things like willingness to travel or work overtime, extra/voluntary training, and temping might help make you more attractive to employers.

Here’s My Choice……

Sheryl went with Option 2 and decided to create a new line of color cosmetics specifically developed for the China market called Pink Young. Pink Young was created with three adjectives in mind: professional, fashionable, and international. It is positioned as the answer for the woman who wants to show her femininity along with her fierceness—a woman who knows what she wants and pursues it. The name and the packaging paid homage to Mary Kay’s signature color, while conveying that this was targeted to a younger demographic.

IV. END-OF-CHAPTER ANSWER GUIDE CHAPTER QUESTIONS AND ACTIVITIES  CONCEPTS: TEST YOUR KNOWLEDGE 8-1.

What is a good? What are the differences between tangible and intangible products?

A good is a tangible product, something that we can see, touch, smell, hear, taste, or possess. It may take the form of a pack of yummy cookies, a shiny new iPad, a house, a part used in production of that Tesla electric sports car you’d like to buy, or a chic but pricey Coach handbag. In contrast, intangible products—services, ideas, people, and places—are products that we can’t always see, touch, taste, smell, or possess.

8-2.

Explain what marketers mean by the core product, the actual product, and the augmented product.

The core product consists of the basic product category benefits and customized benefit(s) the product provides. The actual product is the physical good or delivered service, including the packaging and brand name. The augmented product includes both the actual product and any supplementary services such as warranty, credit, delivery, installation, and so on.

8-3.

What are the two ways marketers classify products? What is the difference between a durable good and a nondurable good? What are the main differences among convenience, shopping, and specialty products?

Marketers classify products as either durable or nondurable goods. Durable goods are consumer products that provide benefits over a period of months, years, or even decades, such as cars, furniture, and appliances. In contrast, nondurable goods, such as newspapers and food, are consumed in the short term. Durable goods are more likely to be purchased under

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Part 3: Develop the Value Proposition for the Customer

conditions of high involvement, while purchases of nondurable goods are more likely to be low-involvement decisions.

Convenience products are low priced, widely available, and frequently purchased with a minimum of comparison and effort. Convenience products include staples such as milk, impulse products such as a magazine, and emergency products such as a drain opener.

Consumers spend considerable time and effort gathering information and comparing alternatives before purchasing a shopping product. Shopping products may be attribute based or price based. Specialty products have unique characteristics and are important to the buyer.

The buyer will devote significant effort to acquire a specialty product.

8-4.

Differentiate between consumer and business markets. What are some common types of products that are sold in each market?

Consumer markets target individuals purchasing goods for personal use. These are categorized into convenience, shopping, specialty, and unsought products, each defined by the consumer’s buying behavior. Common goods sold in consumer markets include food, clothing, personal care products, and household items.

Business markets serve organizations buying goods for operational or production purposes.

These include equipment, maintenance supplies, raw materials, processed materials, and components.

8-5.

What is a new product? Why is understanding new products so important to marketers?

Innovations are classified according to their degree of newness. What are the different levels of newness used by marketers? Why is it so important for marketers to understand in which category an innovation belongs?

The FTC says that a company can call its products new if: • The product is entirely new or changed significantly from the past.

• The product can only be called new for six months.

In reality, new products are anything that consumers perceive as being new. They may be classified as to their degree of newness. Understanding new products is important to companies because of the fast pace of technological advancement, the high cost to companies for developing new products, and the contributions to society that new products can make.

A continuous innovation is a modification of an existing product. A dynamically continuous innovation provides greater change in a product. A discontinuous innovation is a very new product that creates major changes in people’s lives.

8-6.

Explain innovation, creativity, and ideation. What is divergent thinking? What is convergent thinking?

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Chapter 8: Product I: Innovation and New Product Development

Innovation refers to products that consumers perceive as new and different from existing products.

Creativity is a phenomenon in which something new and valuable is created. This can be tangible or intangible, such as an idea, a solution to a problem, or an artistic creation.

In the ideation (or idea generation) phase of product development, marketers use a variety of sources to come up with great new product ideas that provide customer benefits and that are compatible with the company mission. Sometimes ideas come from customers. Ideas also come from salespeople, service providers, and others who have direct customer contact.

Divergent thinking means coming up with as many new ideas as possible and exploring new “out-of-the-box” alternatives.

Convergent thinking moves toward analyzing the different ideas in order to come to a decision on the best choice.

8-7.

What is R&D, and what is its importance to marketers and the product development process?

Research and development (R&D) is a well-defined and systematic approach to how an organization innovates. Investors and financial markets closely scrutinize R&D investments because these expenditures tend to predict how robust the firm’s oncoming new product stream will be. In fact, R&D investment in and of itself is often a central metric for organizational commitment to innovation. Higher levels of R&D activity are inherently more competitively important in some industries versus others (high tech and pharmaceuticals are examples on the high side), but in any firm new product development is fueled by investment in R&D. New product development has seven steps. Marketing Strategy Development— marketing strategies that can be used to introduce the product into the marketplace. Test Marketing—the firm tries out the marketing plan in a limited area.

8-8.

Identify and explain the five steps in the design thinking process.

The five steps in the design thinking process are: 1. Empathize: This initial step involves gaining a deep understanding of the problem and the users, including their needs and goals.

2. Define: In this phase, the insights gathered during the empathizing stage are used to clearly articulate the problem that needs to be solved.

3. Ideate: In this step, the focus is on generating a wide array of ideas and exploring possible solutions. This involves divergent thinking, where many new ideas are developed.

4. Prototype: The ideas generated are turned into prototypes. This involves creating scaled-down versions of the product or specific features found within the product to test the concepts.

5. Test: The final step is testing the prototypes with users to see if the solutions meet their needs.

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Part 3: Develop the Value Proposition for the Customer

8-9.

What is crowdfunding? How does it help products get to market?

Crowdfunding refers to online platforms that allow thousands of individuals to each contribute small amounts of money to fund a new product from a startup company. On these sites, individuals can choose to either donate money (often in exchange for a product sample) or invest in the company. Under this model, even small contributions add up when hundreds or thousands of people like an idea and pitch in. Social media campaigns crank up, and insiders start to buzz about the new product on social media and in the blogosphere.

Evaluation in which a prospect weighs the costs and benefits of the new product. Confirmation comes after adoption when a customer weighs expected versus actual benefits and costs.

8-10. Explain the seven stages of new product development.

The seven stages of new product development are: 1. Idea generation: Marketers use a variety of sources to come up with great new-product ideas that will provide customer benefits and that are compatible with the company mission.

2. Product concept development and screening: Marketers must expand ideas into more complete concepts; product concepts describe what features the product should have and the benefits those features will provide for consumers.

3. Marketing strategy development: In this stage, marketing strategies are developed that can be used to introduce the product into the marketplace.

4. Business analysis: This involves finding out if the product can make a profitable contribution to the organization’s product mix.

5. Technical development: A firm’s engineers work with marketers in refining the design and production process.

6. Test marketing: The firm tries out the marketing plan in a limited area.

7. Commercialization: This means a full-scale launch of the new product and all of the marketing mix components.

8-11. Explain what is meant by diffusion. What is a tipping point?

Diffusion is the process by which the use of a product spreads throughout a population. This concept explains how a new product gradually becomes adopted by parts of the population, eventually reaching widespread usage.

A tipping point is the moment when a product’s adoption rate significantly accelerates from a slow build-up to an unprecedented new level. This is the critical moment when the spread of the product gains substantial momentum, leading to rapid market penetration.

8-12. What product factors affect the rate of adoption of innovations?

•

Relative advantage is the degree to which a consumer perceives that a new product provides superior benefits.

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• • •

Compatibility is the extent to which a new product is consistent with existing cultural values, customs, and practices.

Complexity is the degree to which consumers find a new product or its use difficult to understand.

Trialability is the ease of sampling a new product and its benefits.

 ACTIVITIES: APPLY WHAT YOU’VE LEARNED 8-13. Creative Homework/Short Project Assume that you are a member of the marketing department for a firm that is producing a smart kitchen that will allow all your large and small appliances to communicate with each other, meaning less work for you. In developing this product, you realize that it is important to provide a core product, an actual product, and an augmented product that meets the needs of customers. Develop an outline of how your firm might provide these three product layers in the smart kitchen.

Students should review the definitions of a core product, an actual product, and an augmented product and then develop an outline for providing these three product layers for a smart refrigerator.

8-14. In Class, 10–25 Minutes for Teams Firms go to great lengths to develop new product ideas.

Many firms are now using the ideation process, which includes divergent thinking first followed by convergent thinking. With a group of other students, participate in ideation by first coming up with new product ideas for one of the following (or some other product of your choice): • An app-controlled pet toy • A new flavor of potato chip • A new type of university Then, with your class, use convergent thinking to screen the ideas for possible further product development.

Students should begin this exercise by reviewing the concepts of convergent and divergent thinking.

In the ideation (or idea generation) phase of product development, marketers use a variety of sources to come up with great new product ideas that provide customer benefits and that are compatible with the company mission. Sometimes ideas come from customers. Ideas also come from salespeople, service providers, and others who have direct customer contact.

Divergent thinking means coming up with as many new ideas as possible and exploring new “out-of-the-box” alternatives. Convergent thinking moves toward analyzing the different ideas in order to come to a decision on the best choice.

One of the hardest things for a student to do is to be creative on demand. However, this is exactly what marketers have to do on a daily basis. The easiest way to encourage creativity is to remind students that there are no silly ideas. Each idea is a step toward the really good idea.

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Part 3: Develop the Value Proposition for the Customer

One way to begin the project is to have students work by themselves first. Each student should write down 10 ideas for one of the products—there are no bad ideas. Next, students should compare notes, weed out the bad ideas, and bridge from the good ideas to the best idea. The best idea should be defensible from a marketing and consumer standpoint. All student teams should discuss ideas in class. Award a prize for the best idea based on student votes.

8-15. Creative Homework/Short Project You are a member of a new product team with your company that has developed a computer that carries a perpetual charge—no plug-in required! You are considering conducting a test market for this new product. Outline the pros and cons for test marketing this product. What are your recommendations?

Working in small groups, students should outline the pros and cons for test marketing a computer that carries a perpetual charge. Groups can present their outlines to the class.

8-16. For Further Research (Individual) Select a recently successful product that you believe is innovative and do some research on how the product was introduced. Using the adopter categories in the chapter, identify adopters of the product that you consider to be innovators and provide evidence of specific behaviors and characteristics that support the placement of these consumers within that adopter category. Select a product

from the past that faced challenges or completely failed in the marketplace. Research how the product was introduced and the marketing attempts to gain traction with its target audience.

Using the adopter categories discussed in the chapter, identify the characteristics of consumers who could have potentially been innovators or early adopters for the product. What could the company have done differently to avoid failure in the consumer marketplace?

Student answers will vary. Encourage students to review not only the product’s features and intended benefits but also the marketing strategies used and the societal context at the time.

Instruct students to use the adopter categories from the chapter to hypothesize which consumer groups might have been innovators or early adopters and why they did or did not embrace the product. Facilitate a discussion on how different marketing approaches, timing, or product modifications might have altered the product's fate.

8-17. For Further Research (Individual) Automakers have been fiercely competing to release new zero-emission vehicles. Identify five newly released electric vehicles. Using the five characteristics that affect rate of adoption (relative advantage, compatibility, complexity, trialability, and observability), rate each of the new vehicles on these characteristics. Based on this evaluation, which vehicles do you think will be most quickly adopted by consumers?

Which ones do you think will take the longest to catch on?

Student answers will vary. Ask students to examine the vehicles through the lens of the five characteristics affecting the rate of adoption: relative advantage, compatibility, complexity, trialability, and observability. Have them gather data about each vehicle’s features, market positioning, and technological advancements, and rate how these factors might influence consumer adoption. Encourage them to critically analyze and predict which vehicles are likely to gain traction fastest based on their advantages and market readiness, and which might face obstacles.

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Chapter 8: Product I: Innovation and New Product Development

8-18. For Further Research (Individual) Sometimes products are massively successful because consumers find a use for them separate from what the developing company initially envisioned. Find two products online that fit this description and identify their initial intended use(s), then what other use(s) consumers found for them, and finally whether companies adjusted their marketing efforts around the products after becoming aware of how consumers were actually using the products.

Using the web, students can research a new or new and improved product and summarize how marketers developed the new use for an existing product.  CONCEPTS: APPLY MARKETING METRICS In the chapter, we define creativity and discuss how it relates to innovation. Innovation can be measured in terms of number of successful new products as well as a variety of secondary measures related to those products (e.g., new product launches per year, per employee, and success rate versus failure rate). Innovation is fueled by R&D expenditures, as the chapter notes.

But what about measuring creativity itself? On the one hand, numerous experts have proposed a variety of metrics that companies can use to measure the creativity of new product development teams/efforts including the number of ideas generated, the diversity/novelty of ideas generated, customer satisfaction/feedback on new products or product ideas, and awards/recognition for creative design. On the other hand, some experts have argued that an over focus on metrics can negatively impact creativity. They might argue that the phrase “creativity metric” is an oxymoron. There’s always been a right-brain/left-brain argument that to be optimally successful, marketing has to nurture both the creative and the analytical. Has the proliferation of marketing metrics over the past decade squelched essential creativity emanating from the right brain?

8-19. What is your viewpoint about measuring creativity? Do you believe it is more constructive or damaging to organizational innovation? Support your opinions.

Creativity describes a process that results in something new. Creative outcomes can take on many forms, but most often we experience them as something we can see, hear, smell, touch, or taste. The outcome can be almost anything—an idea, a joke, an artistic or literary work, a painting or musical composition, a novel solution to a problem, an invention, and, of course, a new product. Scientific research into creativity provides strong evidence of the importance of creative processes in the production of novel, useful products.

Creativity could be damaging to innovation because it makes products obsolete. Consider the digital camera, which made the traditional camera obsolete. There was no point in innovating better film for a camera because consumers typically use digital cameras that do not require rolls of film.

8-20. Identify a well-known organization that you believe is quite creative. How do you know that it is creative—that is, what specific evidence can you cite that indicates that a high level of

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Part 3: Develop the Value Proposition for the Customer

creativity is practiced? What metrics could this company use to evaluate the creativity of its product/development teams?

Student answers will vary depending on the organization selected. This question also makes a lively discussion topic encouraging students to consider a wider variety of examples of creative marketing decisions. Apple is a likely selection for some students, who will mention product development, branding, and promotion as examples of Apple’s creativity.

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Chapter 8: Product I: Innovation and New Product Development

 CHOICES: WHAT DO YOU THINK? 8-21. Critical Thinking Technology has changed the speed at which new products enter—and leave—the marketplace. What are three products you think technology will impact in the future? How do you see technology changing them? Will this impact how consumers use the product in the future?

Innovations affected our living standards and patterns in the twentieth century. This question works very well in an open discussion format. Ideas seem to build on one another. Remind students that ideas do not just have to be technology-oriented. Some of our greatest inventions were very simple. Zippers, Velcro, a match, and a can opener have all helped us in our daily lives.

8-22. Critical Thinking Discontinuous innovations are totally new products—something seldom seen in the marketplace. These innovations are often referred to as disruptive innovations.

What are some examples of discontinuous innovations introduced in the past 50 years? Why are there so few discontinuous innovations? What products have companies recently introduced that you believe will end up being regarded as discontinuous innovations?

Students can offer examples of discontinuous innovations and give examples of products that will end up being regarded as discontinuous innovations.

8-23. Ethics There is a growing consumer-driven focus to examine the short- and long-term environmental impacts of products and services. What are some of the specific ways that companies can effectively integrate environmental sustainability into the new product development process? Consider the key stages in the product life cycle, such as sourcing materials, production, usage, and disposal. Discuss some strategies that businesses can use to minimize waste, carbon emissions, and natural resource depletion during the product development stages.

Student answers will vary. Consider focusing on the various stages of the product life cycle: sourcing materials, production, usage, and disposal. Encourage students to identify and analyze strategies that minimize environmental impact, such as sustainable sourcing practices, energy-efficient production methods, designing products for longer use and/or easier recycling, and strategies for reducing waste and emissions.

8-24. Ethics Some companies opt to increase the price of certain types of products when there is an increased need for them—think rain ponchos on a rainy day in a theme park. Because consumers need the product immediately, price and quality are typically irrelevant. Explain the potential positive and negative implications of this practice. Is this practice illegal? Should it be illegal or not?

Students can divide into teams and discuss the pros and cons of this question.

8-25. Ethics Artificial intelligence (AI) is being used more and more to develop new products. How can the use of AI impact decision-making, consumer privacy, and algorithm bias in creating 8-21 Copyright © 2025 Pearson Education, Inc.

Part 3: Develop the Value Proposition for the Customer

new products? How could an increased use of AI in product development affect jobs and society at large? What ethical considerations does this trend generate?

Student answers will vary. Consider dividing the topic into key concerns: decision-making, consumer privacy, algorithm bias, job impact, and societal effects. Encourage students to explore how AI might alter decision-making processes within companies and the potential for AI to enhance or hinder transparency and fairness. Discussion could also focus on consumer privacy and how AI gathers and utilizes consumer data. The conversation about AI’s impact on jobs could focus on automation, skill shifts, and potential job displacement. The broader societal implications could include the overall changes AI may bring to consumer behavior and cultural norms. For ethical considerations, ask students to think about the responsibilities of corporations in addressing these challenges.

8-26. Critical Thinking Consider the differences in marketing to consumer markets versus business markets. Which aspects of the processes of product adoption and diffusion apply to both markets? Which aspects are unique to one or the other? Can products successfully transition from one market to the other? Provide evidence of your findings.

Have the students review the differences in marketing to consumers and business markets.

Product adoption is the process by which an individual begins to buy and use a new product, whereas the diffusion of innovations is how a new product spreads throughout a population.

The stages of the adoption process are awareness, interest, trial, adoption, and confirmation.

To understand the diffusion process, marketers classify consumers according to their readiness to adopt new products as innovations, early adopters, early majority, late majority, and laggards.

Allow the students to engage in discussion on which ways they feel consumers are similar or different to business markets and support their positions with the chapter materials.

8-27. Ethics In this chapter, we explained that knockoffs are slightly modified copies of original product designs. Should knockoffs be illegal? Who is hurt by knockoffs? Is the marketing of knockoffs good or bad for consumers in the short run? In the long run? Is there anything that companies can do during product development to minimize the release of knockoffs?

Answers to the question regarding knockoffs will probably vary. If you are a designer, whether it is apparel or trucks, you do not want your designs knocked off and would probably think that such an activity is illegal. Others would say that copying is the highest form of flattery.

However, knockoffs not only hurt designers by taking away their sales and damaging their brand equity, but also hurt consumers. In the short run it might seem like consumers and society benefit; however, if the product is inferior in quality, consumers will ultimately pay more money for products.

8-28. Critical Thinking In some cases, products with incredibly high consumer demand are removed from the market. What are some common reasons that result in popular products being dis-

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Chapter 8: Product I: Innovation and New Product Development

continued? What types of proactive processes, monitoring, or regulations could have prevented these situations?

Student answers will vary. Consider examining reasons such as changes in company strategy, legal and regulatory issues, supply chain problems, or shifts in consumer preferences.

Encourage students to explore cases where proactive measures, like continuous market research, consumer feedback forums, or tighter regulatory compliance, might have mitigated the need for discontinuation. The discussion can also touch on how companies can monitor market trends, consumer behavior, and regulatory environments to anticipate and adapt to potential issues that might threaten a product’s viability.

8-29. Critical Thinking The augmented product represents the add-ons—the extras manufacturers add to stand out from the crowd. Think about purchasing a car. As a consumer, what types of supporting features would you require before making your purchase? Do you think these extras could ever make up for a sub-par product?

In small groups, students can discuss whether extras can make up for a sub-par product.  MINIPROJECT: LEARN BY DOING What product characteristics do consumers think are important in a new product? What types of service components do they demand? Most important, how do marketers know how to develop successful new products? This miniproject is designed to let you make some of these decisions as you walk through several steps of the new product development process.

8-30. Develop a presentation that summarizes your efforts for each of the following phases of new product development: a. Phase 1: Idea generation: Create (in your mind) a new product item that might be of interest to college students such as yourself. Develop a written description and possibly a drawing of this new product. Describe the benefits of the product. b. Phase 2: Product concept development and screening: Describe what features the product should have and the benefits those features will provide for consumers. Estimate both the technical success and the commercial success of the product. c. Phase 3: Marketing strategy development: Develop a simple marketing plan that identifies the target market and how you can position the product to meet that market’s needs.

Assume now that you have undergone a thorough business analysis (phase 4) and have built a prototype of the product (phase 5). d. Phase 6: Market test: Describe your product to five other college students, as if you had an actual prototype of the product. What is their overall opinion of the new product? Would they try the product? How could you influence them to buy the product? e. Phase 7: Commercialization: Based on the information you have collected, determine whether you are ready to launch the product. If not, describe the reasons why.

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The purpose of this miniproject is to allow students to experience the new product development process from the standpoint of an initiator. Students will examine new product characteristics, service components, and how marketers determine successful new products as they travel through the new product development process.

Individuals (or teams) are asked to review the new-product decision process. Students must make some of these decisions as they walk through several steps of the new product development process. They can write a report that summarizes not only what they have found but also what they have learned about the new-product development process. This actionoriented exercise is an excellent springboard to a discussion on new products.

Choose the best ideas from among the class and have the “inventors” present the ideas to this “tough audience.” Award prizes for success; provide improvement feedback for those that still have work to do.

Instructors may wish to extend the deadline for this assignment or make the assignment early enough so that students will have many opportunities to think, create, write their report, and discuss the outcomes with peers.

V. MARKETING IN ACTION CASE: REAL CHOICES AT IFIXIT Summary of Case For decades, planned obsolescence—the strategy of designing products with an artificially limited lifespan—has shaped industries from automobiles to tech. Now, Kyle Wiens and Luke Soules, founders of iFixit, are challenging this throwaway culture. iFixit empowers consumers to take charge of their electronics through a wealth of repair guides, tools, and parts. This move toward sustainable practices has encouraged giants like Samsung, Google, and Microsoft to rethink their designs, making them more repair-friendly. For example, Microsoft’s Surface Pro 9 now features easily replaceable components such as batteries and screens. As more states adopt “right to repair” laws and consumer preferences increasingly lean toward sustainability, iFixit’s approach is proving revolutionary. Not only does it offer a robust alternative to the endless consumption cycle, but it also presses manufacturers to consider repairability upfront. This fosters a more repair-friendly ecosystem that supports both the DIY enthusiast and professional repair services, paving the way for a more sustainable and less wasteful future in consumer electronics.

Suggestions for Presentation This case could be assigned for various online or in-class discussion activities.

Online Suggestions

Option 1: Assign each group a different electronics brand (such as Samsung, Google, Apple, or 8-24 Copyright © 2025 Pearson Education, Inc.

Chapter 8: Product I: Innovation and New Product Development

Microsoft) to investigate how they’ve partnered with iFixit or adopted similar self-repair initiatives.

Each group could analyze and report on these companies’ commitments to repairability, as evidenced by information from their websites.

Option 2: Ask students to explore and present on the status of “right to repair” legislation in different states, including their own, and discuss its impact on product development approaches.

In-Class Suggestions Option 1: Develop a profile for a customer who would be interested in using iFixit’s services.

Consider factors such as technological proficiency, environmental consciousness, and economic motivations.

Option 2: Discuss other product areas or industries where iFixit could potentially expand its repair advocacy and services.

Questions for Discussion 8-31. This product best fits into the category of a continuous innovation, which is a modification to an existing product (bottled water) that sets one brand apart from its competitors. Because tapped birch water does not involve a significant technological innovation, it would not fit the dynamically continuous category. Since the product does not make a major change in the way that people live, it would not qualify as discontinuous. What approaches can iFixit use to persuade even more manufacturers to collaborate with it instead of resisting its repairfocused business model?

Student responses will vary. Consider asking students to explore the existing challenges and resistance faced by iFixit when it comes to promoting a repair-focused model. This discussion could involve analyzing the potential benefits for manufacturers, such as enhanced brand loyalty and reduced environmental impact. Students can be encouraged to think critically about the various stakeholders involved (manufacturers, consumers, environmental groups) and their—sometimes competing—motivations. The discussion can then shift to brainstorming strategies that iFixit might use to align its objectives with the business models of these manufacturers, such as offering shared branding opportunities, demonstrating the marketing benefits of sustainability, or leveraging legislative trends favoring the right to repair.

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8-32. How should large electronics companies like Apple, Samsung, and Microsoft measure success in an environment where repairability may become a significant factor alongside traditional performance indicators like sales and market share?

Student answers will vary. Ask students to consider both traditional and emerging metrics used in business and marketing. Then, ask students to discuss the integration of repairability scores alongside sales figures and market share as indicators of success. Possible new key performance indicators (KPIs) could include customer satisfaction rates post-repair, the longevity of product use, and reductions in return rates due to improved repair options. The conversation could also encompass the potential for these metrics to influence brand loyalty and corporate reputation.

8-33. How can companies balance the conflict between designing products for longevity and repairability with pressure from investors to maintain revenue streams by frequently encouraging consumer upgrades?

Student answers will vary. Consider asking students to explore how companies can innovate in product design to enhance both durability and repairability, while also developing business models that include recurring revenue streams. Possible ideas include subscription services or leasing models. They might also discuss the role of corporate responsibility and brand image in influencing consumer behavior and investor sentiment, particularly as sustainability becomes more central to corporate values.

WEB RESOURCE https://www.ifixit.com/

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Chapter 9: Product II: Product Strategy, Branding, and Product Management

Chapter 9 Product II: Product Strategy, Branding, and Product Management I. CHAPTER OVERVIEW Today successful product management is more important than ever. As more and more competitors enter the global marketplace and as technology moves forward at an ever-increasing pace, products are created, grow, reach maturity, and decline at faster and faster speeds.

In this chapter, students learn about the life of the product. They learn that a product includes benefits, features, styling, branding, labeling, and packaging. Strategic decisions must be made about each of these elements. These decisions must complement each other, creating an overall product strategy.

II. CHAPTER OBJECTIVES Discuss the different product objectives and strategies a firm may choose.

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9-5.

Discuss the product objectives and strategies a firm may choose.

Understand how firms manage products throughout the product life cycle.

Explain how branding and packaging strategies contribute to product identity.

Describe how marketers structure organizations for new and existing product management.

Understand how to manage your career so that you will be able to adapt and flourish in a changing work environment.

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REAL PEOPLE, REAL CHOICES—HERE’S MY PROBLEM AT CAPSULE Aaron Keller is the cofounder of Capsule, a brand consultancy built on a design-thinking platform. The agency optimizes the intersections between brand and individual. One client is Patagonia. Patagonia as a brand is iconic but needs to be sustainable in revenue and in their relationship with the planet.

Their sales of base layer (long underwear) items were facing a challenging competitive environment. In these situations, every element of a brand has to pull its weight in order to convince shoppers to give it a chance. True to its mission, Patagonia’s packaging was regarded as the most sustainable—it consisted of two rubber bands wrapped around a sushi-rolled product and a large hang tag. Despite its small environmental footprint, the package design might need revamping in order to make more of an impact at the point-of-purchase. Aaron considered his options: 9-1 Copyright © 2025 Pearson Education, Inc.

Part 3: Develop the Value Proposition for the Customer

1. Ignore the problem.

2. Redesign the packaging to be like everyone else.

3. Conduct a complete redesign of the structure, packaging graphics, and display of the product line.

The vignette ends by asking the student which option he/she would choose.

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Aaron chose option #3.

1.

PRODUCT PLANNING: DEVELOP PRODUCT OBJECTIVES AND PRODUCT STRATEGY Strategies the product plan outlines spell out how the firm expects to develop a value proposition that will meet marketing objectives.

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The continual process of product management guides product planning, which is the systematic and usually team-based approach to coordinating all aspects of a product’s marketing initiative including all elements of the marketing mix. In some companies, product management is sometimes also called brand management, and the terms refer to essentially the same thing.

The organization members that coordinate these processes are called product managers or brand managers.

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1.1.

Getting Product Objectives Right Clearly stated product objectives provide focus and direction.

They should support the broader marketing objectives of the business unit in addition to being consistent with the firm’s overall mission. To be effective, product-related objectives must be measurable, clear, and unambiguous—and feasible. In addition, they must indicate a specific period.

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Competitive intelligence and an up-to-date knowledge of competitive product innovations are important to develop product objectives.

Above all, these objectives should consider the long-term implications of product decisions. Planners who sacrifice the long-term health of the firm to reach short-term sales or financial goals choose a risky course. Product planners may focus on one or more individual products at a time, or they may look at a group of product offerings as a whole.

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1.2.

Objectives and Strategies for Individual Products Brand storytelling can help position brands.

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Figure 9.1 Process: Steps to Manage Products

Exhibit: Amy’s Kitchen

Chapter 9: Product II: Product Strategy, Branding, and Product Management

Strategies for individual products may be quite different for new products, for regional products, and for mature products. For new products, the objectives relate to successful introduction. p. 301

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For mature products, product objectives may focus on breathing new life into a product while holding on to the traditional brand personality. For products that have achieved success at the local or regional market, it may be decided to introduce them nationally.

1.3.

Objectives and Strategies for Multiple Products A larger firm often sells a set of related products. This means that strategic decisions affect two or more products simultaneously.

The firm must think in terms of its entire portfolio of products.

A product line is a firm’s total product offering to satisfy a group of target customers. The number of separate items within the same category determines the product line length. Stockkeeping units (SKUs) are unique identifiers for distinct products.

Exhibit: MINI Cooper

Figure 9.2 Process: Objectives for Single and Multiple Products

A large number of variations in a product line is described as a full-line product strategy that targets many customer segments to boost sales potential. A limited-line product strategy, with fewer product variations, can improve the firm’s image if consumers perceive it as a specialist with a clear, specific position in the market.

Exhibit: BMW A product line extension is when organizations extend their brands product line by adding more brands or models. When a firm stretches its product line, it must decide on the best direction to go. If a firm’s current product line includes middle and lower-end items, an upward product line stretch adds new items—higherpriced entrants that claim better quality or that offer more bells and whistles. Conversely, a downward product line stretch augments a line when it adds items at the lower end. Here the firm must take care not to blur the images of its higher-priced, upperend offerings. Some firms reduce options in order to lower the manufacturer’s suggested retail price (MSRP).

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In some cases, a firm may decide that its target is too small a market. In this case, the product strategy may call for a two-way product line stretch that adds products at both the upper and lower ends. A filling-out product strategy adds sizes or styles not previously available in a product category.

p. 304 Whenever a manufacturer extends a product line or a product family, there is risk of cannibalization. This occurs when the 9-3 Copyright © 2025 Pearson Education, Inc.

Exhibit: P&G’s shampoo

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new item eats up sales of an existing brand as the firm’s current customers simply switch to the new product.

1.4.

Product Mix Strategies A firm’s product mix describes its entire range of products.

When they develop a product mix strategy, planners usually consider the product mix width: the number of different product lines the firm produces. If it develops several different product lines, a firm reduces the risk of putting all its eggs in one basket.

Normally, firms develop a mix of product lines that have some things in common.

1.5.

Quality as a Product Objective: TQM and Beyond Product objectives often focus on product quality: the overall ability of the product to satisfy customers’ expectations. Quality is tied to how customers think a product will perform, and not necessarily to some technological level of perfection. Product quality objectives coincide with marketing objectives for higher sales and market share and to the firm’s objectives for increased profits.

TQM firms promote a culture among employees that everyone working there serves customers. Coworkers are internal customers. The internal customer mindset comprises four beliefs: (1) employees who receive my work are my customers, (2) meeting the needs of employees who receive my work is critical to doing a good job, (3) it is important to receive feedback from employees who receive my work, and (4) I focus on requirements of the person who receives my work.

Around the world, many companies look to the uniform standards of the International Organization for Standardization (ISO) for quality guidelines. The ISO 9000 is a broad set of guidelines that establishes voluntary standards for quality management. These guidelines ensure that an organization’s products conform to the customer’s requirements. In 1996, the ISO developed ISO 14000 standards, which concentrate on “environmental management.”

This means the organization works to minimize any harmful effects it may have on the environment.

One way that companies can improve quality is to use the Six Sigma method. The term Six Sigma comes from the statistical term sigma, which is a standard deviation from the mean. Six Sigma refers to six standard deviations from a normal distribution curve. In practical terms, that translates to no more than 3.4 defects per million—getting it right 99.9997 percent of the time.

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Figure 9.3 Snapshot: Internal Customer Mindset Beliefs

Chapter 9: Product II: Product Strategy, Branding, and Product Management

The method involves a five-step process called “DMAIC” (define, measure, analyze, improve, and control).

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In some cases, product quality means durability. Reliability also is an important aspect of product quality. For many customers, a product’s versatility and its ability to satisfy their needs are central to product quality. For other products, quality means a high degree of precision. Quality, especially in business-tobusiness products, also relates to ease of use, maintenance, and repair. Yet, another crucial dimension of quality is product safety.

Finally, the quality of products such as a painting, a movie, or even a wedding gown relates to the degree of aesthetic pleasure they provide. Evaluations of aesthetic quality differ dramatically among people.

2.

MARKETING THROUGHOUT THE PRODUCT LIFE CYCLE The product life cycle (PLC) is a useful way to explain how the market’s response to a product and marketing activities change over the life of a product. Product marketing strategies must evolve and change as they continue through the product life cycle.

2.1.

Introduction Stage In the introduction stage, customers get the first chance to purchase the good or service. During this early stage, a single company usually produces the product.

Figure 9.4 Snapshot: Product Quality p. 306

During the introduction stage, the goal is to get first-time buyers to try the product. Sales (hopefully) increase at a steady but slow pace. The company usually does not make a profit during this stage. Research-and-development (R&D) costs and heavy spending for advertising and promotional efforts cut into revenue.

Exhibit: Orbitz

Figure 9.5 Snapshot: The Product Life Cycle

Figure 9.6 During the introduction stage, pricing may be high to recover the Snapshot: R&D costs or low to attract large numbers of consumers. An Marketing Mix introduction stage can be quite long. Many products never make it Strategies Through past the introduction stage. the Product Life Cycle Marketing during this stage often focuses on informing consumers about the product, how to use it, and its promised benefits. However, it is not as easy as it sounds: Would you believe that the most recent data indicate that as many as 95 percent of new products introduced each year fail?

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Product relaunch is when firms relaunch old or former products.

2.2.

Growth Stage In the growth stage, sales increase rapidly while profits increase and peak. Marketing’s goal is to encourage brand loyalty by 9-5 Copyright © 2025 Pearson Education, Inc.

Exhibit: iPhone

Part 3: Develop the Value Proposition for the Customer

convincing the market that this brand is superior to others. In this stage, marketing strategies may include the introduction of product variations to attract market segments and increase market share.

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When competitors appear, marketers must use heavy advertising and other types of promotion. Price competition may develop, driving profits down. If pricing was set high initially, it may be reduced to meet the increasing competition.

2.3.

Maturity Stage The maturity stage of the product life cycle is usually the longest. Sales peak and then begin to level off and even decline while profit margins narrow. Competition grows intense when remaining competitors fight for their share of a shrinking pie.

Price reductions and reminder advertising may be used to maintain market share. Sales are often to replace a “worn-out” item or to take advantage of product improvements. During the maturity stage, firms will try to sell their product through as many outlets as possible because availability is crucial in a competitive market.

To remain competitive and maintain market share during the maturity stage, firms may tinker with the marketing mix in order to extend this profitable phase for their product.

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2.4.

Decline Stage The decline stage of the product life cycle is characterized by a decrease in product category sales. When the market as a whole begins to shrink, profits decline, there are fewer variations of the product, and suppliers pull out. In this stage, there are usually many competitors, with none having a distinct advantage.

A firm’s major product decision in the decline stage is whether to keep the product. If the firm decides to keep the product, advertising and other marketing communications may be decreased to cut costs, and prices may be reduced if the product can remain profitable.

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If the firm decides to drop the product, it can eliminate it in two ways: (1) phase it out by cutting production in stages and letting existing stocks run out, or (2) simply dump the product immediately.

3.

BRANDING AND PACKAGING: CREATE PRODUCT IDENTITY It is important to give a product an identity and a personality.

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3.1.

What’s in a Name (or a Symbol)?

A brand is a name, a term, a symbol, or any other unique element of a product that identifies one firm’s product(s) and sets it apart from the competition.

How does a firm select a good brand name? Good brand designers say there are four “easy” tests: easy to say, easy to spell, easy to read, and easy to remember.

The name should also “fit” four ways: Fit the target market, Fit the product’s benefits, Fit the customer’s culture, and Fit legal requirements.

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When it comes to graphics for a brand symbol, name, or logo, the rule is that it must be recognizable and memorable. In addition, it should have visual impact.

A trademark is the legal term for a brand name, brand mark, or trade character. The symbol for legal registration in the United States is a capital “R” in a circle: ®. Marketers register trademarks to make their use by competitors illegal.

A firm can claim protection for a brand even if it has not legally registered it. In the United States, common-law protection exists if the firm has used the name and established it over a period of time.

3.2.

Why Brands Matter A brand is a lot more than just the product it represents—the best brands build an emotional connection with their customers.

Marketers spend huge amounts of money on new-product development, advertising, and promotion to develop strong brands. When they succeed, this investment creates brand equity. This term describes a brand’s value over and above the value of the generic version of the product.

Marketers identify different levels of loyalty, or lack thereof, by observing how customers feel about the product. At the lowest level, customers really have no loyalty to a brand, and they will change brands for any reason—often they will jump ship if they find something else at a lower price. At the other extreme, some brands command fierce devotion, and loyal users will go without rather than buy a competing brand.

The truly successful brands, however, are those that truly “bond” with their customers so that people feel they have a real

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Exhibit: Famous brands

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relationship with the product. Here are some of the types of relationships a person might have with a product: • Self-concept attachment • Nostalgic attachment • Interdependence • Love Ultimately, the way to build strong brands is to forge strong bonds with customers—bonds based on brand meaning. This concept encompasses the beliefs and associations that a consumer has about the brand. Brand managers, advertising agencies, package designers, name consultants, logo developers, and public relations firms are just some of the collaborators in a global industry devoted to the task of meaning management.

Brand personality uses personality traits to describe the character and benefits of a good or service. Brand anthropomorphism is the assignment of human qualities to a brand.

Brand storytelling captures the notion that powerful ideas selfpropagate when the audience is connected by digital technology.

The following is a list of ten characteristics of the world’s top brands: 1. The brand excels at delivering the benefits customers truly desire.

2. The brand stays relevant.

3. The pricing strategy is based on consumers’ perceptions of value.

4. The brand is properly positioned.

5. The brand is consistent.

6. The brand portfolio and hierarchy make sense.

7. The brand makes use of and coordinates a full repertoire of marketing activities to build equity.

8. The brand’s managers understand what the brand means to consumers.

9. The brand is given proper support, and that support is sustained over the long run.

10. The company monitors sources of brand equity.

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Because of the existing brand equity, a firm is able to sell its brand extension at a higher price than if it had given it a new brand, and the brand extension will attract new customers immediately. Of course, if the brand extension does not live up to the quality or attractiveness of its namesake, brand dilution can 9-8 Copyright © 2025 Pearson Education, Inc.

Exhibit: Nintendo

Exhibit: Mars M&Ms

Chapter 9: Product II: Product Strategy, Branding, and Product Management

occur and brand equity will suffer, as will brand loyalty and sales.

One other related approach is sub-branding, or creating a secondary brand within a main brand that can help differentiate a product line to a desired target group.

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Sometimes a brand’s meaning simply becomes so entrenched with a particular consumer group that it can be tough to find ways to branch out and achieve new users through extensions.

3.3.

Branding Strategies Because brands contribute to a marketing program’s success, a major part of product planning is to develop and execute branding strategies. Marketers have to determine which branding strategy approach(es) to use.

Figure 9.6 illustrates the options: individual or family brands, national or store brands, generic brands, licensing, and cobranding.

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Exhibit: Courtyard

by Marriott

3.3.1. Individual Brands Versus Family Brands Part of developing a branding strategy is to decide whether to use a separate, unique brand for each product item—an individual brand strategy—or to market multiple items under the same brand name—a family brand or umbrella brand strategy. Individual brands may do a better job of communicating clearly and concisely what the consumer can expect from the product, while a well-known company like Hyatt Hotels find that its high brand equity and reputation sometimes “rub off” on a new brand.

The potential dark side to having too many brands is they may become undifferentiated or confusing if there is poor positioning or if they stray too far from the related parent brand.

3.3.2. National and Store Brands Retailers today often are in the driver’s seat when it comes to deciding what brands to stock and push. In addition to choosing from producers’ brands, called national or manufacturer brands, retailers decide whether to offer their own versions.

Private-label brands, also called store brands, are the retail store or chain’s exclusive trade name. Target has private labels like Goodfellow & Co, Market Pantry, Simply Balanced, and Hearth & Hand.

3.3.3. Generic Brands An alternative to either national or store branding is generic branding, which is no branding at all. Generic branded products are typically packaged in white with black lettering that names 9-9 Copyright © 2025 Pearson Education, Inc.

Figure 9.7 Snapshot: Branding Strategies

Exhibit: Kellogg’s family of brands

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only the product itself (for example, “Green Beans”). Generic branding is one strategy to meet customers’ demand for the lowest prices on standard products such as dog food or paper towels.

Generic brands first became popular during the inflationary period of the 1980s when consumers became especially price conscious because of rising prices.

3.3.4. Licensing Some firms choose to use a licensing strategy to brand their products. This means that one firm sells another firm the right to use a legally protected brand name for a specific purpose and for a specific period.

Licensing can provide instant recognition and consumer interest in a new product, and this strategy can quickly position a product for a certain target market as it trades on the high recognition of the licensed brand among consumers in that segment. A familiar form of licensing occurs when movie producers license their properties to manufacturers of a seemingly infinite number of products.

3.3.5. Cobranding Cobranding benefits both partners when combining the two brands provides more recognition power than either enjoys alone.

Lifestyle brands seek to inspire, guide, and motivate people with the goal of contributing to the consumer’s way of life.

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A new and fast-growing variation on cobranding is ingredient branding in which branded materials become “component parts” of other branded products.

3.4. Disruption in Branding: Toward Social Justice and Marketing’s Responses A significant movement toward greater social justice related to racial equality was rekindled by several tragic events that resulted in harm and death to individuals of color.

Several highly visible consumer brands began to be a focus for reexamination (e.g., Washington Redskins, Aunt Jemima, Eskimo Pie, Mrs. Butterworth’s, Uncle Ben’s). These legacy brands were retired or reimagined.

Rebranding means taking an established brand and intentionally and strategically creating a new name, concept, symbol, design, imagery, and messaging.

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3.4.1. Packages and Labels: Branding’s Little Helpers A package is the covering or container for a product, but it is also a way to create a competitive advantage. Therefore, the important functional value of a package is that it protects the product. In addition to protecting the product, effective packaging makes it easy for consumers to handle and store the product.

The package also communicates brand personality. Effective product packaging uses colors, words, shapes, designs, and pictures to provide brand and name identification for the product.

In addition, packaging provides product facts including flavor, fragrance, directions for use, suggestions for alternative uses (for example, recipes), safety warnings, and ingredients. Packaging may also include warranty information and a toll-free telephone number for customer service.

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Effective package design involves a multitude of decisions.

Planners must consider the packaging of other brands in the same product category.

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The Universal Product Code (UPC), which is the set of black bars or lines printed on the side or bottom of most items sold in grocery stores and other mass-merchandising outlets.

Exhibit: Tiffany & Company’s Blue Box ®

Figure 9.8 Snapshot: Functions of Packaging Exhibit: Pringles

3.4.2. Design Effective Packaging Packaging can speak to some of the intangible characteristics of a product’s brand such as its personality, heritage, and premium image. p. 318

Sustainable packaging involves one or more of the following: elements of the packaging that can be produced from previously used materials, elements of the packaging that use materials in their development that can be repurposed after use, the use of materials that require fewer resources to cultivate, and the use of materials and processes that are generally less harmful to the environment.

Finally, there are many specific decisions brand managers must make to ensure a product’s packaging reflects well on its brand and appeals to the intended target market.

Exhibit: Millionaire after shave

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4.

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4.1.

Manage Existing Products In small firms, a single marketing manager usually handles the marketing function. She is responsible for new-product planning, advertising, working with the company’s few sales representatives, marketing research, and just about everything else. However, in larger firms, there are a number of managers who are responsible for different brands, product categories, or markets.

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4.1.1. Brand Managers Each brand may have its own brand manager who coordinates all marketing activities for a brand; these duties include positioning, identifying target markets, research, distribution, sales promotion, packaging, and evaluating the success of these decisions.

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4.1.2. Product Category Managers Some larger firms have such diverse product offerings that they need coordination that is more extensive. Organizing for product management may include product category managers, who coordinate the mix of product lines within the more general product category and who consider the addition of new-product lines based on client needs.

p. 320

4.1.3. Market Managers Some firms have developed a market manager structure in which different people focus on specific customer groups rather than on the products the company makes. This type of organization can be useful when firms offer a variety of products that serve the needs of a wide range of customers.

4.2.

Organize for New Product Development Because launching new products is so important, the management of this process is a serious matter. In some instances, one person handles new-product development, but within larger organizations, new-product development usually requires many people. Often especially creative people with entrepreneurial skills get this assignment.

p. 320

ORGANIZE FOR EFFECTIVE PRODUCT MANAGEMENT Like all elements of the marketing mix, product strategies are only as effective as their managers make them and carry them out.

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Figure 9.9 Snapshot: Types of Product Management p. 456

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The challenge in large companies is to enlist specialists in different areas to work together in venture teams. These teams focus exclusively on the new-product development effort.

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5. BRAND YOU: MANAGING THE PRODUCT—YOU If you are interviewing for a position, you have to be able to express your value proposition in any situation, including networking and job interviews.

5.1. Your Value Proposition—the Key to Success Your value proposition is a short, simple statement that includes four key pieces of information: • Who you are • What you have accomplished • What makes you unique and how you bring value to an organization • What you want to do An elevator pitch is a 30-second expression of your value proposition summary.

5.2. Launch Your Career with Marketable Skills Internships, volunteering, service learning, and cooperative learning programs are a great way to get real-world experience.

5.2.1. Internships Internships provide opportunities to gain valuable work-related experience and marketable skills.

5.2.2. Volunteering Volunteering for a not-for-profit, professional, or campus organization can help students gain experience while making a difference.

5.3. Manage Your Career by Remaining Employable People and companies change. Skills are outdated in three to five years. New jobs emerge each year that involve tasks that don’t exist today.

5.3.1. Develop a Flexible Career Plan Be proactive and create a flexible career plan that allows for uncertainty. Plan your career to keep up with the continuous changes in the world of work.

5.3.2. Expand Self-Awareness Follow the steps to develop your career plan, stay aware of strengths and preferences, periodically take an inventory of your 9-13 Copyright © 2025 Pearson Education, Inc.

Part 3: Develop the Value Proposition for the Customer

updated skills and preferences, and map new territory for your personal brand.

5.4. Communicate Your Value Keep an eye on the next project, company shift, or product innovation, and position yourself to participate in completing the task(s). Sell yourself. Align your work with your employer’s strategic goals.

5.5. Going Up! The elevator pitch should give someone a summary of your value proposition and should be short enough to be delivered in an average elevator ride. Tell someone who you are, what you’ve done that makes you unique, and what you want to do. p. 323

Here’s My Choice……

Aaron went with Option 3 and decided on a complete redesign of the structure, packaging graphics, and the display of the product line. Patagonia pulled together a team of experts from a variety of fields that included Capsule’s designers to make a big change.

This collaborative group was charged with researching the situation at the shelf, designing a new solution and then delivering it to the marketplace. The new design was inspired by the hex nuts Patagonia’s founder invented. These devices replaced the pitons that climbers hammered into rocks—they minimize any damage to the environment.

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Chapter 9: Product II: Product Strategy, Branding, and Product Management

IV. END-OF-CHAPTER ANSWER GUIDE CHAPTER QUESTIONS AND ACTIVITIES  CONCEPTS: TEST YOUR KNOWLEDGE 9-1.

Explain the concept of product management. List and describe the four steps involved in managing products.

Product management is a systematic and team-based approach to coordinating all aspects of a product’s strategy development and execution. It’s integral for aligning the product with the firm’s market planning and overall objectives.

The four steps involved in managing products are: 1. Develop product objectives: Firms outline what they aim to achieve with the product, ensuring these objectives are SMART—specific, measurable, attainable, realistic, and timely.

2. Decide product strategies: These strategies detail how the product will meet the objectives, often considering the product life cycle stages—introduction, growth, maturity, and decline.

3. Executing branding and packaging strategies: This step is vital for giving the product a unique identity and ensuring it stands out in the market.

4. Organize for product management: Firms may employ brand managers, product category managers, or market managers to ensure that products are managed efficiently and can adapt to market changes and consumer needs.

9-2.

What is a company’s product line? List and explain the different product line extensions that marketers may use. What are two reasons a firm might determine it should expand its product line? What are two reasons for contracting a product line?

A product line is a firm’s total product offering to satisfy a group of target customers. When a firm has a large number of product variations in its product line, it is said to carry a full line.

A company that adopts a limited line strategy markets a smaller number of product variations. In developing product strategies, organizations may decide to extend their product line—that is, add more items to an existing product line. Alternatively, if the company does decide to stretch its product line, it must decide on the best direction to extend it. It can go upward to top-of-the-line items, downward to items on the lower end, do both by implementing a two-way stretch, or follow a filling-out strategy where only certain items are added to fill holes in the line.

Two reasons a firm might decide to expand its product line are:

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Part 3: Develop the Value Proposition for the Customer

1. To attract different customer segments: By adding more brands or models to their existing product line, firms can target different consumer preferences and needs, potentially increasing their market share and customer base.

2. To capitalize on market opportunities: Adding new products that reflect current market trends or technological advances can help a firm stay relevant and competitive in a changing market environment.

Two strategic reasons for contracting a product line are: 1. To focus on more profitable products: If certain items in the product line are not performing well financially, a firm might decide to drop these items to focus resources on more profitable ones.

2. To reduce complexity and costs: Managing a large product line can be complex and costly. By reducing the number of products, a firm can streamline operations and reduce costs associated with production, marketing, and inventory management.

9-3.

What is a company’s product mix? What do we mean by product mix strategy? What factors do marketers consider when developing a product mix strategy?

A company’s product mix refers to its entire range of products offered to customers. The product mix reflects the breadth and diversity of a company’s offerings. The product mix can be organized into different product lines, each targeting specific customer segments or needs.

Product mix strategy refers to the overall approach a company takes in managing its range of products to achieve its marketing and business objectives. It involves decisions about adding new products, modifying existing products, or discontinuing products, as well as how these products are presented and related to each other.

When considering a product mix strategy, marketers usually focus on the width of the product mix, which involves the number of different product lines a company produces. A broader product mix can reduce the risk of over-reliance on one type of product and diversify a company's market presence.

9-4.

Who are internal customers? What is the internal customer mindset, and why is it important in marketing?

Internal customers are employees in a company who depend on other employees to get their work done. The internal customer mindset is part of total quality management (TQM), focusing on treating coworkers as if they were customers. This mindset is based on several key ideas: recognizing that coworkers who use your work are your customers; understanding that keeping these internal customers happy is crucial for doing your job well; appreciating their feedback to improve work processes; and concentrating on their specific needs.

Adopting this approach helps create a quality-focused work environment and improves the overall performance of the company, which in turn helps satisfy the actual customers who buy the company’s products or services.

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Chapter 9: Product II: Product Strategy, Branding, and Product Management

9-5.

Explain the product life cycle concept. List and describe the stages of the product life cycle.

What are some ways products are managed during the different stages of the product life cycle?

The product life cycle (PLC) concept describes how a product progresses through different stages from its introduction to the market until it is removed from the market. This cycle is divided into four main stages, each impacting the way products are managed: • •

•

•

Introduction: This is when a product is first launched. Marketing efforts are focused on awareness and trial. The product may not be profitable at this stage due to high marketing and development costs.

Growth: If the product is successful, it enters the growth stage, where sales begin to increase rapidly. Marketing strategies may include enhancing product features and expanding distribution to capitalize on growing demand. Profits increase during this stage.

Maturity: This stage is characterized by a slowdown in sales growth. The product is well-established in the market, and the focus of management shifts to defending market share while maximizing profit. Marketing strategies may include product differentiation and finding new market segments.

Decline: Eventually, the product faces a decline in sales due to market saturation, technological advances, or changing consumer preferences. Management may need to decide on strategies such as discontinuation, harvesting, or revitalization through repositioning or redevelopment.

9-6. What is ISO 9000? What is Six Sigma?

ISO 9000 is a set of international standards for quality management and quality assurance developed to help companies effectively document the elements needed to maintain an efficient quality system. They are not specific to any one industry and can be applied to organizations of any size.

Six Sigma is a method that provides organizations tools to improve the capability of their business processes. This increase in performance and decrease in process variation leads to defect reduction and improvement in profits, employee morale, and quality of products or services. Six Sigma characterizes the number of defects that come up in a process, showing organizations how to streamline processes to achieve near-perfect results. Six Sigma principles are used to ensure quality improvements over time, which is essential in maintaining a competitive position in the market.

9-7.

What is a brand? What are the characteristics of a good brand name? How do firms provide legal protection for their brands?

A brand is a name, a term, a symbol, or any other unique element of a product that identifies one firm’s product(s) and sets it apart from the competition. Brands are important because they help to develop and maintain customer loyalty and create value or brand equity. A brand 9-17 Copyright © 2025 Pearson Education, Inc.

Part 3: Develop the Value Proposition for the Customer

should be selected that has a positive connotation; is memorable, reproducible, and recognizable; and can be legally protected. In addition, the brand name should be easy to say, easy to spell, easy to read, and easy to remember. Lastly, the brand should fit the target market, fit the product’s benefits, fit the consumer’s culture, and fit legal requirements. To protect a product legally, the brand name or symbol or other distinctive aspects can receive legal trademark protection.

9-8.

In discussing branding, marketers may talk about brand equity, brand meaning, brand personality, and brand anthropomorphism. Explain each of these terms.

Brand equity is a brand’s value over and above the value of the generic version of the product. Brand meaning is the beliefs and associations that a consumer has about the brand.

Brand personality is a distinctive image that captures the character and benefits of a good or service. Brand anthropomorphism is the assignment of human characteristics and qualities to a brand.

9-9.

Why is storytelling important in branding? What are some common characteristics of top brands?

Storytelling is important in branding because it allows companies to connect with consumers on a deeper, more emotional level. Brands use storytelling to create compelling narratives that enhance their identity and resonate with their audience, promoting a strong emotional response. This helps transform the brand from just a product or service into a relatable entity that shares common values and experiences with its target audience.

Some common characteristics of top brands, which are often enhanced by effective storytelling, include: • • • • • • • • • •

The brand excels at delivering the benefits customers truly desire.

The brand stays relevant.

The pricing strategy is based on consumers’ perceptions of value.

The brand is properly positioned.

The brand is consistent.

The brand portfolio and hierarchy make sense.

The brand makes use of and coordinates a full repertoire of marketing activities to build equity.

The brand’s managers understand what the brand means to consumers.

The brand is given proper support, and that support is sustained over the long run.

The company monitors sources of brand equity.

9-10. What does it mean to license a brand? What is cobranding?

Some firms choose to use licensing to brand their products. Typically, a licensing agreement means that one firm sells another firm the right to use a legally protected brand name for a 9-18 Copyright © 2025 Pearson Education, Inc.

Chapter 9: Product II: Product Strategy, Branding, and Product Management

specific purpose and for a specific period. Firms choose a licensing strategy because it can provide instant recognition and consumer interest and it can be important in positioning a product to a particular market segment. Cobranding benefits partners when combining two brands provides more recognition power than either one enjoys alone.

9-11. What are the functions of packaging? What are some important elements of effective package design?

A package is the covering or container for a product and serves to protect a product and allow for easy use and storage. In addition, the colors, words, shapes, designs, pictures, and materials used in the package design communicate a product’s identity, benefits, and other important product information. Package designers must consider cost, product protection, and communication in creating a package that is functional, aesthetically pleasing, and not harmful to the environment.

9-12. What should marketers know about package labeling?

Labels should: • Help consumers by providing useful information • Be legally responsible in their description of their product • Be accurate 9-13. What role do brand managers play? What role do product category managers play? What role do market managers play?

Brand managers coordinate all marketing activities for a brand, including positioning, target marketing, and overseeing promotions and packaging. They function as internal consultants within larger firms, integrating cross-functional teams to manage business for key retail clients.

Product category managers oversee a mix of product lines within a broader category, coordinating strategies across various products to meet client needs and market demands.

Market managers develop strategies for different market segments, optimizing product offerings based on the distinct needs of these groups.  ACTIVITIES: APPLY WHAT YOU’VE LEARNED 9-14. In Class, 10–25 Minutes for Teams Think of products you are familiar with in the marketplace. Brainstorm with your group and identify at least three products (not specific brands) that fall into each of the product life cycle categories—introduction, growth, maturity, and decline. Are any of the products you identified in a transition stage? Discuss what marketing strategies you would suggest for each brand. Present your results to the class.

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Part 3: Develop the Value Proposition for the Customer

The product life cycle explains how products go through four stages from birth to death.

During the introduction stage, marketers seek to get buyers to try the product and may use high prices to recover R&D costs. During the growth stage, characterized by rapidly increasing sales, marketers may introduce new product variations. In the maturity stage, sales peak and level off. Marketers respond by adding desirable new product features or marketdevelopment strategies. During the decline stage, firms must decide whether to phase a product out slowly, drop it immediately, or, if there is residual demand, keep the product.

Students can select products and give examples of them in various stages of the product life cycle and associated marketing strategies.

9-15. Creative Homework/Short Project Choose one of the following large hotel companies: Choice Hotels, Hilton Hotels & Resorts, Marriott International, or Wyndham Hotels & Resorts. Explore and research the different brand banners that it maintains. What appears to be the corporation’s strategy for its product lines? Is the company likely subject to cannibalization? Why or why not? Which brand from its lineup makes the most sense for a location directly next to your college campus? Explain your reasoning.

Student answers will vary. Encourage students to explore corporate websites, investor relations materials, and industry reports to understand the strategic role of each brand within the company’s overall portfolio. Guide discussion toward identifying the corporation’s strategy for its product lines, such as targeting different market segments (e.g., luxury, business, budget travelers) or offering unique experiences. Ask students to consider whether the company is subject to cannibalization by assessing if the brands compete for the same customer base or complement each other by serving distinct segments. Students can analyze which brand would be most suitable for a location adjacent to their college campus by considering factors like local demographics, local business landscape, and local tourist attractions.

9-16. In Class, 10–25 Minutes for Teams Assume that you are working in the marketing department of a major manufacturer of athletic shoes. Your firm is introducing a new product, a line of disposable sports clothing. That’s right—wear it once and toss it! You wonder if it would be better to market the line of clothing with a new brand name or use the family brand name that has already gained popularity with your existing products. Make a list of the advantages and disadvantages of each strategy. Develop your recommendation.

Students can work together in small groups and share their lists of the advantages and disadvantages of each strategy followed by their recommendations.

9-17. In Class, 10–25 Minutes for Teams Assume you have been hired by a regional chain of convenience stores. The president of the company believes the chain has grown big enough to invest in its own house brand to compete with national brands. Do you recommend using the store’s name for the house brand, or do you recommend developing unique sub-brands for the house brand identities? Which product categories do you think make the most sense for a house brand? Are there any product categories that you would not recommend 9-20 Copyright © 2025 Pearson Education, Inc.

Chapter 9: Product II: Product Strategy, Branding, and Product Management

competing with national brands? Should the house brand complement or replace the national brands? Fully explain your answers in a brief presentation to the class.

Student answers will vary. Consider asking students to evaluate the benefits and challenges of using the store’s name for the house brand versus developing unique sub-brands. This includes discussing brand recognition, customer loyalty, and brand perception. Encourage students to think about which product categories are best suited for a house brand, as well as product lines where brand loyalty to national brands might be less intense. Additionally, consider which categories might be more challenging due to strong customer preferences for existing brands. The discussion about whether the house brand should complement or replace national brands should consider shelf space, customer choice, and profitability.

9-18. Creative Homework/Short Project Assume that you have been recently hired by Kellogg’s, the cereal company. You have been asked to work on a plan for redesigning the packaging for Kellogg’s Frosted Flakes, Kellogg’s top-selling cereal. In a role-playing situation, present the following report to your marketing superior: • Discussion of the problems or complaints customers have with current packaging • Discussion of the pros of the current packaging design and appearance • Several different package alternatives • Your recommendations for changing packaging or for keeping the packaging the same Before beginning this exercise, it is suggested that students visit a grocery store to familiarize themselves with packaging of Frosted Flakes and other cereals. The students will notice color, jazzy names, contests, licensing deals, and so forth. However, ask students to also look for alternative packaging. This may spur their creativeness when it comes to offering packaging alternatives. Lastly, if students go to the websites of the various cereal manufacturers, they will often find a historical display of name brands and packaging over the years.

9-19. For Further Research (Individual) You are interested in the role that Six Sigma plays with regard to product quality. Using the Internet, research the concept of Six Sigma and find at least two case studies on companies that employ Six Sigma in their day-to-day activities.

Summarize your findings in a short report.

The term Six Sigma comes from the statistical term sigma, which is a standard deviation from the mean. Six Sigma refers to six standard deviations from a normal distribution curve. In practical terms, that translates to no more than 3.4 defects per million—getting it right 99.9997 percent of the time. The method involves a five-step process called “DMAIC” (define, measure, analyze, improve, and control).

Using the Internet, students can research companies that employ Six Sigma methods and find two case studies on company activities. They can summarize their findings in a report.

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Part 3: Develop the Value Proposition for the Customer

 CONCEPTS: APPLY MARKETING METRICS

The chapter introduced you to the concept of brand equity, an important measure of the value vested in a product’s brand in and of itself. Numerous formulas for calculating brand equity exist. At one extreme is the complex, proprietary formula used by Interbrand, which measures “over 100,000 unique data points” to identify the 100 most valuable global brands each year. At the other end of the complexity spectrum, the Brand Equity Index (BEI), developed by Bill Moran, is the product (multiplication) of just three variables: 1. Effective market share is calculated by multiplying a brand’s market share in a segment by the percentage of the brand’s total sales attributed to that segment and adding it up across all segments in which it competes.

2. Relative price is a ratio of the average price of the brand to the average price of competitive products in the market.

3. Durability is a measure of customer loyalty/retention represented by the estimated percentage of the brand’s customers who will continue to purchase the brand the following year.

9-20. Go to https://interbrand.com/best-global-brands and identify a brand in the top 100 that experienced a significant (10 percent or greater) positive or negative change in the value of its brand compared to the previous year. In your opinion, what factors explain the brand’s high brand equity overall? What do you think caused the significant change in brand equity for this brand during the past year?

This will prove to be a very interesting activity for most students as they explore the brand equity of the favorite brands. By asking them to select a brand that experienced a significant change in brand value over the past year, this question encourages students to explore current events and recent news stories to identify possible causes for the change.

9-21. Two brands dominate a crowded market for a particular product category. Brand A has an effective market share of 40 percent across all segments, enjoys a relative price of 1.2 times greater than the typical price for comparable brands, and expects to retain 70 percent of its current customers next year. Brand B has an effective market share of 30 percent, has a relative price of 1.5 times greater than the typical price, and expects to retain 80 percent of its customers next year. Calculate the BEI for each brand. By this measure, which brand has better brand equity?

BEI = Effective market share × Relative price × Durability BEI (Brand A) = 40% × 1.2 × 70% = 0.336 BEI (Brand B) = 30% × 1.5 × 80% = 0.360 By this measure, Brand B has greater brand equity than Brand A.  CHOICES: WHAT DO YOU THINK?

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Chapter 9: Product II: Product Strategy, Branding, and Product Management

9-22. Critical Thinking Brand equity means that a brand enjoys customer loyalty, perceived quality, and brand-name awareness. To what brands are you personally loyal? What is it about the product that creates brand loyalty and, thus, brand equity? Are there any brands that you were once loyal to but no longer support? How did those brands lose your loyalty?

Students should begin by defining the terms brand equity and brand loyalty. Then they can give examples of brands to which they are personally loyal and why, as well as examples of those brands who lost their brand loyalty.

9-23. Ethics Branding is used in almost all organizations, including nonprofits. Nonprofit organizations such as YMCA, St. Jude’s Children Hospital, and the American Society for the Prevention of Cruelty to Animals (ASPCA) all spend significant investments in developing and promoting their brands, including advertising. Should nonprofit organizations engage in branding using the same methods as for-profit organizations? Why or why not?

Student answers will vary. Consider starting by asking students to compare the branding objectives of nonprofits with those of for-profit companies. Encourage students to explore why these nonprofits might invest heavily in branding and advertising, focusing on the necessities of awareness, fundraising, and mission promotion. Ask students to consider the potential positives, such as increased donations and broader awareness of causes, along with the possible negatives, including the perception of utilizing funds that could otherwise be directed to services.

9-24. Critical Thinking Quality is an important product/service objective, but quality can mean different things for different goods and services, such as durability, precision, aesthetic appeal, and so on. What does quality mean for the following goods/services? a. Laptop computer b. Haircut c. Athletic wear d. A gym or fitness center e. New automobile f. College education Each student will have different impressions of what quality means for these products. What would be the value of these impressions? The impressions point out to the marketer a variety of issues that must be addressed in promotion and segmentation if the consumer is truly to be reached. If competitors reach the consumer with better quality statements and messages, then the competitors will probably get the consumer’s business. Observe how many students put down more than one characteristic for each of the above items.

9-25. Ethics How do you think a company’s behavior toward its customers and its community impact purchase? Have you ever purchased (or not purchased) a brand because of what you knew about their environmental initiatives? How about their stand and actions on controversial issues such as race or gender discrimination, political loyalty, or treatment of employees? What type of issues do you think could cause a decline in sales for a company?

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Part 3: Develop the Value Proposition for the Customer

Students can discuss this question in small groups.

9-26. Critical Thinking There are many products in the marketplace that keep the same packaging year after year, even when there may be a newer best practice. Take a look at the list of products below and think about the brand that you use. Write down any issues you have with the packaging of your preferred brand. Now think about a competitive brand in each category—do they have any benefits your package doesn’t have? What ways could your preferred brand’s packaging be improved? What benefits could the marketer hope to achieve if they took your suggestions? a. A dozen donuts b. Powder laundry detergent c. Deodorant d. Gallon of milk e. Potato chips f. Candy bar To do this project it would probably be better to place the students in small groups and let them exchange their ideas and present the results to the class. Common problems that the students will have experienced with packages are that the packages are often difficult to get into, they tear too easily, they won’t reseal, they leak, they cause spilling or dripping, and they don’t fit the place where they will be stored. Remind the students the function of packages and the costs associated with producing and then changing a package. From a reseller perspective, packages must also fit into shelves in stores and must be stackable (in most instances). Ask the students if they can name some of the communication advantages and disadvantages to changing a package design. Can they remember a package change recently for one of their favorite products? What did they like or not like about the change in packaging?

9-27. Ethics If a company knows that a snack or beverage is typically consumed in a single sitting (such as a bottle of soda or a bag of chips), is it ethical for that company to include on the product’s nutrition label values based on the identification of multiple servings within the product (that is, the nutrition values displayed would represent a single serving of the product that is less than the whole product, making it necessary to multiply those values by the number of servings to identify the total nutritional value of the package)?

Students can discuss the implications of truth in advertising. Are health risks present? Most consumers take the nutrition label at face value and don’t calculate the difference between single servings and multiple servings.

9-28. Ethics Brand licensing is a popular way for companies to expand their brand without investing in new product development or manufacturing resources. For example, Amsterdam-based Philips licenses its brand to other manufacturers for many product lines. In North America, Philips televisions are manufactured by the Japanese company Funai Electric, Philips surge protectors and electrical accessories are manufactured by Jasco Products, and Philips computer monitors are made by little-known TVP USA. However, to 9-24 Copyright © 2025 Pearson Education, Inc.

Chapter 9: Product II: Product Strategy, Branding, and Product Management

consumers, these products are all marketed and sold under the Philips brand. Should companies be required to disclose when a brand is licensed to another company? How might situations such as a product recall impact the Philips brand? How might it impact the true manufacturer’s brand?

Student answers will vary. Encourage students to debate whether companies should be mandated to disclose when a brand is licensed out to another manufacturer. Discuss scenarios, such as product recalls, and ask students to consider how such events might affect consumer perception of the Philips brand versus the actual manufacturer. Ask students to analyze how the reputation of both the licensor and licensee could be impacted in situations where product quality does not meet brand expectations or when safety issues arise. Also, ask students to discuss the ethics of transparency in branding and whether consumers have the right to know the actual source of the products they purchase.  MINIPROJECT: LEARN BY DOING In any supermarket in any town, you will surely find thousands of examples of product packaging.

This miniproject is designed to give you a better understanding of how branding, cobranding, and packaging all work together to compete for your purchasing dollars. a. Go to a supermarket, supercenter, or dollar store in your community. b. Select two product categories of interest to you: snack foods, soup, laundry detergent, shampoo, toothpaste, and so on. c. For each product category, visit that area of the store. Write down a list of the three items that attract your attention first. Identify what it was about the product that attracted your attention (the brand, cobrand, or package design). d. For each of the three products, identify which you are most likely to buy based on the first look alone. Explain why you chose this product.

9-29. Pick up each of three products and study their package design and any information you can find about the product. a. Now which product are you most likely to buy? Explain why you chose this product. b. Were there any products that you wouldn’t purchase based on packaging alone? If so, explain why. c. Compare and contrast the packaging between national brands and store brands. What do you notice?

The purpose of this miniproject is to develop an understanding of branding, cobranding, and packaging as it exists in the marketplace.

9-30. Present a summary to your class on what you learned about the brands and packaging in your two product categories.

Through specific questions (or exercises), individuals (or teams) are asked to review the marketing practices of national manufacturers of everyday products (selected items are given to the students) by visiting a local supermarket, supercenter, or dollar store. During the visit, 9-25 Copyright © 2025 Pearson Education, Inc.

Part 3: Develop the Value Proposition for the Customer

students are asked to make lists of brands in chosen product categories and identify what about the product attracted their attention. Students should conclude their project by writing a descriptive report of their findings and experiences.

Instructors may wish to extend the deadline for this assignment, so students have many opportunities to visit, write their report, and report their findings.

V. MARKETING IN ACTION CASE: REAL CHOICES AT HELEN OF TROY Summary of Case Hydro Flask, a product of the Helen of Troy corporation, has surged to one of the top spots of the water bottle market. Its success is credited largely to its strong brand presence—a brand so beloved that customers don’t just prefer it; they adore it. Beyond mastering the fundamental aspect of keeping drinks cool, Hydro Flask has captivated users with its eye-catching designs. As the appeal of public drinking fountains waned due to health concerns and environmental considerations, public spaces like offices and gyms installed water filling stations, further increasing the demand for reusable water bottles. Hydro Flask’s dominance in the market is due not only to its superior functionality, but also its strategic branding that fosters an emotional connection with its consumers.

This loyalty has been cultivated through dynamic marketing strategies, including live demonstrations of the bottle’s effectiveness and a focus on its aesthetic appeal—attributes that resonate deeply with a consumer base that prioritizes health, sustainability, and personal expression. Looking forward, Hydro Flask is positioned for potential growth through international expansion and new product introductions. However, it faces an extremely competitive landscape, as rival Stanley has also built a loyal following using many of the same strategies.

Suggestions for Presentation This case could be assigned for various out-of-class or in-class discussion activities.

Out-of-Class Suggestions Conduct a few informal interviews with students that you notice carrying Hydro Flask bottles. Be prepared with several questions focused on assessing the level of “brand love” for the Hydro Flask.

In-Class Suggestions In small groups, discuss the key aesthetic, functional, and image-oriented reasons for the popularity of the Hydro Flask. Choose another product category and discuss how the attributes associated with Hydro Flask could be applied to the other type of product to create a similar level of affection.

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Chapter 9: Product II: Product Strategy, Branding, and Product Management

Questions for Discussion 9-31. Helen of Troy has a history of growth and expansion of its product offerings. Its goal for the future is to continue growing its products, including the Hydro Flask. Describe three possible growth strategies Helen of Troy might consider for Hydro Flask. What are the pros and cons of each? Which one would you recommend and why?

Students could consider growth opportunities in several areas: • • • •

Product models: Helen of Troy could offer new sizes (smaller and larger), new shapes, and modifications like different exterior textures.

Cobranding: With its informal association with a certain “look,” Hydro Flask might be able to partner with fashion brands to create specific bottle designs that would display a popular fashion logo along with that of Hydro Flask.

Brand extensions: Opportunities could include products in close proximity such as larger coolers for outdoor activities that use the Hydro Flask thermal functionality or those that are more distant such as outdoor adventure gear or fashion clothing.

Services: Some customers may be willing to pay for a refurbishment of their beloved Hydro Flask bottles that are starting to show their age.

As part of the discussion about growth strategies, students should consider the possibility of new products cannibalizing existing ones and the potential for brand dilution if the new ideas are too different from the original products. A final risk is that brand extensions or other new product ideas fail and hurt the strong reputation that the brand has successfully built.

9-32. To what extent does the Hydro Flask’s future success rely on changing preferences by consumers? How does branding strategy fit into its long-term ability to be successful?

Student answers will vary. Consider facilitating a debate on the extent to which Hydro Flask’s success is reliant on shifting consumer preferences towards sustainable and healthconscious products. This discussion could prompt students to consider how ongoing trends in consumer behavior impact product success and the strategic importance of branding in maintaining market relevance. Encourage students to research and bring examples of other products that have succeeded or failed due to changes in consumer preferences and to discuss how Hydro Flask can continue to adapt its branding strategy to stay competitive and relevant.

9-33. This case demonstrates how common, everyday products can be transformed through effective use of the marketing mix. What are some other ordinary products that you think could benefit from a similar approach to Hydro Flask?

Student answers will vary. Consider asking students to identify ordinary products that could be transformed through innovative marketing strategies, similar to Hydro Flask. Each student could choose a product and propose a unique selling proposition that leverages aspects of the marketing mix, including product design, promotion, place, and price.

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Part 3: Develop the Value Proposition for the Customer

WEB RESOURCE www.hydroflask.com

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Chapter 10: Price: What Is the Value Proposition Worth?

Chapter 10 Price: What Is the Value Proposition Worth?

I. CHAPTER OVERVIEW The chapter begins by asking the question, “What is price?” At first glance, students may think the question has an obvious answer—the number printed on the price sticker. However, as students explore this chapter, they will discover that price is a whole lot more. Price is a function of demand, costs, revenue, and the environment. Pricing can be monetary or non-monetary.

Pricing decisions lead to specific pricing strategies and tactics, discussed in the chapter. Students also learn about the psychological aspect of pricing, as well as legal, and ethical aspects of pricing.

II. CHAPTER OBJECTIVES 10-1. Explain the importance of pricing and how marketers set objectives for their pricing strategies.

10-2. Describe how marketers use costs, demand, revenue, and the pricing environment to make pricing decisions.

10-3. Understand key pricing strategies and tactics.

10-4. Understand the opportunities for Internet pricing strategies and innovations in payment.

10-5. Describe the psychological, legal, and ethical aspects of pricing.

10-6. Understand the important considerations in job compensation, how to set realistic expectations, and improve your chances of getting a great first job.

III. CHAPTER OUTLINE p. 334

REAL PEOPLE, REAL CHOICES— HERE’S MY PROBLEM AT AUTO EUROPE Auto Europe is a wholesale organization. It doesn’t compete with other car rental companies, like Hertz and Avis. Instead it works with them to procure vehicles for customers. Auto Europe for the most part does not compete on price, but rather on quality service.

While college students and other young people look to platforms like Priceline to find the lowest possible rental fees, Auto Europe’s customers tend to be more affluent.

Auto Europe tries to be flexible to some degree on fees, but there is a limit to how much to cut prices. They prefer to emphasize that customers will receive a very high level of service.

Still, these relatively wealthy customers try to get a lower price for the vehicles they book. Requests are made to cut prices when

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Part 3: Develop the Value Proposition for the Customer

a customer finds a similar car that’s available elsewhere for a lower price.

Imad had three options: 1. Match the price and provide the Mercedes for $900 instead of $1,000.

2. Offer to provide the same GM car at $890 to keep things apples-to-apples.

3. Continue to offer the Mercedes for $1,000 and explain that this vehicle is more valuable than the GM car, so it’s worth it to pay a premium.

p. 335

p. 335

Imad chose Option #2.

1.

“YES, BUT WHAT DOES IT COST?” The question of what to charge for a product is a central part of marketing decision making. Way back in Chapter 1, you read about the concept of customer benefits, and importantly that marketers communicate these benefits to the customer in the form of a value proposition. A value proposition is a marketplace offering that fairly and accurately sums up the value that the customer will realize if they purchase a product. The value proposition includes the whole bundle of benefits the firm promises to deliver, not just the benefits of the product itself. Also earlier in this text you learned about the importance of the customer experience (CX or CEX) in the success of a brand. CX is a customer’s perception of a brand based on every interaction the customer has experienced with a business. How much you charge for a product impacts CX. 1.1.

What Is Price?

Price is the assignment of value, or the amount the consumer must exchange to receive the offering or product. Payment may be in the form of money, goods, services, favors, votes, or anything else that has value to the other party. We may call the price tuition, rent, interest, fees, premium, tolls, or fare.

Exhibit: Digital Currencies: Bitcoin

Figure 10.1 Process: Elements of Price Planning

Other non-monetary costs often are important to marketers. It is also important to consider an opportunity cost, or the value of something that is given up to obtain something else.

p. 336

1.2.

Step 1: Develop Pricing Objectives The first crucial step in price planning is to develop pricing objectives. These must support the broader objectives of the firm, such as maximizing shareholder value, as well as its overall marketing objectives, such as increasing market share.

1.2.1. Profit Objectives 10-2 Copyright © 2025 Pearson Education, Inc.

Figure 10.2 Process: Pricing Objectives

Chapter 10: Price: What Is the Value Proposition Worth?

Often a firm’s overall objectives relate to a certain level of profit it hopes to realize. A profit objective is important to firms that believe profit is what motivates shareholders and bankers to invest in a company. p. 337

1.2.2. Sales or Market Share Objectives However, lowering prices is not always necessary to increase market share. If a company’s product has a competitive advantage, keeping the price at the same level as other firms may satisfy sales objectives.

p. 337

1.2.3. Competitive Effect Objectives Sometimes strategists design the pricing plan to dilute the competition’s marketing efforts. In these cases, a firm may deliberately try to preempt or reduce the impact of a rival’s pricing changes. This is referred to as competitive-effect pricing or market-based pricing.

1.2.4. Customer Satisfaction Objectives Many quality-focused firms believe that profits result from making customer satisfaction the primary objective. These firms believe that by focusing solely on short-term profits, a company loses sight of keeping customers for the long term.

1.2.5. Image Enhancement Objectives Consumers often use price to make inferences about the quality of a product. In fact, marketers know that price is often an important means of communicating not only quality but also image to prospective customers. The image enhancement function of pricing is particularly important with prestige products (or luxury products), which have a high price and appeal to statusconscious consumers.

2.

COSTS, DEMAND, REVENUE, AND THE PRICING ENVIRONMENT

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p. 338

p. 338

p. 338

2.1.

Step 2: Estimate Demand The second step in price planning is to estimate demand. Demand refers to customers’ desires for a product: How much of a product are they willing to buy as the price of the product goes up or down?

p. 339

2.1.1. Demand Curves Economists use a graph of a demand curve to illustrate the effect of price on the quantity demanded of a product. The demand curve, which can be a curved or straight line, shows the quantity of a product that customers will buy in a market during a period at various prices if all other factors remain the same.

10-3 Copyright © 2025 Pearson Education, Inc.

Exhibit: Rolex

Figure 10.3 Process: Factors in Price Setting

Part 3: Develop the Value Proposition for the Customer

The demand curve for most goods slopes downward and to the right. As the price of the product goes up (P1 to P2), the number of units that customers are willing to buy goes down (Q1 to Q2). If prices decrease, customers will buy more. This is the law of demand. For example, if the price of bananas goes up, customers will probably buy fewer of them.

p. 339

p. 340

p. 341

There are, however, exceptions to this typical price–quantity relationship. In fact, there are situations in which (otherwise sane) people desire a product more as it increases in price. For prestige products such as luxury cars or jewelry, a price hike may actually result in an increase in the quantity consumers demand because they see the product as more valuable. In such cases, the demand curve slopes upward. The higher-price/higher-demand relationship has its limits. If the firm increases the price too much (say from P2 to P1), making the product unaffordable for all but a few buyers, demand will begin to decrease.

2.1.2. Shifts in Demand The demand curves we have shown assume that all factors other than price stay the same. However, what if they do not? What if the company improves the product or something else happens to bring it to people’s attention? It could cause an upward shift of the demand curve. An upward shift in the demand curve means that at any given price, demand is greater than before the shift occurs. And curves may also shift downward.

2.1.3. Estimate Demand Marketers predict total demand first by identifying the number of buyers or potential buyers for their product and then multiplying that estimate times the average amount each member of the target market is likely to purchase.

Once the marketer estimates total demand, the next step is to predict what the company’s market share is likely to be. The company’s estimated demand is then its share of the whole market. Such projections need to take into consideration other factors that might affect demand, such as new competitors entering the market, the state of the economy, and changing customer tastes.

2.1.4. Price Elasticity of Demand Marketers also need to know how their customers are likely to react to a price change. In particular, it is critical to understand

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Figure 10.4 Snapshot: Demand Curves for Normal and Prestige Products

Figure 10.5 Snapshot: Shift in the Demand Curve

Table 10.1 Estimating Demand for Pizza p. 336

Chapter 10: Price: What Is the Value Proposition Worth?

whether a change in price will have a large or a small impact on demand. p. 341 Price elasticity of demand is a measure of the sensitivity of customers to changes in price. The word elasticity indicates that changes in price usually cause demand to stretch or retract like a rubber band. Some customers are very sensitive to changes in price, and a change in price results in a substantial change in the quantity demanded. In such instances, we have a case of elastic demand. In other situations, we describe a change in price that has little or no effect on the quantity that consumers are willing to buy as inelastic demand.

When demand is elastic, changes in price and in total revenues work in opposite directions. If the price is increased, revenues decrease. If the price is decreased, total revenues increase.

In some instances, demand is inelastic so that a change in price results in little or no change in demand. When demand is inelastic, price and revenue changes are in the same direction; that is, increases in price result in increases in total revenue, while decreases in price result in decreases in total revenue.

Elasticity of demand for a product often differs for different price levels and with different percentages of change.

As a rule, businesses can determine the actual price elasticity only after they have tested a pricing decision and calculated the resulting demand. To estimate what demand is likely to be at different prices for new or existing products, marketers often do research.

Other factors can affect price elasticity and sales. Consider the availability of substitute goods or services. If a product has a close substitute, its demand will be elastic; that is, a change in price will result in a change in demand, as consumers move to buy the substitute product. Marketers of products with close substitutes are less likely to compete on price because they recognize that doing so could result in less profit as consumers switch from one brand to another. p. 342

Changes in prices of other products also affect the demand for an item, a phenomenon we label cross-elasticity of demand.

When products are substitutes for each other, an increase in the price of one will increase the demand for the other. For example, if the price of bananas goes up, consumers may instead buy more strawberries, blueberries, or apples. However, when products are 10-5 Copyright © 2025 Pearson Education, Inc.

Figure 10.6 Snapshot: Price Elasticity of Demand p. 341

Figure 10.7 Snapshot: PriceElastic and PriceInelastic Demand

Part 3: Develop the Value Proposition for the Customer

p. 343

p. 343

complements—that is, when one product is essential to the use of a second—an increase in the price of one decreases the demand for the second.

2.2.

Step 3: Determine Costs Estimating demand helps marketers determine possible prices to charge for a product. It tells them how much of the product they think they will be able to sell at different prices. Knowing this brings them to the third step in determining a product’s price: making sure the price will cover costs. Before marketers can determine price, they must understand the relationship of cost, demand, and revenue for their product.

2.2.1. Variable and Fixed Costs First, a firm incurs variable costs—the per-unit costs of production that will fluctuate depending on how many units or individual products a firm produces. Variable costs can go down with higher levels of production but do not always do so.

p. 344

Fixed costs are costs that do not vary with the number of units produced—the costs that remain the same whether the firm produces 1,000 bookcases this month or only 10. Fixed costs include rent or the cost of owning and maintaining the factory, utilities to heat or cool the factory, and the costs of equipment such as hammers, saws, and paint sprayers used in the production of the product.

p. 344

Average fixed cost is the fixed cost per unit produced, that is, the total fixed costs divided by the number of units produced.

Although total fixed costs remain the same no matter how many units are produced, the average fixed cost will decrease as the number of units produced increases. As we produce more and more units, average fixed costs go down, and so does the price we must charge to cover fixed costs.

In the long term, total fixed costs may change.

p. 344

Combining variable costs and fixed costs yields total costs for a given level of production. As a company produces more and more of a product, both average fixed costs and average variable costs may decrease. Average total costs may decrease, too, up to a point. As output continues to increase, average variable costs may start to increase. These variable costs ultimately rise faster than average fixed costs decline, resulting in an increase to average total cost. As total cost fluctuates with differing levels of production, the price that producers have to charge to cover those costs changes accordingly. Therefore, marketers need to calculate 10-6 Copyright © 2025 Pearson Education, Inc.

Figure 10.8 Snapshot: Variable Costs for Bookcases at Different Levels of Production

Chapter 10: Price: What Is the Value Proposition Worth?

p. 344

p. 344

the minimum price necessary to cover all costs—the break-even price.

2.2.2. Break-Even Analysis Break-even analysis is a technique marketers use to examine the relationship between cost and price and to determine what sales volume must be reached at a given price before the company will completely cover its total cost and past which it will begin making a profit. Simply put, the break-even point is the point at which the company does not lose any money and does not make any profit. A break-even analysis allows marketers to identify how many units of a product they will have to sell at a given price to be profitable.

p. 345

To determine the break-even point, the firm first needs to calculate the contribution per unit, or the difference between the prices the firm charges for a product (the revenue per unit) and the variable costs. This figure is the amount the firm has after paying for the goods that contribute to meeting the fixed costs of production.

p. 346

Often a firm will set a profit goal, which is the dollar profit figure it desires to earn. The break-even point may be calculated with that dollar goal included in the figures.

p. 346

p. 346

Sometimes the target return or profit goal is expressed as a percentage of sales. For example, a firm may say that it wants to make a profit of at least 10 percent on sales. In such cases, this profit is added to the variable cost in calculating the break-even point. The Tax Cuts and Jobs Act of 2017 changed the way that domestic businesses are taxed on overseas earnings. The hope/expectation is that these changes will result in companies returning jobs/investment to the U.S. Break-even analysis does not provide an easy answer for pricing decisions. It provides answers about how many units the firm must sell to break even and to make a profit, but without knowing whether demand will equal the quantity at that price, companies can make big mistakes. It is, therefore, useful for marketers to estimate the demand for their product and then perform a marginal analysis.

2.2.3. Markups and Margins: Pricing Through the Channel So far, we have talked about costs simply from the manufacturer’s perspective. However, most products are not sold directly to the consumers or business buyers of the product. Instead, a manufacturer sells to a wholesaler, distributor, or jobber who in turn sells to a retailer who finally sells the product to the ultimate consumer. Setting prices means considering all of these steps.

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Figure 10.9 Snapshot: BreakEven Analysis Assuming a Selling Price of $100

Part 3: Develop the Value Proposition for the Customer

p. 346

p. 347

p. 347

Each member of the channel of distribution buys a product for a certain amount and adds a markup amount to create the price at which they will sell a product. This markup amount is the gross margin, also referred to as the retailer margin or the wholesaler margin. The margin must be great enough to cover the fixed costs of the retailer or wholesaler and leave an amount for a profit. When a manufacturer sets a price, he or she must consider these margins. Many times, a manufacturer builds its pricing structure around list prices. A list price, which we also refer to as a manufacturer’s suggested retail price (MSRP), is the price that the manufacturer sets as the appropriate price for the end consumer to pay.

2.3.

Step 4: Examine the Pricing Environment Marketers look at factors in the firm’s external environment when they make pricing decisions. The fourth step in developing pricing strategies is to examine and evaluate the pricing environment. Only then can marketers set a price that not only covers costs but also provides a competitive advantage—a price that meets the needs of customers better than the competition.

2.3.1. The Economy Broad economic trends tend to direct pricing strategies. The business cycle, inflation, economic growth, and consumer confidence all help to determine whether one pricing strategy or another will succeed.

During recessions, consumers grow more price sensitive. Many firms find it necessary to cut prices to levels at which costs are covered but the company does not make a profit to keep factories in operation.

p. 348

Inflation may give marketers cause to either increase or decrease prices. First, inflation gets customers used to price increases.

They may remain insensitive to price increases, even when inflation goes away, allowing marketers to make real price increases. In periods of recession, inflation may cause marketers to lower prices and temporarily sacrifice profits in order to maintain sales levels.

2.3.2. The Competition Marketers try to anticipate how the competition will respond to their pricing actions. It is not always a good idea to fight the competition with lower prices. Pricing wars can change consumers’ perceptions of what is a “fair” price, leaving them unwilling to buy at previous price levels.

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Figure 10.10 Snapshot: Markups Through the Channel

Exhibit: Tide

Chapter 10: Price: What Is the Value Proposition Worth?

Generally, firms that do business in an oligopoly (in which the market has few sellers and many buyers) are more likely to adopt status quo pricing objectives in which the pricing of all competitors is similar. Avoiding price competition allows all players in the industry to remain profitable.

p. 349

Firms in a purely competitive market have little opportunity to raise or lower prices. Price is directly influenced by supply and demand.

2.3.3 Government Regulation Governments in the United States and other countries develop two different types of regulations, which have an effect on pricing.

First, a large number of regulations increase the costs of production. Regulations for health care, environmental protection, occupational safety, and highway safety, just to mention a few, cause the costs of producing many products to increase. Other regulations of specific industries such as those imposed by the Food and Drug Administration on the production of food and pharmaceuticals increase the costs of developing and producing those products.

p. 349

Congress enacted the Credit Card Responsibility and Disclosure Act, which limits credit card rates and other fees. The Affordable Care Act, which took effect in 2013–2014, offers all Americans access to health care, including those with preexisting conditions who in the past had been denied coverage.

p. 349

2.3.4. Consumer Trends Consumer trends also can strongly influence prices. Culture and demographics determine how consumers think and behave and so these factors have a large impact on all marketing decisions. Six trends identified for 2024 are: Ask AI: These new tools, including generative artificial intelligence (AI), influence consumer decisions and their expectations of brand engagement.

Delightful distractions: Today’s consumers are highly varietyseeking; and looking for fun and engaging ways to escape the daily pressures and ways to enhance their experiences.

p. 349

Greenwashed out: Consumers are committing to integrating sustainability practices into their shopping behaviors but question whether company and government efforts have any impact.

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Part 3: Develop the Value Proposition for the Customer

Progressively polarized: Political and social issues are closely tied to personal identities and influence consumer spending.

Value hackers: Consumers are now looking for a good deal to compensate for inflation.

Wellness pragmatists: Consumers are putting a high priority on purchases of all sorts of goods and services that they believe can improve their physical and mental wellbeing.

p. 350

2.3.5. The International Environment The marketing environment often varies widely from country to country. Product sizes and channels of distribution can affect the margins. This can have important consequences in developing pricing strategies.

3.

IDENTIFY STRATEGIES AND TACTICS TO PRICE THE PRODUCT In modern business, there seldom is any one-and-only, now-andforever, and best pricing strategy. Like playing a game of chess, making pricing moves and countermoves requires thinking two and three moves ahead.

p. 350

3.1.

Step 5: Choose a Pricing Strategy The next step in price planning is to choose a pricing strategy.

p. 351

3.1.1. Pricing Strategies Based on Cost Marketing planners often choose cost-based strategies because they are simple to calculate and relatively risk free. They promise that the price will at least cover the costs the company incurs in producing and marketing the product.

Cost-based pricing methods have drawbacks. They do not consider such factors as the nature of the target market, demand, competition, the product life cycle, and the product’s image. The calculations for setting the price may be simple and straightforward but accurate cost estimating may prove difficult.

p. 351

The most common cost-based approach to pricing a product is cost-plus pricing in which the marketer totals all the costs for the product and then adds an amount (or marks up the cost of the item) to arrive at the selling price. Many marketers use cost-plus pricing because of its simplicity—users need only estimate the unit cost and add the markup. To calculate cost-plus pricing, marketers usually calculate either a markup on cost or a markup on selling price. Keystoning is a retail pricing strategy in which 10-10 Copyright © 2025 Pearson Education, Inc.

Figure 10.11 Snapshot: Pricing Strategies and Tactics

Chapter 10: Price: What Is the Value Proposition Worth?

the retailer doubles the cost of the item (100 percent markup) to determine the price. p. 351

p. 351

p. 352

3.1.2. Pricing Strategies Based on Demand Demand-based pricing means that the firm bases the selling price on an estimate of volume or quantity that it can sell in different markets at different prices. Firms must determine how much product they can sell in each market and at what price.

Congestion pricing is a pricing strategy of charging a high fee for operating cars during peak traffic times to reduce congestion.

Today, firms find that they can be more successful if they match price with demand using a target costing process. They first determine the price at which customers would be willing to buy the product and then work backward to design the product in such a way that it can produce and sell the product at a profit.

Yield management pricing, another type of demand-based pricing, is a pricing strategy used by airlines, hotels, and cruise lines. Firms charge different prices to different customers in order to manage capacity while maximizing revenue. This strategy works because different customers have different sensitivities to price. The goal of yield management pricing is to accurately predict the proportion of customers who fall into each category and allocate the percentage of the airline or hotel’s capacity accordingly so that no product goes unsold.

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Figure 10.12 Snapshot: Target Costing Using a Jeans Example

Exhibit: Expedia

Part 3: Develop the Value Proposition for the Customer

p. 353

p. 353

p. 355

p. 353

p. 353

3.1.3. Pricing Strategies Based on the Competition Sometimes a firm’s pricing strategy involves pricing its wares near, at, above, or below the competition. A price leadership strategy, which usually is the rule in an industry dominated by few firms and called an oligopoly, may be in the best interest of all firms because it minimizes price competition. Price leadership strategies are popular because they provide an acceptable and legal way for firms to agree on prices without ever talking with each other.

3.1.4. Pricing Strategies Based on Customers’ Needs When firms develop pricing strategies that cater to customers, they are less concerned with short-term results than with keeping customers for the long term.

Firms that practice value pricing, or everyday low pricing (EDLP), develop a pricing strategy that promises ultimate value to consumers. What this means is that, in the customer’s eyes, the price is justified by what they receive.

When firms base price strategies solely or mainly on cost, they are operating under the old production orientation and not a customer orientation. Value-based pricing begins with the customer, then considers the competition, and then determines the best pricing strategy. High/low pricing, or promo pricing, is a retail pricing strategy in which the retailer prices merchandise at list price but runs frequent promotions that heavily discount some products.

3.1.5. New Product Pricing When a product is new to the market or when there is no established industry price norm, marketers may use a skimming price strategy, a penetration pricing strategy, or trial pricing when they first introduce the item to the market.

Setting a skimming price means that the firm charges a high, premium price for its new product with the intention of reducing it in the future in response to market pressure.

If a product is highly desirable and it offers unique benefits, demand is price inelastic during the introductory stage of the product life cycle, allowing a company to recover research-anddevelopment and promotion costs.

A skimming price is more likely to succeed if the product provides some important benefits to the target market that make customers feel they must have it no matter what the cost.

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For a skimming price to be successful, there should also be little chance that competition can get into the market quickly. In addition, the market should consist of several customer segments with different levels of price sensitivity. p. 353

Penetration pricing is the opposite of skimming pricing. In this situation, the company prices a new product very low to sell more in a short time and gain market share early on. One reason marketers use penetration pricing is to discourage competitors from entering the market. The firm first out with a new product has an important advantage.

p. 353

Trial pricing means that a new product carries a low price for a limited time to generate a high level of customer interest. Unlike penetration pricing, in which the company maintains the low price, in this case it increases the trial price after the introductory period. The idea is to win customer acceptance first and make profits later.

p. 354

3.1.6. Price Segmentation Price segmentation is the practice of charging different prices to different market segments for the same product. Peak load pricing is a pricing plan that sets prices higher during periods with higher demand. Surge pricing is a pricing plan that raises prices of a product as demand goes up and lowers it as demand slides.

3.1.7. Bottom-of-the-Pyramid Pricing Bottom-of-the-pyramid pricing is innovative pricing that will appeal to consumers with the lowest incomes by brands that wish to get a foothold in bottom-of-the-pyramid countries.

p. 354

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3.2.

Step 6: Develop Pricing Tactics Once marketers have developed pricing strategies, the last step in price planning is to implement them. The methods companies use to set their strategies in motion are their pricing tactics.

3.2.1. Pricing for Individual Products The way marketers present a product’s price to a market can make a big difference. The following are examples: Two-part pricing requires two separate types of payments to purchase the product.

Payment pricing makes the consumer think the price is “do-able” 10-13 Copyright © 2025 Pearson Education, Inc.

Exhibit: Uber app

Part 3: Develop the Value Proposition for the Customer

by breaking up the total price into smaller amounts payable over time.

Subscription pricing is a strategy where a seller offers or requires customers pay a periodic fee for access to a product.

Decoy pricing is a pricing strategy whereby a seller offers at least three similar products; two have comparable but more expensive prices and one of these two is less attractive to buyers, thus causing more buyers to buy the higher priced, more attractive item. p. 355

3.2.2. Pricing for Multiple Products A clearance sale discounts unwanted inventory.

A firm may sell several products that consumers typically buy at one time. Price bundling means selling two or more goods or services as a single package for one price—a price that is often less than the total price of the items if bought individually.

Captive pricing is a pricing tactic a firm uses when it has two products that work only when used together. The firm sells one item at a very low price and then makes its profit on the second, high-margin item.

p. 355

3.2.3. Distribution-Based Pricing Distribution-based pricing is a tactic that establishes how firms handle the cost of shipping products to customers near as well as far.

F.O.B. (free on board) pricing is a tactic used in business-tobusiness marketing. Often a company states a price as F.O.B. factory pricing means the cost of transporting the product from the factory to the customer’s location is the responsibility of the customer. F.O.B. delivered pricing means the manufacturer pays the cost of loading and transporting the product to the customer.

p. 356

International delivery pricing terms: • CIF (cost, insurance, freight) is used for ocean shipments.

It means the seller quotes a price for the goods (including insurance), all transportation, and miscellaneous charges to the point of debarkation from the vessel.

• CFR (cost and freight) means the quoted price covers the goods and the cost of transportation to the named point of

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Chapter 10: Price: What Is the Value Proposition Worth?

•

debarkation but the buyer must pay the cost of insurance.

This term is typically used only for ocean shipments.

CIP (carriage and insurance paid to) and CPT (carriage paid to) include the same provisions as CIF and CFR. However, they are used for shipment by modes other than water.

p. 356

When a firm uses uniform delivered pricing, it adds an average shipping cost to the price, no matter what the distance from the manufacturer’s plant—within reason.

p. 356

Freight absorption pricing means the seller takes on part or all of the cost of shipping. This policy works well for high-ticket items, for which the cost of shipping is a negligible part of the sales price and the profit margin.

3.2.4. Discounting for Channel Members • Trade or functional discounts: Because the channel members perform selling, credit, storage, and transportation services that the manufacturer would otherwise have to provide, manufacturers normally offer trade discounts to channel intermediaries. These discounts are usually set percentage discounts off the suggested retail or list price for each channel level.

• Quantity discounts: To encourage larger purchases from distribution channel partners or from large organizational customers, marketers may offer quantity discounts, or reduced prices for purchases of larger quantities.

Cumulative quantity discounts are based on a total quantity bought within a specified time, often a year. They encourage a buyer to stick with a single seller instead of moving from one supplier to another. Cumulative quantity discounts often take the form of rebates, in which case the firm sends the buyer a rebate check at the end of the discount period or, alternatively, gives the buyer credit against future orders. Non-cumulative quantity discounts are based only on the quantity purchased with each individual order and encourage larger single orders but do little to tie the buyer and the seller together.

• Cash discounts: Many firms try to entice their customers to pay their bills quickly by offering cash discounts.

• Seasonal discounts: Seasonal discounts are price reductions offered only during certain times of the year.

p. 356

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4.

PRICING AND INNOVATIONS IN PAYMENT FOR E-COMMERCE 10-15 Copyright © 2025 Pearson Education, Inc.

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Because sellers are connected to buyers around the globe as never before through the Internet, corporate networks, wireless setups, and marketers can offer deals tailored to a single person at a single moment. p. 357

4.1. Pricing Advantages for Online Shoppers The Internet allows consumers to gain more control over the buying process while it creates unique pricing challenges for marketers. Shopbots provide price comparisons across websites.

Information is also available about manufacturer and retailer costs.

p. 357

4.2. Dynamic Pricing Strategies One of the most important opportunities the Internet offers is dynamic pricing, in which the seller can easily adjust the price to meet changes in the marketplace. For B2B marketers, employees/workers must print catalogs and price lists and distribute them to salespeople and customers. The Internet cuts costs and helps B2B firms change prices rapidly when costs change.

p. 357

4.3. Online Auctions The Internet provides opportunities for sellers to find buyers through consumer-to-consumer (C2C) sites that host online auctions. An open auction means all buyers know the highest price. A seller can set a reserve price. A reverse auction is when B2B sellers compete for the right to provide a product at a low price.

p. 357

4.4.

Freemium Pricing Strategies A freemium strategy is a business strategy in which a product in its most basic version is provided free of charge but the company charges money (the premium) for upgraded versions of the product with more features, greater functionality, or greater capacity. The freemium pricing strategy has been most popular in digital offerings such as software media, games, or web services where the cost of one additional copy of the product is negligible.

p. 358

4.5.

Internet Price Discrimination Firms use technology to practice Internet price discrimination, which charges different prices to different buyers for the same product on order size or geographic location.

Marketers know that they will maximize profits if they charge each customer the most that person is willing to pay. As long as 10-16 Copyright © 2025 Pearson Education, Inc.

Exhibit: Streaming

Chapter 10: Price: What Is the Value Proposition Worth?

companies don’t charge different prices based on a demographic characteristic such as gender or race, it is not illegal. p. 359

4.6. Innovations in Payment Systems Consumers conduct transactions with businesses and other consumers using cryptocurrency, digital installment plans, buynow-pay-later opportunities, collaborative savings and consumption, rent-to-own programs, and peer-to-peer (P2P) lending.

4.6.1. Cryptocurrency A digital currency that uses cryptography for security is called a cryptocurrency. Bitcoin, Ethereum, Ripple, Litecoin, and Tether are the five most important and most frequently traded.

p. 359

Bitcoin is the most popular and fastest-growing cryptocurrency.

It is appealing because it is organic, which means it is not issued by a central authority.

p. 359

The network of computers that maintains the database of all Bitcoin transactions is called the blockchain.

Advantages to cryptocurrency include: it eliminates risk of credit card fraud for consumers; there is a societal benefit for lowerincome consumers without bank accounts who might otherwise pay fees, since cryptocurrencies charge less; they can be sent anywhere in the world in a few minutes; there are no middlemen.

Some people believe that within 10 years, Bitcoin or another cryptocurrency will be the only money in the world.

p. 359

4.6.2. Digital and Mobile Wallets A digital wallet is a financial account that consumers can use to store funds, make transactions, and track payments by computer.

A mobile wallet is an app on a smartphone that may store credit card, debit card, and rewards card information as well as coupons.

The leading digital wallets are Google Pay, Apple Pay, Samsung Pay, Android Pay, and PayPal. PayPal works across all major devices.

p. 360

4.6.3. Buy-Now-Pay-Later (BNPL) A controversial innovation in payments is the buy-now-pay-later (BNPL) or afterpay payment option. The BNPL options have been criticized because young consumers can quickly get into debt and damage their credit scores.

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Exhibit: Venmo

Part 3: Develop the Value Proposition for the Customer

4.6.4. Save-Now-Buy-Later (SNBL) Another installment process is a save-now-buy-later (SNBL) offering. Payments are automatically drafted from a customer’s bank account; when the agreed-upon amount is saved, the customer can order the item.

4.6.5. Collaborative Savings and Consumption Collaborative savings and consumption programs allow consumers to make payments over a period of time. Each individual in the group contributes a set amount to a central pot.

Every 30 days, a member is randomly selected to withdraw the entire monthly contribution. The group remains intact until every member has drawn out the monthly sum.

4.6.6. P2P Lending Peer-to-peer (P2P) lending, or social lending, allows individuals to borrow money from other individuals. P2P lending companies provide both borrower and lender with assistance.

4.6.7. Rent-to-Own The sharing economy has changed consumers’ attitudes towards renting and swapping clothes. Retailers that offer furniture for homes and for offices have for many years offered consumers and businesses the ability to rent furniture until the buyer owns it.

This is called rent-to-own. The total price tends to be higher than if it was bought outright.

4.7. Disruption on the Consumer Side of the Exchange Many experts believe we will have a cashless society. Consumers use digital currency and smartphone apps instead of cash in more cases. The virus raised concerns about handling cash. Sweden has its own digital currency, the e-krona.

Businesses like going cashless because it is more secure and less expensive to handle. Consumers like it because it’s convenient.

Retailers say that without cash, they can speed up transactions, reduce the risk of theft, and reduce the costs of securing cash to take to the bank. Governments like the ability to record transactions and get the tax revenue.

Older consumers are concerned about remembering access numbers. Charity groups are concerned that individuals subject to domestic abuse won’t be able to hide money.

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p. 361

5.

PSYCHOLOGICAL, LEGAL, AND ETHICAL ASPECTS OF PRICING

p. 362

5.1.

Psychological Issues in Setting Prices Much of what we’ve said about pricing depends on economists’ notion of a customer who evaluates price in a logical, rational manner.

p. 362

5.1.1. Buyers’ Pricing Expectation Often consumers base their perceptions of price on what they perceive to be the customary or fair price. When the price of a product is above or sometimes even when it is below what consumers expect, they are less willing to purchase the product.

5.1.2. Internal Reference Prices Sometimes consumers’ perceptions of the customary price of a product depend on their internal reference price. That is, based on experience, consumers have a set price or a price range in mind that they refer to in evaluating a product’s cost.

p. 362

In some cases, marketers try to influence consumers’ expectations of what a product should cost when they use reference-pricing strategies. For example, manufacturers may compare their price to competitors’ prices when they advertise. Similarly, a retailer may display a product next to a higher-priced version of the same or a different brand.

p. 363

p. 363

Two results are likely: On the one hand, if the prices (and other characteristics) of the two products are close, the consumer will probably feel the product quality is similar. This is an assimilation effect. On the other hand, if the prices of the two products are too far apart, a contrast effect may result, in which the customer equates the gap with a big difference in quality.

5.1.3. Price–Quality Inferences Consumers make price-quality inferences about a product when they use price as a cue or an indicator of quality. If consumers are unable to judge the quality of a product through examination or prior experience, they usually will assume that the higher-price product is the higher-quality product.

Brain scans show that—contrary to conventional wisdom— consumers who buy something at a discount experience less satisfaction than people who pay full price for the very same thing. Researchers call this the price-placebo effect.

5.2.

Psychological Pricing Strategies

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Figure 10.13 Snapshot: Psychological, Legal, and Ethical Aspects of Pricing

Part 3: Develop the Value Proposition for the Customer

p. 363

p. 364

Setting a price is part science, part art. Marketers must understand psychological aspects of pricing when they decide what to charge for their products or services.

5.2.1. Odd–Even Pricing Marketers have assumed that there is a psychological response to odd prices that differ from the responses to even prices. Habit may also play a role. Research on the difference in perceptions of odd versus even prices indeed supports the argument that prices ending in 99 rather than 00 lead to increased sales.

5.2.2. Price Lining Marketers often apply their understanding of the psychological aspects of pricing in a practice they call price lining, whereby items in a product line sell at different prices, or price points. If you want to buy a new digital camera, you will find that most manufacturers have one “stripped-down” model for $100 or less.

A better-quality but still moderately priced model likely will be around $200, while a professional quality camera with multiple lenses might set you back $1,000 or more. Price lining provides the different ranges necessary to satisfy each segment of the market.

p. 364

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p. 364

For marketers this technique is a way to maximize profits. A firm charges each customer the highest price that he is willing to pay.

5.2.3. Prestige or Premium Pricing Sometimes luxury goods marketers use a prestige pricing or premium pricing strategy that turns the typical assumption about price-demand relationships on its head: Contrary to the “rational” assumption that we value a product or service more as the price goes down, people tend to buy more as the price goes up.

5.3.

Legal and Ethical Considerations in B2C and C2C Pricing The free enterprise system is founded on the idea that the marketplace will regulate itself. Unfortunately, the business world includes the greedy and unscrupulous. Government has found it necessary to enact legislation to protect consumers and to protect businesses from predatory rivals.

5.3.1. Deceptive Pricing Practices: Bait and Switch Unscrupulous businesses may advertise or promote prices in a deceptive way. The Federal Trade Commission (FTC), state lawmakers, and private bodies such as the Better Business Bureau

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Exhibit: Oddeven pricing

Chapter 10: Price: What Is the Value Proposition Worth?

have developed pricing rules and guidelines to meet the challenge.

Another deceptive pricing practice is the bait-and-switch tactic, whereby a retailer will advertise an item at a very low price—the bait—to lure customers into the store. However, it is almost impossible to buy the advertised item—salespeople like to say (privately) that the item is “nailed to the floor.” The salespeople do everything possible to get the unsuspecting customers to buy a different, more expensive, item—the switch.

p. 365

It is complicated to enforce laws against bait-and-switch tactics because these practices are similar to the legal sales technique of “trading up.” Simply encouraging consumers to purchase a higher-priced item is acceptable, but it is illegal to advertise a lower-priced item when it’s not a legitimate, bona fide offer that is available if the customer demands it. The FTC may determine if an ad is a bait-and-switch scheme or a legitimate offer by checking to see if a firm refuses to show, demonstrate, or sell the advertised product; disparages it; or penalizes salespeople who do sell it.

5.3.2. Loss-Leader Pricing and Unfair Sales Acts Some retailers advertise items at very low prices or even below cost and are glad to sell them at that price because they know that once in the store, customers may buy other items at regular prices.

Marketers call this loss leader pricing; they do it to build store traffic and sales volume.

Some states frown on loss leader practices so they have passed legislation called unfair sales acts (also called unfair trade practices acts). These laws or regulations prohibit wholesalers and retailers from selling products below cost. These laws aim to protect small wholesalers and retailers from larger competitors because the “big fish” have the financial resources that allow them to offer loss leaders or products at very low prices—they know that the smaller firms can’t match these bargain prices.

p. 365

5.3.3. Misleading Merchandising Sometimes, the merchandising activities in the retail store are deceptive or at least suspicious. Consumers assume that items in an end-aisle display are being sold at a discounted price. When retailers display regularly priced merchandise in these displays, they may be accused of taking advantage of consumers.

p. 365

5.3.4. Price Gouging

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Part 3: Develop the Value Proposition for the Customer

Price gouging occurs when a seller, either a business organization or an individual consumer, seeks to take advantage of extreme needs to charge exorbitant prices for items. Price gouging laws are civil laws rather than criminal laws; the offender can be fined. p. 365

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5.4.

Legal Issues in B2B Pricing Some of the more significant illegal B2B pricing activities include price discrimination, price fixing, and predatory pricing.

5.4.1. Illegal B2B Price Discrimination The Robinson-Patman Act includes regulations against price discrimination in interstate commerce. Price discrimination regulations prevent firms from selling the same product to different retailers and wholesalers at different prices if such practices lessen competition.

5.4.2. Price-Fixing Price-fixing occurs when two or more companies conspire to keep prices at a certain level. Horizontal price-fixing occurs when competitors making the same product jointly determine what price they each will charge. Sometimes manufacturers or wholesalers attempt to force retailers to charge a certain price for their product. When vertical price-fixing occurs, the retailer that wants to carry the product has to charge the “suggested” retail price.

5.4.3. Predatory Pricing Predatory pricing means that a company sets a very low price for the purpose of driving competitors out of business. Later, when they have a monopoly, they turn around and increase prices.

6.

BRAND YOU: HOW MUCH ARE YOU WORTH? You need to know what offer is competitive and set realistic expectations.

p. 367

6.1. Step 1: Realistic Expectations To understand salary, you need to understand value. An employer is going to pay you the market value for what you are worth.

Competition, demand, economic conditions, and other elements in the environment impact the salary you can expect.

Base salary is the annual salary on which commissions and bonuses are calculated.

Commission is additional compensation that is paid based on the amount of goods or services sold.

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Chapter 10: Price: What Is the Value Proposition Worth?

Bonus is additional compensation that is paid based on performance or achievement of a prespecified goal.

Stock options are additional compensation in the form of ownership of the company.

Benefits include insurance, vacation and sick days, day care, tuition reimbursement, 401(k), and others.

Other perks can include subsidized cafeterias, office services such as a concierge, game tables, free coffee and snacks, flex hours, low-cost day care, drop-in medical clinics, and other extras that help offset your living expenses or make it more attractive to work at the company.

6.2. Step 2: Know What You’re Worth Do some research to have an accurate idea of what you’re worth.

Talk with people in the industry about what to expect. Search the Internet. Use the U.S. government’s Bureau of Labor Statistics website. Have one or more internships while in school. Gain work experience while in college. Give a good impression in communications. Keep in touch with contacts. Send a handwritten, mailed, thank-you note.

6.3. Step 3: Know How Much You Need Understand how much it will cost you to live in different places since the cost of everything from food to apartments to gasoline varies from city to city. Your budget should include all possible expenses.

p. 369

6.4 Salary Question Dos and Don’ts Don’t ask about salary in the interview.

Wait until the employer brings up the topic and have a salary range in mind. Communicate it, going higher than the minimum you would take.

Here’s My Choice……

Imad went with Option 2. since about 85 percent of the customers who inquire about a vehicle at Auto Europe wind up working with the company. Of this group, about 35 percent will choose the discounted American vehicle option. The remaining 50 percent of the original customer pool will accept the offer to obtain the Mercedes for $950. This flexible strategy appears to work well. I find that about 35 percent of our customers come back for another rental transaction within a two-year period. That high retention rate is the road to profit for Auto Europe.

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Part 3: Develop the Value Proposition for the Customer

IV. END-OF-CHAPTER ANSWER GUIDE CHAPTER QUESTIONS AND ACTIVITIES  CONCEPTS: TEST YOUR KNOWLEDGE 10-1. What is price, and why is it important to a firm? Describe and give examples of the following types of pricing objectives: profit, market share, competitive effect, customer satisfaction, and image enhancement.

Price is the value that customers give up or exchange to obtain a desired product. Price not only brings revenue into the firm, but also matches competitive offerings and often establishes an image for the firm and its products.

When pricing strategies are determined by profit objectives, the focus is on a target level of profit growth or a desired net profit margin. A profit objective is important to firms that believe profit is what motivates shareholders and bankers to invest in a company.

Market share involves having a pricing strategy to maximize sales (either in dollars or in units) or to increase market share.

Competitive effect objectives mean that the pricing plan is intended to have a certain effect on the competition’s marketing efforts.

Customer satisfaction means that quality-focused firms believe that profits result from making customer satisfaction the primary objective. These firms believe that by focusing solely on short-term profits, a company loses sight of keeping customers for the long term.

Image enhancement is when the consumers use price to make inferences about the quality of a product. Marketers know that price is often an important means of communicating not only quality but also image to prospective customers.

10-2. Explain elasticity of demand. What is the difference between elastic demand and inelastic demand? What is cross-elasticity of demand?

Elasticity of demand measures how the quantity demanded of a good changes in response to a change in its price. If the demand for a product is elastic, it means that a small change in price leads to a significant change in the quantity demanded. Inelastic demand means that the quantity demanded does not change significantly even with a large change in price.

Cross-elasticity of demand refers to how the demand for one good responds to a change in the price of another related good. It measures the relationship between two products, indicating whether they are substitutes or complements. If the price of one product

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Chapter 10: Price: What Is the Value Proposition Worth?

increases and the demand for another increases as well, then the products are considered to be substitutes. If the demand decreases, they are complements.

10-3. Explain variable costs, fixed costs, average variable costs, average fixed costs, and average total costs. What is break-even analysis?

• • • • •

Variable costs are the costs of production that are tied to and vary depending on the number of units produced. Variable costs typically include raw materials, processed materials, component parts, and labor.

Fixed costs are the costs of production that do not change with the number of units produced. A CEO’s salary is a fixed cost.

Average variable costs are the total spent on raw materials, labor, and so on divided by the number of items produced.

Average fixed costs (fixed costs remain the same no matter the level of production) will decrease as the number of units produced increases. To calculate, divide fixed costs by the number produced.

Average total costs are the total costs (the total of the fixed costs and the variable costs for a set number of units produced) divided by the number of units produced.

Break-even analysis is a method for determining the number of units that will have to be produced and sold at a given price to break even—that is, to neither make a profit nor suffer a loss. Marketers use break-even analysis to help them in establishing and deciding on the price for a product. For details on calculations, see the chapter material.

10-4. Marketers try to anticipate how the competition will respond to their pricing actions. They know that consumers’ expectations of what constitutes a fair price largely depend on what the competition charges. However, it is not always a good idea to fight the competition with lower and lower prices. Pricing wars such as those in the fast-food industry can change consumers’ perceptions of what is a “fair” price, leaving them unwilling to buy at previous price levels. Governments in the U.S. and other countries develop two different types of regulations, which have an effect on pricing. First, a large number of regulations increase the costs of production. Regulations for health care, environmental protection, occupational safety, and highway safety, just to mention a few, cause the costs of producing many products to increase. Other regulations of specific industries such as those imposed by the Food and Drug Administration (FD) on the production of food and pharmaceuticals increase the costs of developing and producing those products. Consumer trends also can strongly influence prices. Culture and demographics determine how consumers think and behave and so these factors have a large impact on all marketing decisions. For example, an important trend is that even well-off people no longer consider it shameful to hunt for bargains—in fact, it is becoming fashionable to boast that you found one. As a marketing executive for a chain of shopping malls observed, “Everybody loves to save money. It’s a badge of honor today.” Luxury consumers are looking for prestigious brands at low prices, though they are still willing to splurge for some highticket items. The marketing environment often varies widely from country to country.

This can have important consequences in developing pricing strategies. Can prices be standardized for all global markets or must there be localization in pricing? For products 10-25 Copyright © 2025 Pearson Education, Inc.

Part 3: Develop the Value Proposition for the Customer

including most consumer goods, unique environmental factors in different countries mean marketers must adapt their pricing strategies. Explain the difference between markup and margin. What is a gross margin? What is a retailer margin? What is a wholesaler margin?

Markup is the amount added to the cost price of goods to create a selling price. It is calculated as a percentage over the cost.

Margin is the difference between the selling price of a product and its cost, usually expressed as a percentage of the selling price. This measure helps businesses understand how much profit they make on a product relative to its selling price.

Gross margin is the percentage of sales revenue that exceeds the cost of goods sold (COGS). It is calculated by subtracting COGS from total sales and then dividing that number by total sales.

Retailer margin refers to the profit margin for retailers, which is the difference between what it costs a store to buy goods and the price at which it sells them to consumers.

Wholesaler margin is the profit margin for wholesalers, which involves the cost difference between purchasing goods from manufacturers and selling them to retail businesses.

10-5. Explain and give an example of target costing, yield management pricing, price leadership pricing, and EDLP. • • • •

Target costing occurs when a firm first determines the price at which customers would be willing to buy the product and then works backward to design the product in such a way that it can produce and sell the product at a profit.

Yield management pricing is a pricing strategy used by airlines, hotels, and cruise lines. Firms charge different prices to different customers in order to manage capacity while maximizing revenues.

Price leadership pricing is when retailers advertise items at very low prices or even below cost and are glad to sell them at that price because they know that once in the store, customers may buy other items at regular prices.

EDLP is everyday low pricing, like customers might find at a mass discount store.

10-6. For new products, explain skimming pricing, penetration pricing, and trial pricing. Give examples of situations in which each would be the best choice.

Skimming pricing, which charges a high price to recover costs, works best when a product is highly desirable and offers unique benefits, demand is price inelastic during the introductory stage of the product life cycle, and if the product provides some important benefits to the target market that make customers feel they must have the product no

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Chapter 10: Price: What Is the Value Proposition Worth?

matter what it costs. In addition, there must be little chance that competitors can get into the market quickly.

Penetration pricing, setting a low price to penetrate the market as quickly as possible, is used to discourage competitors from entering the market and because of the low price may actually be a barrier to entry for competitors.

With trial pricing, a new product carries a low price for a limited period to attract the customer. The idea is to win customer acceptance first and make profits later. It might work well when consumers are less familiar with the product or are not sure the product is worth the risk.

10-7. How do marketers customize pricing with price segmentation, peak load pricing, and surge pricing? What are some ways marketers can price to meet the needs of bottom-ofthe-pyramid consumers?

Price segmentation is the practice of charging different prices to different market segments for the same product. Peak load pricing is a pricing plan that sets prices higher during periods with higher demand. Surge pricing is a pricing plan that raises prices of a product as demand goes up and lowers it as demand slides.

Bottom-of-the-pyramid pricing is innovative pricing that will appeal to consumers with the lowest incomes by brands that wish to get a foothold in bottom-of-the-pyramid countries.

Marketers often use sachets to sell a small quantity of a product such as laundry detergent, which is sold at a far lower price than an entire box. This strategy allows poor countries to buy high-quality products at affordable prices.

10-8. Explain F.O.B. What type of marketers use F.O.B.? What is F.O.B. factory pricing? What is F.O.B. delivered pricing?

F.O.B. stands for “free on board” and is a term used in shipping to indicate at what point the ownership and responsibility of goods transfer from the seller to the buyer.

F.O.B. is commonly used by marketers involved in the sale of physical goods that require transportation.

F.O.B. factory pricing means that the buyer assumes responsibility for the goods once they leave the seller’s facility, including paying for the shipping costs.

F.O.B. delivered pricing means that the seller assumes responsibility for the goods all the way to the buyer’s location, including all transportation costs. The seller includes these costs in the selling price of the goods, so the buyer does not pay anything additional for shipping.

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10-9. Explain and give examples of two-part pricing, payment pricing, price bundling, captive pricing, and distribution-based pricing tactics.

Two-part pricing requires two separate types of payments to purchase the product. An example would be a cellular phone company that offers customers a set number of minutes’ usage plus a per-minute rate for extra minutes used. Two-part pricing makes sense when consumption differs among consumers, but the firm must have a base income to cover fixed costs.

Payment pricing breaks up the total price into smaller amounts payable over time, thus making the consumer think the price is “do-able.” Payment pricing makes sense for a product that is high priced, that consumers think is important, and that lasts a long time.

An example would be a car.

Price bundling means selling two or more goods or services as a single package for one price. From a marketing standpoint, price bundling makes sense. If products are priced separately, then it is likely that customers will buy some but not all the items. An example would be a phone company now offering cable services for TV and an Internet connection in one bill.

Captive pricing is a pricing tactic a firm uses when it has two products that work only when used together. The firm sells one item at a very low price and then makes its profit on the second, high-margin item. An example would be a razor and blade; neither individually is useful, but together they have great value. Captive pricing makes sense for a consumer necessity that can be individualized and still meet the needs of the mass market.

Distribution-based pricing is a tactic that establishes how firms handle the cost of shipping products to customers nearby as well as far away. FOB-delivered pricing means the seller pays for the cost of loading and the cost of transporting the item to the customer.

10-10. Explain the concept of freemium pricing.

Freemium is a business strategy where a company offers the most basic version of its product for free but charges for upgraded versions that include more features, greater functionality, or increased capacity. This pricing strategy is particularly popular among digital offerings, including entertainment platforms, online games, and web services.

10-11. What is dynamic pricing? What is Internet price discrimination? What is the difference between the two?

Dynamic pricing can occur when the price can easily be adjusted to meet changes in the marketplace. Internet price discrimination is an Internet pricing strategy that charges different prices to different customers for the same product. The Internet allows consumers to quickly comparison shop for the very lowest price. Marketers maximize 10-28 Copyright © 2025 Pearson Education, Inc.

Chapter 10: Price: What Is the Value Proposition Worth?

profits if they charge each customer the most that person is willing to pay. Placing customers into groups based on where they live, how close they are to the retailer or a competitor, the cost of doing business in the area, or their Internet browsing history can greatly increase profits. Some sites even offer customers a discount if they use a mobile device.

10-12. Explain these psychological aspects of pricing: price–quality inferences, odd–even pricing, internal reference price, price lining, and prestige pricing.

Consumers make price–quality inferences about a product when they use price as a cue or an indicator of quality. If consumers are unable to judge the quality of a product through examination or prior experience, they usually will assume that the higher-priced product is the higher-quality product.

Marketers use odd–even pricing when they assume that there is a psychological response to odd prices that differs from the responses to even prices. Research on the difference in perceptions of odd versus even prices supports the argument that prices ending in 99 rather than 00 lead to increased sales. Habit may play a role.

Internal reference price means, based on experience, consumers have a set price or a price range in their mind that they refer to in evaluating a product’s cost. The reference price may be the last price paid. It may also be the average of all the prices they know of similar products.

Price lining is a practice where items in a product line sell at different prices called price points.

Sometimes luxury goods marketers use a prestige pricing strategy that turns the typical assumption about price–demand relationships on its head: Contrary to the “rational” assumption that we value a product or service more as the price goes down, in these cases, believe it or not, people tend to buy more as the price goes up!  ACTIVITIES: APPLY WHAT YOU’VE LEARNED 10-13. Creative Homework/Short Project Assume that you are an entrepreneur who runs a bakery that sells gluten-free breads and cakes. You believe that the current economic conditions merit an increase in the price of your baked goods. You are concerned, however, that increasing the price might not be profitable because you are unsure of the price elasticity of demand for your products. Develop a plan for the measurement of price elasticity of demand for your products. What findings would lead you to increase the price? What findings would cause you to rethink the decision to increase prices? Develop a presentation for your class outlining (1) the concept of elasticity of demand, (2) why raising prices without understanding the elasticity would be a bad move, (3) your recommendations for measurement, and (4) the potential impact on profits for elastic and inelastic demand.

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This question can be assigned as an out-of-class project. Students can share their projects with the class.

10-14. In Class, 10–25 Minutes for Teams Break into small teams, with each group choosing a different company that uses a freemium pricing model. (Common examples include digital cloud storage, email services, online music streaming, video games, productivity tools, and health and wellness apps.) Compare the company’s offerings on its free pricing tier to those available on its premium tier(s). Identify some of the approaches the company uses to entice consumers to upgrade to its premium tier—this can include promotional tactics, exclusive features, and other incentives. Reflect on whether the free and premium tiers appear tailored to the same or different target audiences.

Student answers will vary. Ask student teams to analyze how their company differentiates between free and premium offerings (for example, Spotify’s free version includes ads and limited functionalities, such as shuffle-only mode and no offline listening, while the premium version offers ad-free listening, on-demand playback, and offline access.)

Encourage discussion on the strategic use of freemium models to build a user base and generate leads for paid upgrades. Explore the effectiveness of these strategies across various markets and product categories.

10-15. For Further Research (Groups) In this chapter, we talked about different forms of digital money and about the possibility of a cashless society. Plan and execute a simple research project with students at your university. You need to find out: a. What type(s) of digital cash they currently use if any. b. What they see as benefits and disadvantages of using that digital cash. c. What they see as benefits and disadvantages of a cashless society. d. How they would react if their government moved to a cashless society.

Prepare a report for your class.

Students can share their reports with the class.

10-16. Creative Homework/Short Project Different environments can result in drastically different pricing for identical products. Consider a 20-ounce bottle of Pepsi that can be sold in multiple locations. Rank the following in order of where marketers may set the lowest price for the product to where you would expect marketers to set the highest price for the same product. Write a brief paragraph that explains your overall answer and why these pricing variations exist.

• In a cooler at a convenience store • At a concession stand at a professional hockey game • On a shelf in a grocery store or supercenter • At a fast-food restaurant in an airport • In a vending machine at an amusement park 10-30 Copyright © 2025 Pearson Education, Inc.

Chapter 10: Price: What Is the Value Proposition Worth?

• • •

At a rest stop kiosk off a toll road At a concert in a large arena In a vending machine on your college campus

Student answers will vary. One possible order is below; however, justifications for other rankings can be made. Generally, the more captive the audience and the fewer available alternatives, the higher the price that marketers can charge.

1.

2.

3.

4.

5.

6.

7.

8.

On a shelf in a grocery store or supercenter In a cooler at a convenience store In a vending machine on your college campus At a rest stop kiosk off a toll road At a fast-food restaurant in an airport In a vending machine at an amusement park At a professional hockey game At a concert in a large arena

Encourage students to consider the factors that influence pricing strategies in different contexts, such as customer accessibility, competition, venue type, and purchase urgency. Discuss why, for example, a convenience store might charge more than a grocery store (convenience and immediate consumption). Discuss why event-based locations like concerts and sporting events often have the highest prices (captive audience and no outside competition). Ask students to think about consumer behavior in these settings and how it affects their willingness to pay.

10-17. For Further Research (Individual) In this chapter, we talked about how airlines use yield management pricing to ensure that every seat is filled on every flight, thus maximizing profits. Go to the websites of at least two different airlines. Check the prices of a flight for each airline approximately three weeks from “now.” Then, check the prices for the same flights in less than a week, in one week, and in two weeks. Write a report on your findings and what they tell you about airline pricing.

Yield management pricing is a pricing strategy used by airlines, hotels, and cruise lines.

Firms charge different prices to different customers in order to manage capacity while maximizing revenues. Students can research airline pricing by using websites like Trivago.com or Bookbuddy.com to compare flights on several airlines.

10-18. For Further Research (Groups) Select one of the product categories below. Identify two different firms that offer consumers a line of product offerings in the category. For example, Dell, HP, and Apple each market a line of laptop computers, while Hoover, Dyson, and Bissell offer lines of vacuum cleaners. Using the Internet or by visiting a retailer who sells your selected product, research the product lines and pricing of the two firms. Based on your research, develop a presentation on the price lining strategies of the two firms. Your presentation should discuss (1) the specific price points of the product offerings of each firm and how the price lining strategy maximizes revenue, (2) your ideas for why the specific price points were selected, (3) how the price lining strategies of the

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two firms are alike and how they are different, and (4) possible reasons for differences in the strategies. a. b. c. d.

Laptop computers Vacuum cleaners Smart TVs Smartphones

The main reason for price lining is that different customers are willing to pay different prices for the same item. For example, you may only be willing to spend up to $500 for a new computer, whereas I am willing to pay up to $1500 for a new computer. Therefore, a computer brand is likely to satisfy our different desires to spend money on a computer to the extent that a product line of computers has various price points that match our perception of the maximum amount we are each willing to pay.

One key analysis for each of the different types of products in this activity is for students to estimate the variability of desired price points in each type—for example, how many different price points are required to satisfy different types of consumers in the smartphone category? Should smartphone brands offer a wide or narrow variety of price points? Should smartphone brands offer even more price points than they currently do?  CONCEPTS: APPLY MARKETING METRICS

Contribution per unit and break-even point are two popular and very useful metrics for marketing decision making. These metrics help marketers determine the sales volume needed to financially profit from a marketing opportunity. As explained in the chapter, contribution per unit is the difference between the selling price per unit and the variable cost(s) of the product. Break-even analysis uses the contribution to tell marketers how much must be sold to cover the fixed costs associated with a marketing opportunity.

A local restaurant, Bob’s BBQ, is considering an opportunity to sell its popular BBQ sauce through a regional grocery store chain. The restaurant has been bottling and selling Bob’s Wicked Sauce through the restaurant, and the owner believes it has the unused capacity to produce up to 500 bottles per week without increasing fixed costs. It plans to use social media to create buzz around the grocery store launch. In addition, the contract with the chain requires it to invest $20,000 in advertising and promotional expenses during the first year. The grocery store will pay $4.00 per bottle, and the variable costs, including packaging, are $1.50 per bottle.

10-19. What is the contribution per unit for Bob’s Wicked Sauce?

The contribution per unit is the difference between the price the firm charges for a product (revenue per unit) and the variable costs. The price is $4 and the unit variable cost is $1.50, so the contribution per unit is $4 – $1.50 = $2.50.

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Chapter 10: Price: What Is the Value Proposition Worth?

10-20. How many bottles of Bob’s Wicked Sauce would the grocery store chain need to buy for Bob’s BBQ to break even on the required advertising and promotional expenses?

The break-even point in units = Total fixed costs / Contribution per unit to fixed costs.

So, in this case: $20,000 / $2.50 = 8,000 bottles 10-21. What sales volume (a) in units and (b) in dollars would Bob’s BBQ need to achieve to earn a total profit of $25,000?

Break-even point (in units) with target profit included = (Total fixed costs + Target profit) / Contribution per unit to fixed costs.

So, in this case: $20,000 + $25,000 / $2.50 = $45,000 / $2.50 = 18,000 units.

Break-even points (in dollars) with target profit included = BEP (units) × Selling price.

So, in this case, 18,000 × $4.00 = $72,000.

10-22. Based on the details given, does this seem like a good business venture to you? Why or why not?

Students should note in their discussion that Bob’s can produce up to 500 bottles per week, or up to 500 × 52 = 26,000 bottles per year, without incurring additional fixed costs.

Because the BEP is considerably less than this amount, the proposal is feasible. In addition, Bob’s has the capacity to produce more than enough bottles to reach its goal of $25,000 in profit, making this a potentially attractive opportunity. Students can discuss whether they believe the BE volume is realistic given the other information provided above.  CHOICES: WHAT DO YOU THINK? 10-23. Ethics Several online stores now sell products to consumers at different prices based on the user’s information, such as geographic location—which determines your proximity to competitors and your area’s average income. Although this practice, known as Internet price discrimination, is not illegal, some would say it is unethical. Do you believe this practice is unethical? Should this practice be illegal? If you think the practice should be legal, should retailers be required to put a disclaimer on their site? Explain your reasoning.

Internet price discrimination is an Internet pricing strategy that charges different prices to different customers for the same product. However, the Internet does allow consumers to quickly comparison shop for the very lowest price. Although marketers maximize profits by placing customers into groups based on where they live, how close they are to the retailer or a competitor, the cost of doing business in the area, or their Internet browsing history, customers can find a lower price if they wish to surf the net. Students can debate whether price discrimination should be illegal or if they think it is unethical.

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10-24. Critical Thinking Two-part pricing and payment pricing are tactics that are designed to make things more affordable for customers and better meet their needs. List two products where you feel consumers would benefit if a two-part pricing tactic were used. What are two products where you feel consumers would benefit if a payment pricing tactic were used? Explain your reasoning for these decisions.

Two-part pricing requires two separate types of payments to purchase the product; for example, golf and tennis clubs charge yearly or monthly fees plus fees for each round of golf or tennis. Payment pricing makes the consumer think the price is “do-able” by breaking up the total price into smaller amounts payable over time. For example, Dollywood, a theme park in Tennessee, markets its season passes based on a six-payment price. You can purchase a two-park pass for six equal payments of only $27.32—which sounds much more affordable than the total price of $164! Students can discuss the advantages and disadvantages of these pricing approaches for the average consumer as well as the business customer. Student responses will vary.

10-25. Ethics Many successful retailers use a loss leader pricing strategy, in which they advertise an item at a price below their cost and sell the item at that price to get customers into their store. They feel that these customers will continue to shop with their company and that they will make a profit in the long run. Do you consider this an unethical practice? Who benefits and who is hurt by such practices? Do you think the practice should be made illegal, as some states have done? How is this different from bait-and-switch pricing?

Students will have varying opinions on this topic. For some, free enterprise will be their main consideration. For others, looking after the underdog will be a priority and they will be concerned that smaller retailers cannot afford to compete with loss-leader pricing.

Different states regulate this practice differently, so no single opinion is particularly wrong or right. The difference between loss-leader pricing and bait-and-switch is that the latter seeks to bring customers in and sell them a more expensive product, not the one advertised; the advertised item is “nailed to the floor.”

10-26. Ethics The buy-now-pay-later (BNPL) industry has seen a rapid rise lately, with companies like Affirm, Klarna, and Afterpay being widely adopted by online retailers.

Unlike credit cards, which typically extend a line of credit with the option of paying off purchases over time with interest, BNPL companies usually offer immediate financing for purchases without interest; consumers pay off the purchase in structured installment payments. Although BNPL services don’t change bottom-line retail prices, they can change consumer perceptions regarding price affordability. What ethical considerations should marketers address when promoting BNPL services to consumers? What are some of the ethical dilemmas that marketers must consider when targeting potentially vulnerable demographics, such as younger consumers or lower-income consumers, with BNPL marketing campaigns?

Student answers will vary. Consider initiating discussions about the potential impact these services have on consumer spending behaviors, particularly among vulnerable 10-34 Copyright © 2025 Pearson Education, Inc.

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demographics like young and lower-income consumers. Discuss ethical concerns that may arise when these services encourage overspending or hide the true cost of items.

Encourage students to consider the responsibility of marketers to clearly communicate the terms of BNPL services and the implications of defaulting on payments.

10-27. Ethics Cost Plus Drugs, founded by entrepreneur Mark Cuban, utilizes a cost-plus pricing strategy to sell over 2,200 different prescription drugs to consumers. The online pharmacy limits its markup of prescription medications to 15 percent of the cost it pays for the drugs, plus a $5 labor fee and a $5 shipping fee. Cost Plus Drugs’ direct-to-consumer distribution model typically bypasses insurance companies and pharmacy benefit managers entirely. This model not only results in lower out-of-pocket pricing for many consumers but also addresses larger social and economic equity issues relating to prescription drug costs. How might drug manufacturers and traditional pharmacies react to this form of competition? Do you think a cost-plus model is an appropriate model for other components of healthcare? Why or why not?

Student answers will vary. Ask students to examine how drug manufacturers and traditional pharmacies might respond to such disruptive competition and whether a costplus model could be extended to other aspects of healthcare, such as medical devices, doctor’s visits, or hospital services. The discussion could also cover potential challenges to implementing this model more broadly, such as resistance from established industry players (insurance companies) or regulatory hurdles (government agencies).

10-28 Critical Thinking You work as a marketer for a large chain of upscale skin care boutiques that offer all-natural skin and beauty products. The price of your ingredients has been rising steadily for over two years, cutting into your profits. Your research tells you that the market won’t tolerate a price increase. As a result, you’ve arrived at two possible approaches. You could switch to less expensive, slightly inferior ingredients from new suppliers and maintain current pricing. Alternatively, you could engage in “shrinkflation”—the concept of slightly reducing the product size while still maintaining the current price. Shrinkflation is often referred to as an invisible price increase. Which option would you choose? Explain the process you used to arrive at your decision. What, if anything, do you tell your customers about the change?

Student answers will vary. Encourage discussion that explores the ethical implications and potential consumer reactions to both options. Encourage students to consider the longterm brand implications of each choice. Ask how transparency with customers might mitigate backlash. Discuss the importance of maintaining trust and quality perception among consumers. Ask students to discuss alternative strategies, such as increasing operational efficiencies or enhancing product value through branding.

10-29. Critical Thinking Some retailers sell their own store brands that compete with well-known national brands. Typically, the store brands are sold right beside the name-brand product on the shelf with a much lower price. The hope is to convince the consumer to purchase the store brand because it is offered at a lower price point with the same ingredients (and sometimes even eerily similar packaging). Do you believe consumers place more trust in a product that has a higher price? Why or why not? Based on what you’ve learned so far in 10-35 Copyright © 2025 Pearson Education, Inc.

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this course, explain how national brands can utilize the broader marketing mix to overcome competition from lower-priced store brands.

Student answers will vary. Ask students to consider whether or not consumers inherently trust higher-priced items to be of better quality. The discussion may expand to how national brands can leverage other elements of the marketing mix, such as promotional campaigns, packaging, and product placement, to differentiate themselves from lowerpriced competitors. This conversation can explore how effective branding and marketing strategies can overcome consumer bias toward pricing, emphasizing the role of perceived value and brand loyalty in consumer decision making.  MINIPROJECT: LEARN BY DOING The purpose of this miniproject is to help you become familiar with how consumers respond to different prices by conducting a series of pricing experiments. For this project, you should first select a product category that students such as yourself normally purchase. It should be a moderately expensive purchase, such as athletic shoes, a smartphone, or a piece of luggage. You should next obtain two photographs of items in this product category or, if possible, two actual items. The two items should not appear to be substantially different in quality or in price.

Note: You will need to recruit separate research participants for each of the activities listed in the next section.

10-30. Experiment 1: Reference Pricing a. Place the two products together. Place a sign on one with a low price. Place a sign on the other with a high price (about 50 percent higher will do). Ask your research participants to evaluate the quality of each of the items and to tell which one they would probably purchase. b. Reverse the signs and ask other research participants to evaluate the quality of each of the items and to tell which one they would probably purchase. c. Place the two products together again. This time place a sign on one with a moderate price. Place a sign on the other that is only a little higher (less than 10 percent higher).

Again, ask research participants to evaluate the quality of each of the items and to tell which one they would probably purchase. d. Reverse the signs and ask other research participants to evaluate the quality of each of the items and to tell which one they would probably purchase.

10-31. Experiment 2: Odd–Even Pricing For this experiment, you will only need one of the items from experiment 1. a. Place a sign on the item that ends in 99 cents (e.g., $62.99). Ask research participants to tell you if they think the price for the item is very low, slightly low, moderate, slightly high, or very high. Also ask them to evaluate the quality of the item and to tell you, on a scale of 1 to 10, with 10 being very likely, how likely they would be to purchase the item.

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Chapter 10: Price: What Is the Value Proposition Worth?

b. This time place a sign on the item that ends in 0 cents (e.g., $60). Ask different research participants to tell you if they think the price for the item is very low, slightly low, moderate, slightly high, or very high. Also ask them to evaluate the quality of the item and to tell you how likely they would be to purchase the item.

Develop a presentation for your class in which you discuss the results of your experiments and what they tell you about odd–even pricing and about assimilation and contrast effects in price perceptions.

This miniproject will help students understand the concepts of psychological pricing.

They will be able to test the concepts of odd–even pricing and reference pricing and determine whether the concepts work. In addition, they will be asked to think about pricing as it relates to quality. The experimental nature of this project will aid in reinforcing many of the concepts presented in the text.

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V. MARKETING IN ACTION CASE: REAL CHOICES AT LIVE NATION Summary of Case In the live entertainment arena, dynamic pricing has taken center stage, reshaping how tickets are priced. Spearheaded by Live Nation via its Ticketmaster subsidiary, this approach adjusts ticket costs based on real-time demand. Airlines, hotels, and ride-sharing apps have long embraced this concept. This model not only aligns ticket prices with market demand, but also complicates matters for concertgoers, testing their budget limits and altering their perceptions of entertainment value. This strategy has led to ticket prices surging, sometimes reaching as high as $1,300 in some secondary resale markets. Dynamic pricing for concerts took off at the same time as the growing trend of music tourism, where fans are prepared to travel and pay premium prices for a live experience. Cities hosting blockbuster tours, like Taylor Swift’s Eras Tour, particularly benefit. However, there’s growing pushback from fans shocked by steep prices. The fallout has even reached legislative floors, most notably in Massachusetts, where its “Taylor Swift bill,” seeks to temper dynamic pricing by enhancing ticket pricing transparency. Despite the controversies, the undeniable success of this model in capturing the full economic value of live performances suggests it could expand into other sectors.

Suggestions for Presentation This case could be assigned for various online or in-class discussion activities.

Online Suggestions Ask students to research and compare how different industries implement dynamic pricing.

Industries to consider include airlines, hotels, and entertainment (e.g., movies, concerts, sports).

Students should focus on identifying the psychological, legal, and ethical implications of such pricing strategies.

In-Class Suggestions Organize a group activity where students develop pricing strategies for a hypothetical concert tour. Break the class into small groups and assign each group a different scenario involving variables such as artist popularity, venue size, and target audience demographics. Without specific data, students should use their understanding of market dynamics to set initial ticket prices and decide if and how they would use dynamic pricing. Each group should present their strategy, explaining how they considered costs, demand, and expected revenue to justify their pricing decisions.

Questions for Discussion 10-32. How does dynamic pricing in the live music industry influence consumer perception of ticket value and affordability when it comes to the price component of the marketing mix?

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Chapter 10: Price: What Is the Value Proposition Worth?

perceived value of seeing a high-demand artist, and the negatives, such as potential alienation of fans due to perceived price gouging. The discussion could explore how dynamic pricing impacts the perceived fairness and value of tickets.

10-33. Examine the contrasting viewpoints on whether higher ticket prices might lead to increased fan loyalty or result in a backlash from loyal fan bases. Which do you think is the stronger case? Why? Student answers will vary. Consider asking students to explore how high ticket prices might be justified by the unique, irreplaceable experience of live concerts, potentially increasing fan loyalty as concerts are perceived to be more valuable or exclusive. Then, guide students to consider the opposite viewpoint, where high prices could lead to disenchantment, particularly among longstanding fans who feel priced out. Another option is to consider a structured in-class debate, with students divided into groups to argue for each perspective, using theories from consumer behavior and brand loyalty to support their arguments.

10-34. What other products or services may be a match for dynamic pricing in the future?

What considerations should marketers take into account before switching to a dynamic pricing model?

Student answers will vary. Encourage students to identify other industries or products where dynamic pricing could be beneficial. Ask them to consider factors like demand, inventory, and consumer sensitivity to pricing changes. Possible answers could include sporting events and theatrical productions. This model has even been explored for peak pricing for public transport or access to bridges or tunnels into major cities. Encourage discussion on the ethical considerations and potential consumer backlash. How can businesses and organizations mitigate negative perceptions?

WEB RESOURCES

www.ticketmaster.com www.livenation.com

 TEST YOUR MARKETING MATH 10-39 Copyright © 2025 Pearson Education, Inc.

Part 3: Develop the Value Proposition for the Customer

10S-1. Assume that you are in charge of pricing for a firm that produces pickles. You have fixed costs of $4,200,200. Variable costs are $0.65 per jar of pickles. You are selling your product to retailers for $0.98. You sell the pickles in cases of 24 jars per case. (Hint: Note that the pickle producer cannot sell pickles except in full jars and in full cases. Therefore, you need to be careful and round up when calculations result in a partial jar or partial case.) a. How many jars of pickles must you sell to break even? b. How much must you sell in dollars to break even? c. How many jars of pickles must you sell to break even plus make a profit of $1,000,000? d. Assume a retailer buys your product for $1.09. Its business requires that it price products with a 30 percent markup on cost. Calculate its selling price. e. Assume you have an MSRP of $1.89 for the pickles. If a retailer has a required 40 percent retailer margin on all products it sells, what is the most it is willing to pay the producer for the pickles? f. A clothing retailer knows that to break even and make a profit, it needs to have a minimum retailer margin (also referred to as a contribution margin or gross margin) of at least 60 percent. If it is to sell a pair of shorts for the manufacturer’s suggested retail price of $69.99, what is the most it can pay the manufacturer for the shorts and maintain its margin? g. A salesperson is developing a quote for a landscaping company that wants to buy six commercial riding mowers. The cost for each mower is $3,150. The firm requires that it have a 35 percent margin on all equipment sold, so the salesperson is using a markup on selling price to calculate the quote to the buyer. What will the quote be per mower if they use a 35 percent markup on selling price?

Answers: a. You need to sell 10,500,500 jars of pickles to break even (fixed costs of $4,200,200 divided by the contribution per jar of $.40). b. $10,290,490, but if you need to sell full cases, $10,290,510. c. You need to sell 325,000 jars of 40 pickles each, or 13,000,000 jars of pickles, to earn a $1,000,000 profit. d. A 30 percent markup for a retailer would warrant a selling price of $. e. If a retailer has an MSRP of $1.89 with a required 40 percent retailer margin, the retailer is willing to pay up to $. f. A retailer can pay up to $ for a pair of shorts that retail for $69.99 with a required margin of 60 percent. g. With a 35 percent markup on a mower, the quote would be a sales price of $.

10S-2. Executives of Studio Recordings Inc. produced the latest compact disc by the Starshine Sisters Band, titled Sunshine/Moonshine. The following cost information pertains to the 10-40 Copyright © 2025 Pearson Education, Inc.

Chapter 10: Price: What Is the Value Proposition Worth?

CD. a. CD package b. Songwriters’ royalties c. Recording artists’ royalties d. Advertising and promotion e. Studio Recordings Inc.’s overhead f. Selling price to the CD distributor

$0.55/CD $0.85/CD $1.10/CD $3,200,000 $450,000 $9.75

Calculate the following: 1. Contribution per CD unit 2. Break-even volume in CD units and dollars 3. Net profit if 1 million CDs are sold 4. Necessary CD unit volume to achieve a $500,000 profit

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Part 3: Develop the Value Proposition for the Customer

Answers: 1. The contribution per CD unit is $. The contribution per unit is the selling price ($9.75)

minus the variable costs (CD package, $.55; songwriters’ royalties, $.85; and recording artists’ royalties, $1.10 for a variable cost of $2.50).

2. The break-even volume in CD units is (units must be in whole numbers) based on fixed costs of $ divided by (revenue per unit $9.75 – variable cost per unit 2.50 = 7.25).

3. If 1 million CDs are sold, the company would have profit of $ ($ in revenue minus the fixed costs of $ and 1 million CDs at a variable cost of $2.50 per CD).

4. You would need to sell units to earn $500,000 in profit (your fixed costs of $ plus the profit goal of $500,000 divided by the contribution per unit of $).

10S-3. A distributor of equipment and supplies for physician’s offices and other similar healthcare customers requires that their salespeople negotiate with customers to get the best price possible. At the same time, the distributor management knows that to cover overhead costs such as salary, rent, and utility bills plus provide a satisfactory level of profit, they need a margin of 45 percent. Therefore, the salespeople use a markup on selling price to calculate their quotes. If the company buys cases of disposable examination gowns for $288, what is the lowest price the salesperson can quote the customer?

Answer: Markup on selling price formula SP = cost / (1.00 – margin percentage) SP = $288 / (1.00 – .45) SP = $288 / .55 SP = $523.64 10S-4. Green Stuff is a regional chain of small restaurants. The Green Stuff menu includes only salads, all priced at $9.99, and beverages. Each restaurant serves an average of 900 salads a week at that price. The company wants to raise the price of its salads to $10.95 but is concerned that the price increase will lower sales volume and could actually lower total revenue for the stores. To determine whether it should raise salad prices, the company has tested the higher price of $10.95 in some of its stores. The results of its study showed that when the price of the salads was increased, average store sales declined from 900 salads per week to 750.

Calculate the price elasticity of demand for Green Stuff’s price increase experiment. What conclusions can be drawn from the price increase experiment? What would you recommend that Green Stuff do?

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Chapter 10: Price: What Is the Value Proposition Worth?

Answer: E (Price elasticity of demand) = percentage change in quantity / percentage change in price Percentage change in quantity = (Q2 – Q1) / Q1 = (650 – 800) / 800 = 150/800 = .1875 Percentage change in price = (P2 – P1) / P1 = ($10.95 – $8.95) / $8.95 = $2.00 / $8.95 = .2234 E = .1875 / .2234 = .84 Based on this research, demand is inelastic and the change in price should not decrease revenue.

10S-5. Assume a firm has the following year-end results on its income statement: Net sales $2,450,000 Gross margin $1,289,000 Net income $532,000 Operating expenses $258,999 Returns and allowances $18,300 Based on this, calculate its gross margin ratio, net income ratio, operating expense ratio, and returns and allowances ratio. How do you interpret each of these ratios?

Answer: Gross margin ratio

= gross margin / net sales = 1,289,000 / 2,450,000 = .53 or 53%

Net income ratio

= net income / net sales = 532,000 / 2,450,000 = .22 or 22%

Operating expense ratio

= operating expenses / net sales = 258,999 / 2,450,000 = .11 or 11%

Returns and allowances ratio = returns and allowances / net sales = 18,300 / 2,450,000 = .01 or 1% 10-43 Copyright © 2025 Pearson Education, Inc.

Part 3: Develop the Value Proposition for the Customer

The gross margin suggests the cost of goods sold leaves room for the firm to earn a profit, depending on other costs. The net income tells you the percentage they make after the other costs and expenses are included. Net income would allow you to compare across firms or might be used to set objectives. The operating expenses are just over 11 percent of sales, which suggests the expenses are conservative. Similarly, the returns and allowances are low, accounting for just less than 1 percent of sales.

10-44 Copyright © 2025 Pearson Education, Inc.

Chapter 11: Deliver the Goods

Chapter 11 Physical Distribution Concepts and Business-to-Business Markets I. CHAPTER OVERVIEW When retailers and manufacturers work together within a channel of distribution, linkages can be made stronger and profitability of all channel members can be improved. In this chapter, students learn the definition and functions of a distribution channel. Length and intensity of channels are explained. Continually emphasized is the need for developing channel objectives, careful selection of channel members, and the management of the channel. Through these systematic efforts, businesses can maintain a higher level of customer satisfaction and profitability. Business purchase decisions are and the business buyer decision process, including the use of social media and ecommerce, are also covered.

II. CHAPTER OBJECTIVES 11-1. Explain what a distribution channel is, identify types of wholesaling intermediaries, and describe the different types of distribution channels.

11-2. List and explain the steps to plan a distribution channel strategy.

11-3. Discuss the concepts of logistics and supply chain.

11-4. Understand the characteristics of business-to-business (B2B) markets and how marketers classify B2B customers.

11-5. Identify and describe the different business purchase situations and the business buying decision process, including the use of e-commerce and social media.

11-6. Understand how to prepare for an interview to maximize your chances of getting the job.

III. CHAPTER OUTLINE p. 392

REAL PEOPLE, REAL CHOICES—HERE’S MY PROBLEM AT CALMBOX Daniil Kulchenko is the founder and CEO of calmbox, a monthly subscription box “for calm and mindfulness” (i.e., for stress relief). About eight months into the business, he was presented with an opportunity to list calmbox in the Cratejoy Marketplace, which was the Amazon for subscription boxes at the time. The platform promised increased exposure, print media coverage, and online promotion. The downside was that Cratejoy would take 10 percent of the revenue generated through its platform in perpetuity.

Desperate for a marketing solution and lacking the cash flow to fund his own advertising, Daniil decided to join the marketplace.

The decision to join Cratejoy initially led to a significant growth 11-1 Copyright © 2025 Pearson Education, Inc.

in subscribers, from around 150 to 1,000 in just two months.

However, about two to three months in, Cratejoy announced that it would be increasing its cut from 10 percent to 15 percent going forward. This was a major blow because it significantly impacted the business’s profit margin, which was typically only around 20 to 25 percent at the time, so more than half of the profit margin would be going to the marketplace. To ensure the long-term sustainability of his business Daniil needed to make a decision.

Daniil had three options: Option 1: Stay in the marketplace and take the significant profit margin hit, hoping to maintain sufficient overall profit through increased volume. Option 2: Lean further into the marketplace/distributor avenue and list calmbox on Amazon and other similar online platforms. Option 3: De-list from the marketplace, losing that marketing avenue entirely, and develop the company’s own marketing with direct distribution.

The vignette ends by asking the student which option he/she would choose.

Daniil chose Option #3. p. 394

1.

TYPES OF DISTRIBUTION CHANNELS AND WHOLESALE INTERMEDIARIES The delivery of goods to customers involves physical distribution, which refers to the activities used to move finished goods from manufacturers to final customers. Physical distribution activities include order processing, warehousing, materials handling, transportation, and inventory control.

The focus of logistics is on the customer. The customer’s goals become the logistics provider’s goals.

A channel of distribution consists of, at a minimum, a producer— the individual or firm that manufactures or produces a good or service—and a customer. This is a direct channel. Channels often are indirect because they include one or more channel intermediaries—firms or individuals such as wholesalers, agents, brokers, and retailers who in some way help move the product to the consumer or business user.

p. 395

1.1. Functions of Distribution Channels Channels provide time, place, and ownership utility.

Distribution channels provide a number of logistics or physical distribution functions that increase the efficiency of the flow of goods from producer to customer.

11-2 Copyright © 2025 Pearson Education, Inc.

Exhibit: Flowers

Chapter 11: Deliver the Goods

p. 395

p. 396

Distribution channels create efficiencies because they reduce the number of transactions necessary for goods to flow from many different manufacturers to large numbers of customers. This occurs in two ways. The first is breaking bulk. Wholesalers and retailers purchase large quantities (usually cases) of goods from manufacturers but sell only one or a few at a time to many different customers. Second, channel intermediaries reduce the number of transactions when they create assortments—they provide a variety of products in one location—so that customers can conveniently buy many different items from one seller at one time. The transportation and storage of goods are other physical distribution functions.

Figure 11.1 Process: Reduce Transactions via Intermediaries

Channel intermediaries also perform a number of facilitating functions that make the purchase process easier for customers and manufacturers.

Whether online or in-store, these same sorts of customer-related services are even more important in business-to-business markets (B2B markets) where customers purchase larger quantities of higher-priced products.

Channel members perform risk-taking functions.

p. 396 Intermediaries perform a variety of communication and transaction functions, providing marketing information to the sales force and to customers with complaints or other inputs concerning the product.

p. 397

p. 396

1.2. The Evolution of Distribution Functions In the future, channel intermediaries that physically handle the product may become obsolete. Already companies are eliminating many traditional intermediaries because they find that they do not add enough value in the distribution channel—a process we call disintermediation of the channel of distribution. For marketers, disintermediation reduces costs.

Some companies use the Internet to make coordination among members of a supply chain more effective in ways that end consumers never see. These firms develop better ways to implement knowledge management, which refers to a comprehensive approach that collects, organizes, stores, and retrieves a firm’s information assets. These assets include both databases and company documents and the practical knowledge

11-3 Copyright © 2025 Pearson Education, Inc.

Exhibit: Geek Squad

Figure 11.2 Snapshot: Key

of employees whose past experience may be relevant to solving a new problem.

Types of Intermediaries

p. 396

p. 396

One of the more vexing problems with Internet distribution is the potential for online distribution piracy, which is the theft and unauthorized repurposing of intellectual property via the Internet.

Piracy is a type of copyright infringement.

1.2.1. Wholesaling Intermediaries Wholesaling intermediaries are firms that handle the flow of products from the manufacturer to the retailer or business user.

p. 396

p. 398

1.2.2. Independent Intermediaries Independent intermediaries do business with many different manufacturers and many different customers. Because no manufacturer owns or controls them, they make it possible for many manufacturers to serve customers throughout the world while they keep prices low.

Merchant wholesalers are independent intermediaries that buy goods from manufacturers and sell to retailers and other businessto-business customers. Because merchant wholesalers take title to the goods (that is, they legally own them), they assume certain risks and can suffer losses if products are damaged, become outdated or obsolete, are stolen, or just do not sell.

• Full-service merchant wholesalers provide a wide range of services for their customers, including delivery, credit, productuse assistance, repairs, advertising, and other promotional support—even market research.

• In contrast, limited-service merchant wholesalers provide fewer services for their customers. Like full-service wholesalers, limited-service wholesalers take title to merchandise but are less likely to provide services such as delivery, credit, or marketing assistance to retailers. Specific types of limited-service wholesalers include the following: a. Cash-and-carry wholesalers provide low-cost merchandise for retailers and industrial customers that are too small for other wholesalers’ sales representatives to call on. b. Truck jobbers carry their products to small business customer locations for their inspection and selection. c. Drop shippers are limited-function wholesalers that take title to the merchandise but never actually take possession of it. d. Mail-order wholesalers sell products to small 11-4 Copyright © 2025 Pearson Education, Inc.

Table 11.1: Types of Intermediaries

Exhibit: Wholesaling warehouse

Chapter 11: Deliver the Goods

retailers and other industrial customers, often located in remote areas, through catalogs rather than a sales force. e. Rack jobbers supply retailers with specialty items such as health and beauty products and magazines.

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Merchandise agents or brokers are a second major type of independent intermediary. Agents and brokers provide services in exchange for commissions. They may or may not take possession of the product, but they never take title; that is, they do not accept legal ownership of the product. Agents normally represent buyers or sellers on an ongoing basis, whereas clients employ brokers for a short period.

• Manufacturers’ agents, or manufacturers’ reps, are independent salespeople who carry several lines of noncompeting products.

• Selling agents, including export/import agents, market a whole product line or one manufacturer’s total output.

• Commission merchants are sales agents who receive goods, primarily agricultural products such as grain or livestock, on consignment—that is, they take possession of products without taking title.

• Merchandise brokers, including export/import brokers, are intermediaries that facilitate transactions in markets such as real estate, food, and used equipment, in which there are lots of small buyers and sellers.

1.2.3. Manufacturer-Owned Intermediaries Sometimes manufacturers set up their own channel intermediaries. In this way, they can operate separate business units that perform all the functions of independent intermediaries while at the same time they can still maintain complete control over the channel.

• Sales branches are manufacturer-owned facilities that, like independent wholesalers, carry inventory and provide sales and service to customers in a specific geographic area.

• Sales offices are manufacturer-owned facilities that, like agents, do not carry inventory but provide selling functions for the manufacturer in a specific geographic area.

• Manufacturers’ showrooms are manufacturer owned or leased facilities. These showrooms contain products that are permanently displayed.

1.3.

Types of Distribution Channels 11-5 Copyright © 2025 Pearson Education, Inc.

Figure 11.3 Snapshot: Different Types of Channels of Distribution

When they develop distribution (place) strategies, marketers first consider different channel levels. This refers to the number of distinct categories of intermediaries that make up a channel of distribution.

1.3.1. Consumer Channels The simplest channel is a direct channel. A direct channel is used for a number of reasons. It may allow the producer to serve its customers better and at a lower price than is possible using a retailer. Using a direct channel gives control to the producer.

When the producer handles distribution, it maintains control of pricing, service, and delivery—all elements of the transaction.

Exhibit: eBay

The producer–retailer-consumer channel is the shortest indirect channel.

One fast-growing channel is the consumer-to-consumer (C2C) channel, which is a business model in which customers trade with each other using a third-party platform such as eBay Classifieds, Facebook Marketplace, or Poshmark.

p. 402

p. 402

p. 403

Exhibit: DoorDash

The producer–wholesaler–retailer–consumer channel is a common distribution channel, giving retailers a large selection of products.

1.3.2. B2B Channels Business-to-business distribution channels facilitate the flow of goods from a producer to an organizational or business customer.

They can be direct or indirect. The simplest indirect channel in industrial markets occurs when the single intermediary—a merchant wholesaler we refer to as an industrial distributor rather than a retailer—buys products from a manufacturer and sells them to business customers. Because business-to-business marketing often means selling high-dollar, high-profit items to a market made up of only a few customers, direct channels are common.

1.3.3. Dual (or Multiple) and Hybrid Distribution Systems A dual or multiple distribution system occurs when producers, dealers, wholesalers, retailers, and customers interact with more than one type of channel. This is common in the pharmaceutical Exhibit: Warby industry. Instead of serving a target market with a single channel, Parker some companies combine channels—direct sales, distributors, retail sales, and direct mail to create a hybrid marketing system.

1.4. Distribution Channels and the Marketing Mix How do decisions regarding place relate to the other three Ps? Place decisions affect pricing. Marketers that distribute products 11-6 Copyright © 2025 Pearson Education, Inc.

Chapter 11: Deliver the Goods

through low-priced retailers such as Walmart, T.J. Maxx, and Marshalls will have different pricing objectives and strategies than will those that sell to specialty stores or traditional department stores.

Distribution decisions can sometimes give a product a distinct position in its market. For example, Enterprise Rent-a-Car avoids being overly dependent on the cutthroat rental car market as it opens retail outlets in primary locations in residential areas and local business centers. p. 403

Subscription boxes represent a new business model for distribution that supplies surprises by sending out a box each month filled with items you never knew you wanted but you just have to have.

p. 404

2.

DEVELOP A CHANNEL STRATEGY Firms that operate within a channel of distribution— manufacturers, wholesalers, and retailers—do distribution planning, which is a process of developing distribution objectives, evaluating internal and external environmental influences on distribution, and choosing a distribution strategy.

The following is a discussion of distribution planning from the perspective of manufacturers, wholesalers, and retailers.

p. 404

2.1. Step 1: Develop Distribution Objectives The first step to decide on a distribution plan is to develop objectives that support the organization’s overall marketing goals.

In general, the overall objective of any distribution plan is to make a firm’s product available when, where, and in the quantities customers want at the minimum cost. More specific distribution objectives, however, depend on the characteristics of the product and the market.

p. 404

2.2. Step 2: Evaluate Internal and External Environmental Influences After they set their distribution objectives, marketers must consider their internal and external environments to develop the best channel structure. The organization must examine its own ability to handle distribution functions, what channel intermediaries are available, the ability of customers to access these intermediaries, and how the competition distributes its products. When they study competitors’ distribution strategies, marketers learn from competitors’ successes and failures.

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Exhibit: The subscription model

Figure 11.4 Process: Steps in Distribution Planning

Exhibit: Piaggio’s Vespa scooters

p. 405

2.3. Step 3: Choose a Distribution Strategy Distribution intensity means the number of intermediaries at each level of the channel. Planning a distribution strategy means making at least three decisions.

p. 405

2.3.1. Decision 1: Conventional, Vertical, or Horizontal Marketing System?

A conventional marketing system is a multilevel distribution channel in which members work independently of one another.

Their relationships are limited to simply buying and selling from one another.

p. 405

A vertical marketing system (VMS) is a channel in which there is formal cooperation among channel members at two or more different levels: manufacturing, wholesaling, and retailing. Often, a vertical marketing system can provide a level of cooperation and efficiency not possible with a conventional channel. There are three types of vertical marketing systems: o In an administered VMS, channel members remain independent but voluntarily work together to become the power of a single channel member. o In a corporate VMS, a single firm owns manufacturing, wholesaling, and retailing operations, giving the firm total control over all channel operations.

• In a contractual VMS, cooperation is enforced by a contract that spells out each member’s rights and responsibilities and how they will cooperate. The channel members can have more impact as a group than they could alone.

A retailer cooperative is a group of retailers that has established a wholesaling operation to help them compete more effectively with the large chains.

Franchise organizations are another type of contractual VMS. Franchise organizations include a franchiser (a manufacturer or a service provider) who allows an entrepreneur (the franchisee) to use the franchise name and marketing plan for a fee. In these organizations, contractual arrangements explicitly define and strictly enforce channel cooperation.

p. 406

In a horizontal marketing system, two or more firms at the same channel level agree to work together to get their product to the customer. Sometimes these agreements are between unrelated businesses.

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Exhibit: McDonald’s

Chapter 11: Deliver the Goods

p. 406

2.3.2. Decision 2: Intensive, Exclusive, or Selective Distribution?

The three basic choices for deciding how many wholesalers and retailers to carry a product are intensive, exclusive, and selective distribution.

Intensive distribution aims at maximizing market coverage by selling a product through all wholesalers or retailers that will stock and sell the product. Availability is more important than any other consideration in customers’ purchase decision. Products such as gum, milk, and soft drinks are intensively distributed.

p. 407

Exclusive distribution means limiting distribution to a single outlet in a particular region. Some cars, pianos, and products with high price tags are sold this way.

p. 407

The gray market is a distribution channel in which a product’s sale to a customer is technically legal, but is viewed as inappropriate by the manufacturer of the related product. Gray markets often emerge around high-end luxury goods sold through exclusive distribution.

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Selective distribution fits when demand is so large that exclusive distribution is inadequate, but selling costs, service requirements, or other factors make intensive distribution a poor fit. Selective distribution is suitable for shopping products such as household appliances and electronic equipment.

2.4. Step 4: Develop Distribution Tactics These decisions are usually about the type of distribution system to use, such as a direct or indirect channel, or a conventional or integrated channel. These decisions have a direct impact on customer satisfaction.

2.4.1. Decision 1: Select Channel Partners Selecting channel partners usually results in a long-term commitment. Questions to be considered include: Will the member contribute to profitability? Can the member provide services the customer wants? What impact will this have on channel control? Who are the channel members’ competitors channel partners? What is the firm’s dedication to social responsibility?

2.4.2. Decision 2: Manage the Channel The channel leader, sometimes called a channel captain, is the dominant firm that controls the channel. The captain has channel power relative to other channel members. Channel power is the ability of one channel member to influence, control, and lead the entire channel based on one or more sources of power. The power comes from a variety of sources: 11-9 Copyright © 2025 Pearson Education, Inc.

Table 11.2: Characteristics That Favor Intensive Versus Exclusive Distribution Exhibit: Hermès handbags

Exhibit: Baseball stadiums

Exhibit: CocaCola

• • •

A firm has economic power when it has the ability to control resources.

A firm such as a franchiser has legitimate power if it has legal authority to be in charge.

A producer firm has reward or coercive power if it engages in exclusive distribution and has the ability to give profitable products and to take them away from the channel intermediaries.

p. 409 Channel cooperation helps everyone. It occurs when producers, wholesalers, and retailers depend on one another for success.

Channel conflict refers to incompatible goals, poor communication, and disagreement over roles, responsibilities, and functions among firms at different levels of the same distribution channel that may threaten a manufacturer’s distribution strategy. p. 409

3.

LOGISTICS AND THE SUPPLY CHAIN Marketing success is about implementation.

p. 409

Marketers place a great deal of emphasis on logistics, the process of designing, managing, and improving the movement of products through the supply chain. Logistics is also a relevant consideration regarding product returns, recycling and material reuse, and waste disposal—reverse logistics.

p. 410

3.1. The Lowdown on Logistics When a firm does logistics planning, the focus also should be on the customer. Logistics aims to deliver exactly what the customer wants—at the right time, in the right place, and at the right price. p. 410

3.1.1. Order Processing Order processing includes the series of activities that occurs between the time an order comes into the organization and the time a product goes out the door.

p. 410

Fortunately, many firms automate this process with enterprise resource planning (ERP) systems. An ERP system is a software solution that integrates information from across the entire company, including finance, order fulfillment, manufacturing, and transportation. Data need to be entered into the system only once, and then the organization automatically shares this information and links it to other related data.

3.1.2. Warehousing Warehousing—storing goods in anticipation of sale or transfer to another member of the channel of distribution—enables

p. 410

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Figure 11.5 Process: The Five Functions of Logistics

Chapter 11: Deliver the Goods

marketers to provide time utility to consumers by holding on to products until consumers need them.

Part of developing effective logistics means making decisions about how many warehouses we need and where and what type of warehouse each should be.

Firms use private and public warehouses to store goods. p. 411

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A distribution center is a warehouse that stores goods for short periods and that provides other functions such as breaking bulk.

3.1.3. Materials Handling Materials handling is the moving of products into, within, and out of warehouses. Once in the facility the goods may be handled over a dozen separate times. Procedures that limit the number of times a product must be handled decrease the likelihood of damage and reduce the cost of materials handling.

3.1.4. Transportation Logistics decisions take into consideration options for transportation, the mode by which products move among channel members. Modes of transportation differ in their: • Dependability: ability to deliver goods safely and on time • Cost: the total transportation costs to move a product from one location to another, including any charges for loading, unloading, and in-transit storage • Speed of delivery including loading and unloading • Accessibility: number of different locations carrier serves • Capability to handle different products such as large and small, fragile, or bulky • Traceability: ability to locate goods in shipment

Table 11.3 A Comparison of Transportation Modes

Each mode of transportation has strengths and weaknesses that make it a good choice for different transportation needs.

• Railroads: Railroads are best to carry heavy or bulky items, such as coal and other mining products, over long distances. Railroads are about average in their cost and provide moderate speed of delivery.

• Water: Ships and barges carry large, bulky goods and are very important in international trade. Water transportation is relatively low in cost but can be slow.

• Trucks: Trucks or motor carriers are the most important Exhibit: Amazon transportation mode for consumer goods, especially for shorter hauls. Motor carrier transport allows flexibility because trucks can travel to locations missed by boats, trains, and planes. Trucks also carry a wide variety of products, including perishable items. Although costs are 11-11 Copyright © 2025 Pearson Education, Inc.

p. 412

high for longer-distance shipping, trucks are economical for shorter deliveries. Because trucks provide door-to-door service, product handling is minimal, and this reduces the chance of product damage.

• Air: Air transportation is the fastest and the most expensive transportation mode. It is ideal to move high-value items such as important mail, fresh-cut flowers, and live lobsters.

• Pipeline: Pipelines carry petroleum products such as oil and natural gas and a few other chemicals. Pipelines flow primarily from oil or gas fields to refineries. They are very low in cost, require little energy, and are not subject to disruption by weather.

• The Internet: As we discussed earlier in this chapter, marketers of services such as banking, news, and entertainment take advantage of distribution opportunities the Internet provides.

3.1.5. Inventory Control Inventory control means developing and implementing a process to ensure that the firm always has sufficient quantities of goods available to meet customers’ demands.

One of the most used measures of inventory control is inventory turnover or inventory turns, which is the number of times a firm’s inventory completely cycles through during a defined time frame (usually in one year). Marketers can measure inventory turnover by using the value of the inventory at cost or at retail, or this metric can even be expressed in units.

Benchmarks for inventory turnover vary greatly. A firm can up its profitability through increases in inventory turnover; however, management will have to calculate whether increased volume adds to profits.

p. 413

Some companies are even phasing in a sophisticated technology (similar to the EZ Pass system many drivers use to speed through tollbooths) known as radio frequency identification (RFID).

RFID lets firms tag clothes, pharmaceuticals, or virtually any kind of product with tiny chips that contain information about the item’s content, origin, and destination. This technology has the potential to revolutionize inventory control and help marketers ensure that their products are on the shelves when people want to buy them.

Firms store goods for many reasons, such as enabling production to meet seasonal demand and creating economies in ordering.

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Chapter 11: Deliver the Goods

p. 413

Inventory control has a major impact on the overall costs of a firm’s logistics initiatives. Level loading is a manufacturing approach intended to balance the inventory holding capabilities and production capacity constraints of a manufacturer for a particular product through the implementation of a consistent production schedule, employed both during and beyond periods of peak demands. Stock-outs, which are zero-inventory situations resulting in lost sales and customer dissatisfaction, may be very negative. To balance these two opposing needs, manufacturers turn to just-in-time (JIT) inventory techniques with their suppliers. JIT sets up delivery of goods just as they are needed on the production floor. This minimizes the cost of holding inventory while it ensures the inventory will be there when customers need it.

p. 414

3.2. Place: Pulling It All Together Through the Supply Chain The supply chain includes all the activities necessary to turn raw materials into a good or service and put it into the hands of the Exhibit: H&M consumer or business customer.

Cross-docking is a supply chain efficiency technique in which products are transferred off a supplier’s truck directly onto a buyer’s truck bound for the next distribution point, such as a retail store.

p. 415

Supply chain management is the coordination of flows among the firms in a supply chain to maximize total profitability. These “flows” include not only the physical movement of goods but also the sharing of information about the goods—that is, supply chain partners must synchronize their activities with one another.

p. 415

Insourcing occurs when companies contract with a specialist who services their supply chains. Unlike the outsourcing process where a company delegates nonessential tasks to subcontractors, insourcing means that the client company brings in an external company to run its essential operations.

The major difference between a supply chain and a channel of distribution is the number of members and their functions. A supply chain is broader; it consists of those firms that supply the raw materials, component parts, and supplies necessary for a firm to produce a good or service plus the firms that facilitate the movement of that product to the ultimate users of the product.

This last part—the firms that get the product to the ultimate users—is the channel of distribution.

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Technology is driving disruption in supply chain management.

Artificial intelligence is an enabler of autonomous vehicles.

Anticipatory shipping delivers products before customers place an order, using predictive analytics. The sharing economy has implications for logistics and supply chain.

4. A PRIMER ON BUSINESS-TO-BUSINESS (B2B) MARKETS Like an end consumer, a business buyer makes decisions—but with an important difference: The purchase may be worth millions of dollars, and both the buyer and the seller have a lot at stake.

B2B markets, also called organizational markets, include manufacturers and other product producers, wholesalers, retailers, and a variety of other organizations, such as hospitals, universities, and governmental agencies.

4.1. Types of Business-to-Business Customers Figure 11.6 Snapshot: The 4.1.1. Producers Business Producers purchase products for the production of other goods Marketplace and services that they in turn sell to make a profit. They are customers for a vast number of products from raw materials to goods manufactured by still other producers.

4.1.2. Resellers Resellers buy finished goods for reselling, renting, or leasing to consumers and other businesses. Although resellers do not actually produce goods, they do provide their customers with time, place, and possession utility by making the goods available to consumers when and where they want them.

4.1.3. Government and Not-for-Profit Organizations Governments and not-for-profit institutions are two other types of organizations in the business marketplace. Government markets make up the largest single business and organizational market in the United States.

Not-for-profit or nongovernmental organizations (NGOs) are organizations with educational, community, and other public service goals, such as hospitals, churches, universities, museums, and charitable and cause-related organizations such as the Salvation Army and the Red Cross.

4.1.4. The North American Industry Classification System Marketers can identify their customers using the North American Industry Classification System (NAICS). This is a numerical coding of industries developed by the United States, Canada, and 11-14 Copyright © 2025 Pearson Education, Inc.

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Mexico. The NAICS reports the number of firms, the total dollar amount of sales, the number of employees, and the growth rate for Table 11.4: The industries, all broken down by geographic region. Firms may also North American use the NAICS to find new customers.

Industry Classification 4.2. Factors That Make a Difference in Business Markets System: A There are differences that make business-to-business marketing Sample more complex.

4.2.1. Multiple Buyers In business markets, products often have to do more than satisfy an individual’s needs. They must meet the requirements of everyone involved in the company’s purchase decision.

4.2.2. Number of Customers Organizational customers are few and far between compared to end-user consumers. In the United States, there were about 128.6 million consumer households but only 32.5 million businesses and other organizations in 2019.

4.2.3. Size and Cost of Purchases Business-to-business products can dwarf consumer purchases both in the quantity of items ordered and in the price of individual purchases. Recognizing such differences in the size of purchases allows marketers to develop effective marketing strategies.

4.2.4. Geographic Concentration Many business customers are located in a small geographic area rather than being spread out across the country.

Figure 11.7 Snapshot: Key Differences in Business (Organizational) Versus Consumer Markets Table 11.5: Differences Between Business (Organizational) Markets and Consumer Markets

4.3. B2B Demand Demand in business markets differs from consumer demand.

Most demand for B2B products is derived, inelastic, fluctuating, and joint.

4.3.1. Derived Demand Business customers do not purchase goods and services to satisfy their own needs. Businesses instead operate on derived demand, because a business’s demand for goods and services comes either directly or indirectly from consumers’ demand for what it produces. Because of derived demand, the success of one company may depend on another company in a different industry.

The derived nature of business demand means that marketers must constantly be alert to changes in consumer trends that ultimately will have an effect on B2B sales.

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Figure 11.8 Process: Derived Demand

4.3.2. Inelastic Demand Inelastic demand means that it usually does not matter if the price of a business-to-business product goes up or down— business customers still buy the same quantity. Demand in business-to-business markets is mostly inelastic because what is being sold is often just one of the many parts or materials that go into producing the consumer product. It is not uncommon for a large increase in a business product’s price to have little effect on the final consumer product’s price.

Business-to-business demand is not always inelastic. Sometimes producing a consumer good or service relies on only one or a few materials or component parts. If the price of the part increases, demand may become elastic if the manufacturer of the consumer good passes the increase on to the consumer.

4.3.3. Fluctuating Demand Business demand also is subject to greater fluctuations than is consumer demand. There are two reasons for this: • First, even modest changes in consumer demand can create large increases or decreases in business demand.

• A product’s life expectancy—some machinery needs to be replaced every 10 or 20 years and marketers have to work hard to even out production.

4.3.4. Joint Demand Joint demand occurs when two or more goods are necessary to create a product.

5.

BUSINESS BUYING SITUATIONS AND THE BUSINESS BUYING DECISION PROCESS 5.1 The Buyclass Framework Like end user consumers, business buyers spend more time and effort on some purchases than on others. This usually depends on the complexity of the product and how often they need to make the decision. A buyclass framework identifies the degree of effort required of the firm’s personnel to collect information and make a purchase decision. These classes, which apply to three different buying situations, are straight rebuys, modified rebuys, and newtask buys.

5.1.1. Straight Rebuy A straight rebuy refers to the routine purchase of items that a B2B customer regularly needs. The buyer has purchased the same 11-16 Copyright © 2025 Pearson Education, Inc.

Figure 11.9: Snapshot Elements of the Buyclass Framework

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items many times before and routinely reorders them when supplies are low, often from the same suppliers. Reordering the items takes little time.

5.1.2. Modified Rebuy A modified rebuy occurs when a firm decides to shop around for suppliers with better prices, quality, or delivery times. This situation also can occur when the organization confronts new needs for products it already buys.

Modified rebuys require more time and effort than straight rebuys. The buyer generally knows the purchase requirements and she has a few potential suppliers in mind.

5.1.3. New-Task Buy A first-time purchase is a new-task buy. Uncertainty and risk characterize buying decisions in this classification, and they require the most effort because the buyer has no previous experience on which to base a decision.

A prospective customer’s new-task buying situation represents both a challenge and an opportunity. Although a new-task buy can be significant in and of itself, many times the chosen supplier gains the added advantage of becoming an “in” supplier for more routine purchases that will follow.

5.2. Professional Buyers and Buying Centers Trained professional buyers typically carry out buying in business-to-business markets. These people typically have titles such as purchasing agents, procurement officers, or directors of materials management. Professional purchasers shop all day, every day. They are responsible for selecting quality products and ensuring their timely delivery.

The buying center is the group of people in the organization who participate in the decision-making process. It is a cross-functional team of decision makers. Generally, the members of a buying center have some expertise or interest in the particular decision, and as a group, they are able to make the best decision.

Depending on the complexity of the purchase and the size of the buying center a participant may assume one, several, or all of the following roles: • Initiator: begins the buying process by first recognizing that the firm needs to make a purchase.

• User: a member of the buying center who actually needs the product.

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• • • •

Gatekeeper: the person who controls the flow of information to other members.

Influencer: the person(s) who affects the buying decision by dispensing advice or sharing expertise.

Decider: the member of the buying center who makes the final decision.

Buyer: the person who has responsibility for executing the purchase.

Table 11.6 Roles in the Buying Center

5.3. The Business Purchase Decision Process The following is a description of the five steps involved in the business buying decision process.

5.3.1. Step 1: Recognize the Problem The first step occurs when someone sees that a purchase can solve a problem. Two events may occur in the problem recognition step. First, a request or requisition, usually written, is made. Then, depending on the complexity of the purchase, a buying center may be formed.

5.3.2. Step 2: Search for Information The buying center searches for information about products and suppliers in this second step. Members of the buying center may individually or collectively refer to reports in trade magazines and journals, seek advice from outside consultants, and pay close attention to marketing communications from different manufacturers and suppliers. The job of marketers is to make sure the information is available when and where business customers want it.

Business buyers often develop product specifications, that is, a written description of the quality, size, weight, color, features, quantity, training, warranty, service terms, and delivery requirements for the purchase. Once the product specifications are in hand, the next step is to identify potential suppliers and obtain written or verbal proposals, or bids, from one or more of them.

5.3.3. Step 3: Evaluate the Alternatives The buying center assesses the proposals in this stage of the buying decision process. Total spending for goods and services can have a major impact on the firm’s profitability. All things being equal, price is the primary consideration. Pricing evaluations must take into account discount policies for certain quantities, return-goods policies, the cost of repair and maintenance services, terms of payment, and the cost of financing large purchases. For capital equipment, cost criteria also include 11-18 Copyright © 2025 Pearson Education, Inc.

Figure 11.10 Process: Steps in the Business Buying Decision Process

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the life expectancy of the purchase, the expected resale value, and disposal cost for the old equipment.

Although a bidder is often selected because it offers the lowest price, there are times when the buying decision is based on other factors.

The more complex and costly the purchase, the more time buyers spend searching for the best supplier—and the more marketers must do to win the order. In some cases, a company may even ask one or more of its current customers to participate in a customer reference program. In these situations, customers formally share success stories and actively recommend products to other potential clients, often as part of an online community composed of people with similar needs.

Marketers often make formal presentations and product demonstrations to the buying center group.

5.3.4. Step 4: Select the Product and Supplier The next step in the buying process is the purchase decision—the selection of the best product and supplier to meet the firm’s needs. Reliability and durability rank especially high for equipment and systems that keep the firm’s operations running smoothly without interruption. For some purchases, warranties, repair service, and regular maintenance after the sale are important.

The customer reference program is a formalized process by which customers formally share success stories and actively recommend products to other potential clients, usually facilitated through an online community.

One of the most important decisions for a buyer is how many suppliers can best serve the firm’s needs. Sometimes one supplier is more beneficial to the organization than multiple suppliers are.

Single sourcing, in which a buyer and seller work quite closely, is particularly important when a firm needs frequent deliveries or specialized products.

Multiple sourcing means buying a product from several different suppliers. Under this system, suppliers are more likely to remain price competitive.

Sometimes supplier selection is based on reciprocity, which means that a buyer and seller agree to be each other’s customers 11-19 Copyright © 2025 Pearson Education, Inc.

by saying essentially, “I’ll buy from you, and you buy from me.”

The U.S. government frowns on these types of agreements and often determines that the agreements are illegal, limiting free competition.

Outsourcing, also known as offshoring, occurs when firms obtain outside vendors to provide goods or services that might otherwise be supplied in-house.

Reverse marketing occurs when buyers try to find suppliers that can produce specifically needed products and then attempt to “sell” the idea to the suppliers. The seller aims to satisfy the buying firm’s needs.

5.3.5. Step 5: Evaluate Postpurchase An organizational buyer assesses whether the performance of the product and the supplier is living up to expectations. The buyer surveys the users to determine their satisfaction with the product as well as with the installation, delivery, and service provided by the supplier.

5.4 B2B E-Commerce and Social Media Business-to-business (B2B) e-commerce refers to the Internet exchanges between two or more businesses or organizations. B2B e-commerce includes exchanges of information, goods, services, and payments.

Using the Internet for e-commerce allows business marketers to link directly to suppliers, factories, distributors, and their customers, radically reducing the time necessary for order and delivery of goods, tracking sales, and getting feedback from customers. .4.1. Intranets and Extranets Many companies maintain intranets, which provide more secure means of conducting business. An intranet is an internal corporate computer network that uses Internet technology to link company departments, employees, and databases. Intranets give access only to authorized employees.

When a company allows certain suppliers, customers, and others outside the organization to access its intranet, the system is known as an extranet. A business customer who has been authorized to use a supplier’s extranet can place orders online. Extranets can be especially useful for companies that need to have secure communications between the company and its dealers, distributors, and/or franchisees.

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Intranets and extranets are very cost efficient. They allow business partners to collaborate on projects and to build relationships.

5.4.2. The Dark Side of B2B E-Commerce There are several security issues that impact B2B e-commerce.

When hackers break into company sites, they can destroy company records and steal trade secrets. Both B2C and B2B ecommerce companies worry about authentication and ensuring that transactions are secure. This means making sure that only authorized individuals are allowed to access a site and place an order. Maintaining security also requires firms to keep the information transferred as part of a transaction, such as a credit card number, from criminals’ hard drives.

They can give out unauthorized access to company computer systems by being careless about keeping their passwords into the system a secret.

Malware is software designed specifically to damage or disrupt computer systems. Another security risk is spyware, or software that gathers information on an individual’s or organization’s computer.

A firewall is a combination of hardware and software that ensures that only authorized individuals gain entry into a computer system. The firewall monitors and controls all traffic between the Internet and the intranet to restrict access.

Encryption means scrambling a message so that only another individual (or computer) that has the right “key” can unscramble it.

5.4.3. B2B and Social Media Although most of us associate business use of social media such as Facebook, LinkedIn, and Twitter with consumer marketing, B2B organizations are increasing their use of and their budgets for social media.

Social media sites: • identify target audiences.

• identify with which potential customers your competitors interact.

• monitor what customers say about your product, firm, and

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competitors. provide platforms for conversations, answers to questions, and shared experience.

6. BRAND YOU: DELIVERING YOUR VALUE PROPOSITION Think of an interview like a sales call. It is an opportunity to sell yourself and build long-term relationships.

6.1. Step 1: Study the Company Have a complete job description.

Prepare for several job interviews at the same time.

6.2. Step 2: Prepare Good Questions and Good Answers Be prepared to ask good questions. Do not ask about salary and benefits. Practice.

6.3. Step 3: Close the Interview Ask for the job.

6.4. Step 4: Follow Up Write a hand-written thank-you note within 24 hours.

6.5 How to Dress and What to Bring Dress professionally. First impressions are important.

Bring samples of work and extra copies of your résumé.

Here’s My Choice……

Daniil went with Option 3 and terminated the relationship with the marketplace and developed his own marketing with direct distribution. As a result, calmbox experienced an initial significant drop in sales for an extended period of time. However, this decision allowed Daniil to build internal marketing strategies and regain control over the customer journey and customer experience management. Calmbox was able to provide more tailored and personalized customer service. This increased customer satisfaction and fostered stronger relationships with subscribers, contributing to the long-term success and growth of the business. In the long term, it provided the flexibility and opportunity to capture the entire profit margin and invest in advertising and promotion at more sustainable customer acquisition costs. Over time, calmbox grew bigger and more successful than it had ever been on Cratejoy.

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IV. END-OF-CHAPTER ANSWER GUIDE CHAPTER QUESTIONS AND ACTIVITIES  CONCEPTS: TEST YOUR KNOWLEDGE 11-1. What is a channel of distribution? What are channel intermediaries? What are direct and indirect channel intermediaries?

A channel of distribution is a series of firms or individuals that facilitate the movement of a product from the producer to the final customer. Channel intermediaries are the firms or individuals such as wholesalers, agents, brokers, or retailers who help move a product from the producer to the consumer or business user.

A direct channel is a channel of distribution in which there are no intermediaries or middle levels. Factors could be cost, speed of delivery, or channel control.

An indirect channel is the distribution of goods in which manufacturers reach end users through intermediaries—wholesalers, dealers, distributors, agents, and/or retailers. Factors could be familiarity with intermediaries, consumer buying behavior, or ability to reach consumers.

11-2. Explain the functions of distribution channels.

Certain functions help the consumer with their purchase decision. Channels provide time, place, and ownership utility for consumers. Channel members handle the physical distribution function for products, including the activities of breaking and accumulation of bulk, creating assortments, and reducing the number of transactions necessary for the flow of goods, transportation, and storage. Intermediaries in channels of distribution also perform a variety of both communications and facilitating functions.

11-3. Explain the risk-taking functions associated with distribution. What are the communication and transaction functions of distribution?

The risk-taking functions of distribution involve intermediaries bearing financial risks when they purchase and store inventory that may not sell, potentially leading to losses from unsold, outdated, or damaged goods. The communication and transaction functions are activities that facilitate the movement of goods and enhance customer satisfaction, such as customer service, offering store credit cards, and promotional efforts.

11-4. Manufacturers’ agents—use independent salespeople; carry several lines of non-competing products. Selling agents, including export/import agents—handle the entire output on one or more producers. Commission merchants—receive commission on sales price of products. Manufacturerowned intermediaries:Sales branches—wholesaler-type facilities owned and run by a manufacturer.

Sales offices—like sales branches, are typically located in strategic geographic areas in What is online distribution piracy? What is copyright infringement?

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Online distribution piracy is the unauthorized repurposing and distribution of intellectual property via the internet, often involving the theft of digital content. Copyright infringement occurs when works protected by copyright law are used without permission from the copyright holder.

11-5. What factors are important in determining whether a manufacturer should choose a direct or indirect channel?

The decision to go direct is usually related to control and cost. With indirect, instead of serving a target market with a single channel, companies have added new channels—direct sales, distributors, retail sales, and direct mail.

11-6. Describe some of the differences between consumer channels and B2B channels.

Consumer channels typically involve longer distribution channels, including wholesalers and retailers that are used to reach broader markets. They deliver goods to end consumers through various retail formats that balance cost, efficiency, and accessibility. B2B channels often involve shorter, more direct distribution paths, often with fewer intermediaries. B2B channels typically involve bulk buying, highly technical service requirements, and customized product delivery. B2B channels focus on maintaining a consistent supply for production processes and often involve closer, contractual relationships between suppliers and buyers to ensure reliable fulfillment of business requirements.

11-7. How do B2B markets differ from consumer markets?

B2B markets differ from consumer markets primarily in demand characteristics and purchasing processes. In B2B markets, demand is derived from the demand for consumer goods. It typically is inelastic, meaning quantity demanded does not change significantly with price changes. B2B demand can fluctuate more than consumer demand because a small increase in consumer demand can result in a large increase in demand for raw materials.

Additionally, B2B buying decisions are typically more complex and involve multiple decision-makers and professional buyers.

11-8. Explain intensive, exclusive, and selective forms of distribution.

Intensive distribution aims at maximizing market coverage by selling a product through all wholesalers or retailers that will stock and sell the product (e.g., chewing gum).

Exclusive distribution means limiting distribution to a single outlet in a particular region (e.g., pianos or cars).

Selective distribution fits in between exclusive and intensive distribution.

11-9. Explain the four steps in distribution planning. What are the decisions that must be made in developing distribution tactics? What is a channel leader, or channel captain? Explain 11-24 Copyright © 2025 Pearson Education, Inc.

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channel power and channel conflict.

Distribution planning is best accomplished when marketers follow the steps as follows: a. Develop distribution objectives. b. Evaluate internal and external environmental influences. c. Choose a distribution strategy.

• Number of channel levels • Conventional, vertical, or horizontal marketing system • Intensive, exclusive, or selective distribution d. Develop distribution tactics.

• Select channel partners • Manage the channel • Develop logistics strategies o Order processing o Warehousing o Materials handling o Transportation o Inventory control The channel leader, sometimes called a channel captain, is the dominant firm that controls the channel. The captain has power relative to other channel members. The power comes from a variety of sources: • A firm has economic power when it has the ability to control resources.

• A firm such as a franchiser has legitimate power if it has legal authority to be in charge.

• A producer firm has reward or coercive power if it engages in exclusive distribution and has the ability to give profitable products and to take them away from the channel intermediaries.

Channel conflict refers to incompatible goals, poor communication, and disagreement over roles, responsibilities, and functions among firms at different levels of the same distribution channel that may threaten a manufacturer’s distribution strategy.

11-10. What is logistics? Explain the five functions of logistics. What is reverse logistics?

Logistics is the process of designing, managing, and improving the movement of products through the supply chain. Physical distribution includes activities used to move finished goods from manufacturers to final customers as listed below: 1.

2.

3.

4.

5.

Order processing: Transferring title and handling paperwork related to distribution Warehousing: Storing goods before they reach final customers Materials handling: Moving products into, within, and out of warehouses Transportation: Physically moving the goods from one location to another Inventory control: Determining what amounts and types of goods should be kept on hand before sale

Logistics planning focuses on the customer and decisions are the best trade-off between low costs and high customer service, thus providing the product to the customer at the lowest 11-25 Copyright © 2025 Pearson Education, Inc.

cost possible as long as the firm meets delivery requirements. Logistics is also a relevant consideration regarding product returns, recycling and material reuse, and waste disposal— reverse logistics.

11-11. How do warehousing decisions impact delivery time to consumers? What is a distribution center and what functions does it serve?

Warehousing refers to storing goods in anticipation of sale or transfer to another member of the channel of distribution. This enables marketers to provide time utility to consumers by holding on to products until consumers need them. A distribution center is a warehouse that stores goods for short periods and that provides other functions such as breaking bulk.

11-12. What role does transportation play in distribution? List and explain six factors that are important when considering transportation choices.

Transportation in distribution involves moving products among channel members, playing a critical role in ensuring goods reach their destination efficiently and effectively.

Six important factors to consider when selecting transportation modes are: 1. Dependability: Reliability of the carrier to deliver goods safely and on time 2. Cost: Total transportation costs, including charges for loading, unloading, and in-transit storage 3. Speed of delivery: The total time taken to move products from one location to another 4. Accessibility: The extent to which the carrier can reach different locations 5. Capability: The carrier’s ability to handle various types of products, whether large, small, fragile, or bulky 6. Traceability: The ability to track and locate goods during shipment, ensuring control and security of the products 11-13. What is a supply chain, and how is it different from a channel of distribution? Explain insourcing.

The supply chain includes all the activities necessary to turn raw materials into a good or service and to put it into the hands of the consumer or business customer. The distribution channels are a subset of the supply chain.

Insourcing is when a company hires an external firm to manage essential parts of its supply chain operations. This practice allows companies to maintain control over critical operations while also benefiting from the expertise of specialists. Insourcing can enhance efficiency and expertise in areas like logistics and distribution.

11-14. Explain what we mean by derived demand, inelastic demand, fluctuating demand, and joint demand.

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Derived demand occurs when the demand for one product is a consequence of the demand for another product, such as the demand for pulp due to the demand for paper.

Inelastic demand means price changes do not significantly affect the quantity demanded, as parts often constitute a small portion of the final product’s cost.

Fluctuating demand is more volatile due to factors like the life expectancy of machinery and economic conditions, leading to significant variations in business demand.

Joint demand happens when multiple products are needed together to produce a final product, such that a shortage in one can reduce the demand for others. An example is car manufacturing, where tires, batteries, and spark plugs are all required for final assembly.

11-15. Describe the buyclass framework. What are new-task buys, modified rebuys, and straight rebuys?

The buyclass framework categorizes business buying decisions into three types based on complexity: new-task buys, modified rebuys, and straight rebuys. New-task buys involve purchasing a product for the first time, requiring extensive decision-making and information gathering. Modified rebuys occur when changes are considered for previously purchased products, involving some evaluation and negotiation. Straight rebuys are routine repurchases from existing suppliers with minimal decision making; it is assumed that the buyer is satisfied with the current terms and supplier.

11-16. What is a buying center? What are the roles of the members in a buying center?

A buying center is a group within an organization responsible for making purchase decisions. Roles include the initiator, who recognizes the need; users, who will use the product; influencers, who provide evaluation criteria; buyers, who handle the purchasing process; deciders, who have the final decision authority; and gatekeepers, who control information flow.

11-17. How do the steps in the consumer decision process differ from the steps in the business buying process?

The consumer decision process involves steps such as recognizing a need, searching for information, evaluating alternatives, making the purchase decision, and post-purchase evaluation. The business buying process, although similar in steps, is significantly more complex. It involves multiple stakeholders within a buying center, detailed product specifications, a formal request for proposals, and extensive negotiations. Additionally, business purchases often require formal approval and more thorough evaluations due to the higher stakes and larger scale involved.

11-18. What is single sourcing? Multiple sourcing? Outsourcing?

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Single sourcing involves relying on one supplier for a particular product. It can enhance quality consistency and supplier relationships but poses risks if the supplier fails.

Multiple sourcing uses several suppliers to mitigate dependency risks, generating competitive pricing and reliability.

Outsourcing refers to contracting external vendors to perform tasks that could be done internally, such as manufacturing or service provision. This allows firms to focus on core activities but potentially lose some control over quality.

11-19. Explain the role of intranets and extranets in B2B e-commerce. Describe the security issues firms face in B2B e-commerce and some safeguards firms use to reduce their security risks.

Intranets and extranets facilitate B2B e-commerce by enhancing internal communication and enabling secure transactions with external partners. Intranets are private networks within an organization, and extranets extend this access to selected external partners. These types of sites improving collaboration and supply chain efficiency. Security issues in B2B ecommerce include unauthorized access, data breaches, and cyber-attacks. Firms mitigate these risks through safeguards such as firewalls, encryption, secure login protocols, and regular security audits. ACTIVITIES: APPLY WHAT YOU’VE LEARNED 11-20. For Further Research (Individual) Find an example of disintermediation that has been employed by a particular firm. Research the specific impact of the disintermediation on the organization’s operations and its customers’ experience with the firm. Evaluate both the pros and the cons of the related example of disintermediation.

Disintermediation is the removal of intermediaries from a supply chain, or “cutting out the middlemen” in connection with a transaction or a series of transactions. Instead of going through traditional distribution channels, which had some type of intermediary (such as a distributor, wholesaler, broker, or agent), companies may now deal with customers directly, for example via the Internet. Disintermediation may decrease the total cost of servicing customers and may allow the manufacturer to increase profit margins and/or reduce prices.

Using the Internet or business press, students can find examples of companies that sell directly to the consumer without intermediaries. They can assess the pros and cons of disintermediation in the company selected.

11-21. In Class, 10–25 Minutes for Teams As the one-person marketing department for a candy manufacturer (your firm makes high-quality, hand-dipped chocolates using only natural ingredients), you are considering making changes in your distribution strategy. Your products have previously been sold through a network of food brokers that call on specialty food and gift stores. But you think that perhaps it would be good for your firm to develop a corporate vertical marketing system (i.e., vertical integration). In such a plan, a number of company-owned retail outlets would be opened across the country. The president of your 11-28 Copyright © 2025 Pearson Education, Inc.

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company has asked that you present your ideas to the company executives. In a role-playing situation with one of your classmates, present your ideas to your boss, including the advantages and disadvantages of the new plan compared to the current distribution method.

As a starting point, students should review the material in the text on VMS as compared to the conventional channel method. The conventional method has many players that all have their own plans, objectives, and agendas. In a VMS system, there is cooperation, mutual objectives, and an attention to reducing costs. However, the VMS approach reduces control of any individual member. The corporate version has ownership with one major party and, therefore, requires not only knowledge as a requirement but also a sizable outlay of cash.

Could this company pull this off? Other VMS formats might be considered.

11-22. For Further Research (Individual) Assume you have been hired by the owner of a small business that manufactures special laundry detergent designed exclusively to clean the synthetic fibers in athleisure and fitness apparel. The company has the option of shipping ecommerce sales directly from its own small warehouse or using fulfillment services provided by large marketplaces like Walmart and Amazon. In the second case, the company would ship products in bulk to large fulfillment centers, where they would be held until sales via the marketplace sites. The marketplace would then complete fulfillment of the product, charging the laundry detergent manufacturer for storage, fulfillment, and distribution costs. Conduct research to identify the advantages and disadvantages of both processes. Which path do you recommend for the small business owner? Write a short paper that explains how you arrived at your decision.

Student answers will vary. Encourage students to consider factors like cost, control, customer service, and scalability. Ask them to analyze how a business’s size, growth stage, and target market impact these options.

11-23. For Further Research (Individual) Visit the website for FedEx (www.fedex.com). FedEx has positioned itself as a full-service provider of logistics solutions. After reviewing its website, answer the following questions: a. What logistics services does FedEx offer its customers? b. Who are FedEx’s major competitors? What services do they offer? c. What does FedEx say to convince prospective customers that its services are better than those of the competition?

Student answers to this question should include the following five characteristics of logistics: order processing, warehousing, materials handling, transportation, and inventory control. Students should be encouraged to include many of the concepts in this chapter on logistics in their answers.

11-24. In Class, 10–25 Minutes for Teams You are the VP of marketing for a new company that has created a robot lawn mower. Similar to the iRobot Roomba Robot Vacuum, it can mow the lawn using automation and sensors to make it easy to take care of the yardwork without breaking a sweat. Your management team is working to determine a distribution strategy.

You have been asked to write up a summary of the benefits and drawbacks for each of the 11-29 Copyright © 2025 Pearson Education, Inc.

three options for distribution: intensive, exclusive, and selective. Work with your team to comprehensively review each option.

This question could be assigned as a research paper. Students can find many companies that make their supply chain sustainable.

11-25. Creative Homework/Short Project Your friend is studying for an upcoming marketing test but doesn’t quite understand logistics. Write up a summary of the various logistics functions and devise a short multiple-choice quiz that will help him test his comprehension of the subject.

Students should review the logistics functions outlined in the chapter and then devise a multiple-choice quiz.

11-26. Creative Homework/Short Project Assume you are employed in the marketing department of a firm that makes transmissions for BMW automobiles. You are part of a buying center that is addressing several needed purchases. One is a new-task buy, one is a modified rebuy, and one is a straight rebuy. First, list a product that you imagine would fall into each of the three categories for the firm. Then, describe the steps you would think the buying center would go through in each of the three buys. Write a brief report on your ideas.

Student answers will vary. Encourage students to provide examples for each category related to BMW transmissions, such as new manufacturing technology (new task), upgrading existing machinery (modified rebuy), and routine raw material orders (straight rebuy).

Discuss the research steps and stakeholders for each buy. Highlight different roles within the buying center and how they interact in each scenario.  CONCEPTS: APPLY MARKETING METRICS Perfect order rate is a supply chain metric that measures “the percentage of orders delivered to the right place, with the right product, at the right time, in the right condition, in the right package, in the right quantity, with the right documentation, to the right customer, with the correct invoice.” In e-commerce, the perfect order rate calculation typically involves four measures: • • • •

On-time delivery rate: The percentage of orders that arrive when the customer expected them Completed shipment rate: The percentage of orders shipped with all the items the customer expected Damage-free shipping rate: The percentage of orders that arrived in good condition Correct documentation rate: The percentage of orders in which the customer received all necessary documentation including an accurate invoice

These metrics may be further refined to pinpoint specific flaws in the system. For example, a large distribution center might break down the completed shipment rate into warehouse picking accuracy and packaging accuracy. Calculating the perfect order rate is a simple matter of multiplying the individual measures together to determine the overall percentage of perfect orders.

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Chapter 11: Deliver the Goods

Consider a large e-commerce retailer with 20 regional distribution centers across the United States that uses perfect order rate to evaluate the order fulfillment performance of each center. Last year, the distribution center that serves your region had a 92 percent on-time delivery rate, a 98 percent completed shipment rate, a 97 percent damage-free shipping rate, and a 99.5 percent invoice accuracy rate.

11-27. Calculate the perfect order rate for the fulfillment process above. Interpret your result.

Perfect order rate = On-time delivery rate × Completed shipment rate × Damage-free shipping rate × Invoice accuracy rate Perfect order rate = 92% × 98% × 97% × 99.5% = 87% The results show that the company is carrying out logistics activities effectively most of the time. However, there is room for improvement, particularly in the area of on-time delivery.

11-28. Do you think the company should be satisfied with this level of performance at one of its distribution centers? Why or why not? What are some strategies management could use to increase its perfect order rate? What would be the main benefits of investing in such improvements?

The company should generally be satisfied with this level of performance. However, it would be important to compare these results to performance benchmarks set for the individual distribution center and/or to the average values of each metric across all distribution centers. Students will come up with a variety of opinions here. One strategy is to focus on the highest error rate above (“Delivered on time”) before tackling the second highest error rate (“Shipped without damage”), and so on. As for the advantages to the firm for investing in decreasing the error rates across categories, the focus of a firm and its marketing strategy should always be about continuous improvement to ensure the proper and accurate delivery of product to the consumer. In light of this, the text provides the following: When a firm does logistics planning, however, the focus also should be on the customer. In the old days when managers thought of logistics as physical distribution only, the objective was to deliver the product at the lowest cost. Today, forward-thinking firms consider the needs of the customer first. The customer’s goals become the logistics provider’s goals. And this means that when they make most logistics decisions, firms must decide on the best trade-off between low costs and high customer service. The appropriate goal is not just to deliver what the market needs at the lowest cost but rather to provide the product at the lowest cost possible as long as the firm meets delivery requirements. Although it would be nice to transport all goods quickly by air (even by drone), that is certainly not practical. But sometimes air transport is necessary to meet the needs of the customer, no matter the cost.

11-29. Is a zero error rate realistic? How close should a firm be expected to come to zero errors?

A zero error rate seems unrealistic. It is a goal that can motivate employees, however.

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CHOICES: WHAT DO YOU THINK?

11-30. Critical Thinking Many entrepreneurs choose to start a franchise business rather than “go it alone.” Do some research on franchise opportunities. Find an example in both the restaurant and the service industry to review. Do you think these franchise opportunities offer good opportunities to make money? What are the positive and negative aspects of purchasing each of the franchises you have researched? Assuming you were an entrepreneur, would you elect to invest in one, both, or neither of them? Why do you feel this way?

The easy answer to the question is that franchising must be good because so many people do it. The more sophisticated answer is that franchising is popular because the local owner can specialize in customer interaction and turn over other functional responsibilities to other members of the franchise network (i.e., product shipment and acquisition, promotion, national image, etc.).

Buying a franchise rather than starting from scratch often confers certain advantages: 1. Using the franchise name gives the merchant advertising clout, purchasing power, and name recognition.

2. The franchise provides services for the operator such as employee training, giving access to lower prices for needed materials, and helping pick a location with visibility.

There is a cost, however. Disadvantages include: 1. The owner must pay a percentage of revenue for the right to be a franchise member.

2. The business format of the franchise must be followed to the letter.

3. If the franchise gets into difficulty, the individual operators are affected.

11-31. Critical Thinking Would you purchase a durable product (such as a watch) online at a significantly lower price than the MSRP (manufacturer suggested retail price) if you knew that the retailer was not officially authorized by the product’s manufacturer to sell it? Putting ethical concerns aside for a moment, what risks would most concern you about making such a purchase, and what steps could the related retailer take to lessen those risks?

Students can have a lively discussion about the risks of online shopping. How can a shopper know if they are getting the item itself or an imitation? For example, I needed a watch strap for a Cartier Tank Watch. Many were offered online, but I couldn’t verify whether they were produced by Cartier or not. I ended up buying the watch strap at a Cartier dealer.

11-32. Critical Thinking Can a company’s reverse logistics system have a significant influence on how a consumer views the organization and its brand? Are there specific types of products for which a company’s reverse logistics system could play a more important role in contributing to a customer’s view of the organization? For those companies, what characteristics would you expect their reverse logistics systems to have in order to create high added value for a customer?

Logistics is a relevant consideration regarding product returns, recycling and material reuse, 11-32 Copyright © 2025 Pearson Education, Inc.

Chapter 11: Deliver the Goods

and waste disposal—reverse logistics. Reverse logistics becomes even more important as firms start to more seriously consider sustainability as a competitive advantage and put more effort into maximizing the efficiency of recycling to save money and the environment at the same time. There are many companies, for example, coffee companies, that boast about fairtrade products and an environmentally friendly supply chain. More and more consumers make purchases based on whether or not a product is made by a company seriously interested in protecting the environment. Reverse logistics adds value to a product from the customer’s perspective.

11-33. Critical Thinking In recent years, there has been a surge in companies adopting subscription-based models for product distribution. Some common examples include subscription boxes for cosmetics, meal kits, and even socks. Evaluate the advantages and disadvantages of this distribution approach. How does it impact customer loyalty and overall supply chain efficiency? Can you identify any additional industries where you think a subscription model would be particularly effective? Explain your answers.

Student answers will vary. Consider starting by asking students to explore the advantages and disadvantages of this approach. Highlight that subscription models can enhance customer loyalty by offering convenience and personalized experiences. However, challenges such as high customer churn rates and the complexity of managing recurring deliveries could impact supply chain efficiency. Encourage students to analyze how these models streamline inventory management and create predictable revenue streams. Also discuss potential drawbacks, including the need for advanced logistics and sophisticated customer service systems.

11-34. Ethics. Many companies are now relying on the “gig economy” for last-mile delivery services. Evaluate some of the ethical considerations surrounding companies that leverage gig workers to gain flexibility and cut costs in their distribution operations. What roles and responsibilities should companies have regarding issues such as fair compensation, worker safety, and job security in the gig economy?

Student answers will vary. Consider asking students to examine how companies gain flexibility and reduce costs through this labor model. Ask them to compare that against the potential ethical trade-offs. Encourage students to explore topics such as fair compensation, worker safety, and job security. Encourage them to consider the responsibilities of companies towards gig workers, discussing how businesses can balance cost-cutting measures with ethical practices to maintain a sustainable and responsible operation.

Facilitate a debate on potential policy measures and corporate ethics guidelines that could address these issues.

11-35. Critical Thinking Many companies are now offering same-day delivery services to meet evolving customer expectations. Explore the challenges and opportunities associated with implementing these fast delivery options. How can companies balance speed with costeffectiveness? What industries or products benefit the most from rapid delivery services?

11-33 Copyright © 2025 Pearson Education, Inc.

Student answers will vary. Asking students to consider the logistical, financial, and strategic factors companies must navigate. Encourage an exploration of how businesses can balance the need for rapid delivery with cost-effectiveness. Consider the role of technology, including optimized routes and local warehousing efficiencies. Discuss which industries or products—such as perishables, healthcare, or e-commerce—benefit most from fast delivery services.

11-36. Critical Thinking The practice of buying business products based on sealed competitive bids is popular among all types of business buyers. What are the advantages and disadvantages of this practice to buyers? What are the advantages and disadvantages to sellers? Should companies always give the business to the lowest bidder? Why or why not?

Student answers will vary. For buyers, advantages may include potentially lower prices due to competition and transparent procurement processes. Disadvantages may include the risk of selecting a supplier based solely on price, which could compromise quality or service. For sellers, sealed bids can ensure a fair chance to compete, but the process may limit negotiation opportunities. Discuss whether companies should always choose the lowest bidder by considering factors such as total cost of ownership, supplier reliability, and quality. Encourage students to consider examples where the lowest bid might not be the best choice due to long-term costs.

11-37. Ethics Many firms in developed countries such as the U.S. contract with companies in least developed countries to perform work that they used to do at home, a process called offshoring. This practice has received much criticism for a number of different reasons.

What do you think about offshoring. Is it ethical, and if so, in what ways? Who is benefiting from this practice and how? Who is being hurt by this practice and how?

Student answers will vary. Offshoring can reduce costs and increase efficiency for companies, benefiting shareholders and customers with lower prices. However, it can also lead to job losses in the home country, raising ethical concerns about economic inequality and exploitation of workers in developing countries. Encourage students to discuss who benefits (e.g., companies, shareholders, consumers) and who is harmed (e.g., domestic workers, offshored employees facing poor working conditions). Discuss potential strategies to mitigate negative impacts, such as corporate social responsibility initiatives and fair trade practices. MINIPROJECT: LEARN BY DOING You have been hired by a national drug store chain that currently has no presence in your state but plans to build between 30 and 50 stores there in the next 10 years. To support the new stores, the company plans to build one distribution center in your state. You have been asked to select the location for the distribution center. Among the factors you’ve been asked to consider are: • Average distance between the distribution center and the stores • Your state’s highway and transportation infrastructure • Environmental sustainability 11-34 Copyright © 2025 Pearson Education, Inc.

Chapter 11: Deliver the Goods

• •

Access to a workforce (the center will employ up to 300 people at peak times) Available land to support a large distribution center

11-38. Prepare a report that outlines your research and fully explains your recommendation for where to build the distribution center.

Student answers will vary. Start by asking students to focus on key factors such as minimizing the distance between the center and future stores to reduce transportation costs and improve logistics efficiency. Emphasize the importance of evaluating the state’s transportation infrastructure, including access to highways. Discuss environmental sustainability, including green building technologies, and the availability of a local workforce, which would be crucial for staffing up to 300 employees. Also, consider land availability not only for the new center, but also for potential expansions.

V. MARKETING IN ACTION CASE: REAL CHOICES AT SHEIN Summary of Case In the competitive e-commerce landscape, Shein has distinguished itself by avoiding traditional business approaches and instead leveraging technology to create a distribution and logistics model that is now catching an entire industry by surprise. This allows Shein to offer very low prices, rapidly advancing the company from a niche seller of wedding dresses to a leading fast-fashion retailer. Shein’s business model avoids large-scale forecasts, opting instead for minimal initial orders to test product viability before scaling up, contrasting with traditional retail models that often suffer from surplus or insufficient stock. However, Shein’s success raises ethical concerns, including potential human rights issues, unsafe working conditions, and significant environmental impacts. Critics also accuse Shein of promoting disposable fashion. Yet, despite these issues, retail giants like Amazon and Walmart have not significantly opposed Shein, possibly due to its slower delivery times. As Shein plans to expand in the U.S. and potentially pursue an IPO, its strategy highlights the complexity among innovative business practices, global trade dynamics, and ethical challenges.

Suggestions for Presentation This case could be assigned for various online or in-class discussion activities.

Online Suggestions Have students gather and analyze online customer reviews about Shein and its products. These can be on Shein’s site itself or third-party review sites. Have students look for patterns in customer satisfaction or dissatisfaction, particularly focusing on product quality, customer service, and delivery times.

In-Class Suggestions Organize a debate on the sustainability and ethics of fast fashion, using Shein as a case study.

Discuss the environmental and social impacts of Shein’s business model. Consider what strategies Shein could implement to mitigate these concerns without compromising its business efficiency.

Additionally, explore how Shein can maintain its market position if it is ever pressured to change its 11-35 Copyright © 2025 Pearson Education, Inc.

operational practices via regulations or shifts in consumer preferences towards more sustainable products.

Questions for Discussion 11-39. How does Shein’s distribution and logistics model differ from traditional retailers?

What can competitors learn from Shein?

Student answers will vary. Encourage students to analyze how Shein uses real-time data for inventory management and the implications of minimal initial orders. Comparing these practices with traditional forecasting and bulk ordering processes will help students to better understand operational efficiencies and potential drawbacks. Ensure that students also consider ethical standards and environmental impacts, prompting a critical evaluation of how innovative logistics can be responsibly integrated into existing business models.

11-40. How might Shein’s expansion plans in the North American market—including the opening of distribution centers and the introduction of a marketplace platform— impact its distribution and logistics?

Student answers will vary. Ask students to examine the potential effects of new distribution centers and a marketplace platform on the company’s logistics and delivery efficiency.

Encourage students to consider how reduced shipping times might enhance customer satisfaction and competitive positioning, especially against industry leaders like Walmart and Amazon. Prompt students to discuss potential challenges Shein may face, such as increased operational costs and complexities, and how these factors might influence its market strategy and consumer perception.

11-41. How does Shein’s ability to add thousands of new products daily impact its competitiveness in the fast-fashion industry? What challenges might arise from having such a high product turnover rate?

Student answers will vary. Consider asking students to explore the implications of adding thousands of new products daily on Shein’s market competitiveness. Encourage them to consider how this strategy affects Shein’s ability to quickly capture and respond to fashion trends, potentially giving it an edge over slower-moving competitors. Ask students to discuss possible challenges, such as maintaining product quality, managing a vast inventory, and ethical concerns related to fast fashion.

WEB RESOURCE https://us.shein.com

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Chapter 12: Deliver the Customer Experience

Chapter 12 Deliver the Customer Experience I. CHAPTER OVERVIEW Customer satisfaction comes from all of the customer’s experiences. Customer journey mapping identifies all of the individual touchpoints customers experience and evaluates each touchpoint.

The face of retailing is constantly evolving. From bricks-and-mortar establishments to online transactions, retailing is changing to meet the needs of consumers. Students explore the concept of wheel-of-retailing and learn how retailers are classified, including resale outlets. The promise of B2C e-commerce is explored as well as associated limitations. Unethical behavior by consumers and employees in retail contexts are noted. The marketing of services and other intangibles is discussed.

II. CHAPTER OBJECTIVES 12-1. Understand marketing’s focus on excellent customer experiences in traditional and online retailing.

12-2. Define retailing and understand how we classify traditional retailers.

12-3. Understand the marketing of services and other intangibles.

12-4. Describe business-to-consumer (B2C) e-commerce and related forms of nonstore retailing.

12-5. Understand the ways that customer experiences will continue to evolve in the future.

12-6. Understand the problems retailers face with unethical behavior by consumers and employees.

12-7. Understand how to make every interview successful.

III. CHAPTER OUTLINE

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Part 4: Deliver and Communicate the Value Proposition

p. 443

REAL PEOPLE, REAL CHOICES—HERE’S MY PROBLEM AT PEPSICO PepsiCo’s efforts to engage the audience during Super Bowl 53 in Atlanta went well. Dr. Paula Hopkins and her team wanted to be sure Super Bowl 54 in Miami gave fans a positive customer experience. Marketing programs involve creating commemorative products of special packaging for the event. Packaging must be set up in advance, must provide sufficient return on investment, and must help local communities feel connected to the campaign.

In Miami, Paula and her team wanted to connect with the Latinx identity and tropical feel.

Dr. Paula Hopkins and her team considered their options: 1. Convert all messaging to Spanish or Spanglish, deliver the first-ever pink-top Pepsi can, and add a big pink Miami to the Pepsi 12-packs to play upon a color that many people associated with the city.

2. Just sync with Pepsi’s national promotional activities and show only the Super 54 logo and NFL shield on the commemorative can.

3. The activation program for last year’s Super Bowl in Atlanta worked really well. Repeat the elements.

The vignette ends by asking the student which option he/she would choose.

p. 444

Paula and her team chose option #1.

1. THE CUSTOMER EXPERIENCE IS EVERYTHING! Retailing is the final stop on the distribution path—the process by which goods and services are sold to the consumer for their personal use.

Customer experience is important. The quality of the encounter between the customer and seller is more important than displays and sales. Online activities dominated people’s lives during the pandemic. Large shopping malls may not exist.

Customer experience (CX or CEX) describes customers’ overall assessments of their interactions with a good, service, or retail location. Everything a retailer does impacts customers’ perceptions.

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Chapter 12: Deliver the Customer Experience

p. 445

1.1.

Customer Journey Mapping

Customer journey mapping is the process of identifying customer touchpoints and tracking the experiences customers have when they interact with a brand or a store as they become aware of, consider and evaluate, and decide to purchase a product in order to improve the customer experience.

Making a customer journey map starts with specifying every touchpoint. A mapping project involves precise tracking of the experiences that customers have when they interact with a product, store, or service. It identifies pain points.

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Exhibit: Customer journey

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p. 446

2. THE PHYSICAL EXPERIENCE 2.1. Retailing: A Mixed (Shopping) Bag About one of every ten U.S. workers is employed in retail, where most retailers are small businesses. Retailing has different faces in different parts of the world.

p. 447

p. 447

2.2.

The Evolution of Retailing As the economic and sociocultural pictures change, different types of retailers emerge—and they often squeeze out older, outmoded types.

The wheel-of-retailing hypothesis states that new types of retailers begin at the entry phase where they find it easiest to enter the market with low-end strategies as they offer goods at lower prices than their competitors do. After they gain a foothold, they gradually trade up. They improve their facilities and increase the quality and assortment of merchandise. Finally, retailers move on to a high-end strategy with even higher prices, better facilities, and amenities such as parking and gift-wrapping. Upscaling results in greater investment and operating costs, so the store must raise its prices to remain profitable, which then makes it vulnerable to still newer entrants that can afford to charge lower prices. Therefore, the wheel turns.

Exhibit: Sears

Figure 12.1 Snapshot: The Wheel of Retailing

Cheaper online outlets and direct-to-consumer (D2C) retail businesses emerged post-COVID-19. p. 447

2.3 Classifying Retailers by What They Sell One of the most important strategic decisions a retailer makes is what to sell—its merchandise mix. If a store’s merchandise mix is too limited, it may not have enough potential customers, whereas if it is too broad the retailer runs the risk of being a “jack of all trades, master of none.” A product line is a set of related products offered by a retailer.

p. 448

As retailers experiment with different merchandise mixes, it is getting harder to make these direct comparisons. Combination stores offer consumers food and general merchandise in the same store. Supercenters such as Walmart Supercenters are combination stores that combine an economy supermarket with other lower-priced merchandise.

p. 449

A retailer’s merchandise assortment, or selection of products sold, has two dimensions: breadth and depth. Merchandise 12-4 Copyright © 2025 Pearson Education, Inc.

Table 12.1 Different Retailers Offer Varying Product Assortments, Levels of Service, Store Sizes, and Prices p. 447

Chapter 12: Deliver the Customer Experience

breadth, or variety, is the number of different product lines available. A narrow assortment means that shoppers will find only a limited selection of product lines. A broad assortment means there is a wide range of items.

p. 449

Merchandise depth is the variety of choices available within each specific product line. A shallow assortment means that the selection within a product category is limited. A deep assortment means that there is a great deal of selection within a product category.

2.4 Classifying Retailers by Level of Service Retailers differ in the level of service they provide to consumers and realize there is a tradeoff between service and low prices.

p. 450

When customers shop at self-service retailers, they make their product selection without any assistance, they often must bring their own bags or containers to carry their purchases, and they may even handle the checkout process with self-service scanners.

Contrast that experience to visiting a full-service retailer. Many of us prefer to shop at major department stores like Bloomingdale’s and specialty stores like Barnes & Noble, which provide supporting services such as gift wrapping and offer trained sales associates who can help us select that perfect gift.

Limited-service retailers fall somewhere between self-service and full-service retailers.

Vending machines and other no-service retailers involve minimal space and personnel.

p. 450

2.5 Major Brick-and-Mortar Retailing Formats Table 12.1 provides a list of retailer types and their characteristics.

p. 450

2.5.1 Retail Formats That Continue to Thrive 2.5.1.1 Convenience Stores Convenience stores carry a limited number of frequently purchased items and cater to consumers willing to pay a premium for the ease of buying staple items close to home.

p. 450

2.5.1.2 Limited-Assortment Supermarkets Limited-assortment supermarkets, or extreme-value food retailers, while carrying much the same types of products as the

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Figure 12.2 Snapshot: Classification of Book Retailers

by Merchandise Selection

Part 4: Deliver and Communicate the Value Proposition

larger supermarkets, carry only around 1,500 SKUs, such as German limited-assortment supermarkets Aldi and Lidl.

p. 451

p. 451

p. 451

2.5.1.3 Supermarkets Supermarkets are food stores that carry a wide selection of edibles and related products. The lines between them and other types of retailers are blurring.

2.5.1.4 Specialty Stores Specialty stores do not sell a lot of product lines, but they offer a Exhibit: good selection of brands in the lines they sell.

Specialty stores Specialty stores can tailor their assortment to the specific needs of a targeted consumer, and they can offer a high level of knowledgeable service.

2.5.1.5 Concept Stores Concept stores use ideas from galleries, magazines, and the hospitality industry to sell the idea of a lifestyle. They create spaces where consumers want to hang out, meet with friends, sit, and work. Concept stores get refreshed periodically to encourage frequent visits by customers.

2.5.1.6 Flash Retailing, or Pop-Up Stores Flash retailing, or pop-up stores and pop-up retailing, are short-term retail experiences that generate interest, create buzz, and allow companies to test concepts in different locations at a low cost.

p. 451 2.5.1.7 Recommerce (Resale Stores) The U.S. recommerce industry includes resale stores like thrift stores, consignment stores, pawn shops, and antique stores, which have grown in popularity with interest in sustainability and upcycling. p. 452 2.5.1.8 Dollar and Variety Stores Dollar and variety stores originated as the five-and-dime or dime stores that began in the late 1800s. In these early variety stores such as the iconic Woolworth’s, all items sold for a nickel or a dime. Today’s variety stores include Dollar General, Family Dollar, and Dollar Tree. p. 452 2.5.1.9 Discount Stores General merchandise discount stores, such as Target, Kmart, and Walmart, offer a broad assortment of items at low prices and with minimal service and are the dominant outlet for many products.

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Exhibit: Kohl’s

Chapter 12: Deliver the Customer Experience

2.5.1.10 Off-Price Retailers Off-price retailers obtain surplus merchandise from manufacturers and offer brand name, fashion-oriented goods at low prices. p. 452 2.5.1.11 Warehouse Clubs Warehouse clubs like Costco and BJ’s are a newer version of the discount store. These establishments do not offer any of the amenities of a full-service store. Customers buy many of the products in larger-than-normal packages and quantities.

p. 453

2.5.2 Retail Formats That Are Struggling 2.5.2.1 Department Stores Department stores sell a broad range of items and offer a deep selection organized into different sections of the store. In the United States, department stores have struggled in recent years. In other parts of the world, they are thriving. Historically, department stores have sold both soft goods (nondurables such as clothing, cosmetics, and bedding) and hard goods (durable goods such as appliances, furniture, and electronics).

p. 453

Bifurcated retailing is the decline of middle-of-the-market retailing due to the increasingly popular low-end, discount stores and the increasing popularity of upscale specialty retailing.

p. 453

2.5.2.2 Leased Departments Leased departments are spaces or departments within a larger retail store that an outside firm rents (e.g., photography studios, pet departments, banks).

2.5.2.3 Factory Outlets and Outlet Stores A manufacturer owns the factory outlet store. Some factory outlets enable the manufacturer to sell defective merchandise or excess inventory. Other factory outlets are simply another distribution channel. An outlet store is a retailer-owned store where excess merchandise or special buys from vendors, not offered in the regular retail stores, is available at lower prices.

2.5.2.4 Category Killers A category killer or category specialist is a very large specialty store that carries a vast selection of products in its category. Some examples are Home Depot, Best Buy, and Staples.

2.5.2.5 Hypermarkets Hypermarkets combine the characteristics of warehouse stores and supermarkets. They are several times larger than other stores.

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Part 4: Deliver and Communicate the Value Proposition

2.6 Disruption in Retail The retail industry has faced a number of highly disruptive forces in the last decade. That leaves many with the question of what they will face in the future. Here are some predictions and some suggestions for retailers.

2.6.1 No Limits!

The internet has been an equalizing force in retail 2.6.2 We No Longer Go Online—We Live Online Smartphones make information accessible from anywhere.

2.6.3 The Customer Is in Charge No customer wants mediocrity. Instead, they want the best and retailers much deliver or lose customers.

2.6.4 Apocalypse? No Some retailers are going bankrupt, but many new ones are emerging. Retailers that want to survive must adapt.

p. 455

p. 455

3. THE SERVICE EXPERIENCE In this section, we’ll consider some of the challenges and opportunities that face marketers whose primary offerings are intangiFigure 12.3 Snapshot: bles: services and other experience-based products that we can’t touch. Services are one type of intangible that also happens to be Characteristic the fastest-growing sector in our economy. s of ServicesTabl e 12.2 3.1 Marketing Services Marketing The service industry includes many consumer-oriented services, Strategies for ranging from dry cleaning to body piercing. It also encompasses a Service vast number of services directed toward organizations. Some of Organizations the more common business services include vehicle leasing, inforExhibit: mation technology services, insurance, security, legal advice, food Retail store services, cleaning, and maintenance. employee 3.1.1 Characteristics of Services Services have four unique characteristics versus products.

1.

Intangibility—Marketing of services might be called “marketing the product that isn’t there.” Services do not assume a tangible form. Intangibility means customers can’t see, touch, or smell good service.

2. Perishability—This term refers to the characteristic of a service that makes it impossible to store for later sale or 12-8 Copyright © 2025 Pearson Education, Inc.

Chapter 12: Deliver the Customer Experience

consumption. Capacity management is the process by which organizations adjust their services in an attempt to match supply with demand.

3. Variability—Variability means that over time, even the same service that the same individual performs for the same customer changes—even if only in minor ways.

4. Inseparability—This means that it is impossible to divide the production of a service from the consumption of that service. p. 456

p. 456

3.2 The Service Encounter The central role that employees play in making or breaking a service underscores the importance of the service encounter, or the interaction between the customer and the service provider. The most expertly cooked meal is just plain mush if a surly or incompetent server brings it to the table.

To minimize the potentially negative effects of bad service encounters and to save on labor costs, some service businesses turn to disintermediation. With disintermediation, firms remove the “middleman” from the service encounter, thus eliminating the need for customers to interact with people at all.

Because services are intangible, marketers have to be mindful of the physical evidence that goes along with them. An important part of this physical evidence is the servicescape: the environment in which the service is delivered and where the firm and the customer interact.

3.3 How We Provide Quality Service If a service experience isn’t positive, it can quickly turn into a disservice with nasty consequences. Quality service ensures that customers are satisfied with what they have paid for.

p. 458

In order to consistently provide high-quality service, many service organizations use the SERVQUAL scale, a popular instrument to measure customers’ perceptions of service quality. SERVQUAL identifies five dimensions, or components, of service quality: ■ Tangibles: The physical evidence of service quality, such as the physical facilities and equipment, professional appearance of personnel, and look and functionality of the website.

■ Reliability: The ability to dependably and accurately provide what was promised to the customer.

■ Responsiveness: The willingness to help customers and provide prompt service.

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Table 12.3: Strategies to Sell a Celebrity

Part 4: Deliver and Communicate the Value Proposition

■ Assurance: The knowledge and courtesy of employees that conveys trust and confidence.

■ Empathy: The degree to which the service provider genuinely cares about customers and takes the customer perspective into account when delivering service.

Figure 12.4 Snapshot: Factors That Shape the Future of Services

The SERVQUAL scale is reliable and valid and service businesses usually administer the scale in a survey format through a written, online, or phone questionnaire to customers.

3.4 Marketing People, Places, and Ideas By now, you understand that services are intangibles that marketers work hard to sell. But as we said previously, services are not the only intangibles that organizations need to market. Intangibles such as people, places, and ideas often need to be “sold” by someone and “bought” by someone else. Let’s consider how marketing is relevant to each of these.

3.4.1 Marketing People People marketing is especially important in careers that involve public opinion. Marketers use the following strategies to market people: • Pure selling approach: An agent pitches client’s qualifications to potential buyers.

• Product involvement approach: An agent works with a client to increase their value.

• Market fulfillment approach: An agent scans the market to identify unmet needs and then finds the right person to fulfill those needs.

3.4.2 Marketing Places Place marketing strategies regard a city, state, country, or other locale as a brand. Marketers use the marketing mix to create a suitable identity so that consumers choose this brand over competing destinations.

3.4.3 Marketing Ideas Idea marketing refers to strategies that seek to gain market share for a concept, philosophy, belief, or issue. Even religious organizations market ideas about faith and desirable behavior when they adopt secular marketing techniques to attract young people.

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Table 12.4 Benefits and Limitations of ECommerce

Exhibit: Interactive virtual experience

Chapter 12: Deliver the Customer Experience

As we look into the future, we recognize that service industries will continue to play a key role in the growth of both the U.S. and the global economy. Some trends that impact services include: • Changing demographics • Technology • Globalization

4. THE DIGITAL EXPERIENCE Nonstore retailing is any method a firm uses to complete an exchange that does not require a customer to visit a store. The following is a discussion of two other types of nonstore retailing: direct selling and automatic vending.

4.1 B2C E-Commerce Business-to-consumer (B2C) e-commerce is the online exchange between companies and individual consumers.

Exhibit: Smart Mall

The COVID-19 pandemic made individuals more comfortable with purchasing online and using their smartphones to make mcommerce purchases.

Digitally influenced purchases occur when consumers do online research before making a product purchase in a traditional store.

4.2 Benefits of B2C E-Commerce From the consumer’s perspective, electronic marketing increases convenience as it breaks down many of the barriers time and location cause.

For some consumers, online shopping provides an additional benefit because it fulfills their experiential needs; that is, their desire to shop for fun. Consumers who are collectors or who enjoy hobbies are most likely to be experiential shoppers.

Virtual experiential marketing is an online marketing strategy that uses enhancements—including colors, graphics, layout and design, interactive videos, contests, games, and giveaways—to engage experiential shoppers online.

Marketers realize equally important benefits from e-commerce.

Because an organization can reach many consumers via electronic commerce, it is possible to develop very specialized businesses that could not be profitable if limited by geographic constraints.

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Exhibit: Bass Pro Shops

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The Internet provides an excellent opportunity to bring merchants with excess merchandise and bargain-hunting consumers together.

Distressed inventory is a term used to indicate retailer inventory that may not sell and is sold to online liquidators.

One of the biggest advantages of e-commerce is that it is easy to get price information.

E-commerce also allows businesses to reduce costs. Compared to traditional bricks-and-mortar retailers, e-tailers’ costs are minimal—no expensive mall sites to maintain and no sales associates to pay.

4.3 Limitations of B2C E-Commerce One drawback is that customers must wait a few days to receive most products. Consumers cannot touch and feel information before buying many products.

Shopping cart abandonment occurs when e-commerce customers leave an e-commerce site with unpurchased items in their cart.

Developing countries with primarily cash economies pose another obstacle to the success of B2C e-commerce. Because few consumers use credit cards, they cannot easily pay for items they purchase over the Internet. For consumers in these countries there are a growing number of alternatives for safely paying for online purchases.

As major marketers beef up their presence on the web, they worry that inventory they sell online will cannibalize their store sales.

Physical stores will trend toward destination retail where consumers visit retailers for entertainment and the total experience. Bass Pro Shops Mega Outdoor Stores are an example with massive aquariums and exhibits in the stores. p. 465

5. THE PHYSICAL EXPERIENCE: WHAT’S “IN STORE” FOR THE FUTURE? In response to evolving consumer preferences, many businesses are swiftly adapting their strategies to create phygital experiences that seamlessly blend digital methods with traditional in-person activities to create an integrated customer experience.

p. 465

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Several factors motivate innovative merchants to reinvent the way they do business: the economic environment, changing demographics, consumer preferences, technology, and globalization.

5.1 Economic Evolution The economic downturn that began in 2007 resulted in less discretionary income. Retail sales, including the all-important Christmas sales, fell in nearly all retail segments.

p. 465

p. 466

In 2020, the COVID-19 pandemic changed the economic environment as state and local governments required consumers to stay at home to limit the spread of the virus. The world and the U.S. faced economic uncertainties.

5.2 Customer Evolution Some of the ways changing demographics are altering the face of retailing include: • Retailers can no longer afford to stand by and assume that their customer base is the same as it has always been.

• As more time-challenged consumers (especially women) are involved in the workforce, they demand greater convenience.

• During the COVID-19 pandemic, consumers looked for hygienic experiences.

• Larger companies must tailor their strategies to the cultural makeup of specific areas.

• A change in consumer preferences has led retailer to develop creative experiences for experiential shoppers.

They might choose to practice experiential merchandising, a tactic to convert shopping from a passive activity into a more interactive one by engaging the customer in a participatory experience in the store.

Retailtainment is all about marketing strategies that enhance the shopping experience.

A destination retailer is a firm that consumers view as distinctive enough to become loyal to it. Consumers go out of their way to shop there.

p. 467

Exhibit: PETA.org p. 408

5.3 Technological Evolution Technology is disrupting the way retailers do business.

• Advanced electronic point-of-sale (POS) systems.

These devices contain computer brains that collect sales data and connect directly into the store’s inventory-control system. Stores may use POS systems to create perpetual 12-13 Copyright © 2025 Pearson Education, Inc.

Exhibit: The Avengers S.T.A.T.I.O.N

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inventory unit control systems that keep a running total on sales, returns, transfers to other stores, etc. This technology allows stores to develop computerized automatic reordering systems that are automatically activated with inventories reach a certain reorder level. p. 467

p. 467

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•

Proximity marketing (also known as beacon marketing) is a retail marketing strategy in which beacon devices are placed strategically throughout a store and emit a Bluetooth signal to communicate with shoppers’ smartphones as they browse the aisles of the store.

•

The store of the future will use RFID tags (and other technology) to assist the shopper in ways we haven’t even thought of.

•

Digital wallets refer to the use of Bluetooth technology that connects with customer smartphones and allows customers to pay for items without cash or even swiping a credit card.

•

Omnichannel (omni-channel) marketing is a retail strategy that provides a seamless shopping experience, whether the customer is shopping online from a desktop or mobile device, by telephone, or in a brick-and-mortar store.

Technology has also given retailers: • Extended reality (XR) provides shoppers with the opportunity to browse merchandise and try them on.

• Recommendation engines have access to the customer’s former shopping behavior in order to make a recommendation for future purposes.

• Retailers use order fulfillment automation, or autonomous mobile robots (AMR) in warehouses to fulfill customers’ orders.

• Face recognition technology provides retailers with the opportunity to more successfully fight shoplifting and retail crime.

• Internet of Things (IoT) and smart equipment is predicted to transform the shopping experience by providing customers with personalization and information for decision making.

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Exhibit: Smart mirrors

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6. ETHICAL CONSIDERATIONS IN THE CUSTOMER EXPERIENCE

p. 468

6.1 Dishonest Behaviors Retailers must deal with ethical problems that involve both their customers and their employees. Losses due to shrinkage are a growing problem. Shrinkage is the term retailers use to describe stock losses due to shoplifting, employee theft, and damage to merchandise.

6.1.1 6.1.2 6.1.1 Shoplifting Shoplifting is an organized criminal activity. Gangs that commit organized retail crime (ORC) use store floor plans and foillined bags to evade security sensors and get away with thousands of dollars in goods in a day. Individuals who facilitate organized retail crime by stealing the merchandise are boosters. Fencers are individuals who facilitate organized retail crime by selling the merchandise to consumers or businesses. Diverters are individuals who facilitate organized retail crime by selling the p. 468 merchandise back to retailers.

The NRF survey found an increase in e-fencing. The deep Web refers to places on the Web that you can’t access with most search engines and that provide a means for criminals to connect to buy and sell stolen or illegal items.

6.1.3 Employee Theft A second major source of shrinkage in retail stores is employee theft of both merchandise and cash. Employee theft accounted for 30 percent of shrinkage in 2016.

p. 469

6.1.4 Retail Return Fraud Retail return fraud occurs when someone returns an item that they did not purchase—almost always a stolen item—for a refund.

The NRF estimates that customers return as much as 11 percent of total retail sales each year and more than 10 percent of those returns are fraudulent.

6.1.4 Retail Borrowing The consumer practice of purchasing a product with the intent to return the nondefective merchandise for a refund after it has fulfilled the purpose for which it was purchased is retail borrowing.

6.2 Ethical Treatment of Customers 12-15 Copyright © 2025 Pearson Education, Inc.

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Customer profiling is the act of tailoring the level of customer service based on a customer’s perceived ability to pay.

p. 469

Critics argue retailers have an obligation not to sell products to customers if the products are harmful.

p. 469

6.3 Other Ethical Issues in B2C and C2C Retailing Deceptive posting of items for sale on C2C retailing sites is a challenge.

Intellectual property violations may be due to ignorance or may be deliberate.

Breaches in information security is an ethical issue in ecommerce. Cybercriminals hack companies’ computers and gather the information.

Misrepresented product quality occurs because you can’t view or touch an e-commerce product.

Vendor compliance violations occur when individuals sell brands in avenues that are not in compliance with the vendor.

Fraud can be a far more serious problem with e-commerce sites.

Price gouging is all too often seen on C2C e-commerce.

6.4 Fair Trade: Retailing and Global Social Responsibility Marketing organizations, including retailers, are concerned about their social bottom line. Sometimes you will see the phrase “fair trade good,” “fair trade certified,” or something similar on a product label.

.

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7. BRAND YOU: EVALUATING AND FINALIZING YOUR OFFER 7.1 Salary Discussions Know what you are worth and delay salary discussions as long as possible.

7.1.1 How to Know What You’re Worth Calculate your market, consider your preparation and experiences, and have a minimum number in mind.

7.1.2 Why Should You Delay Salary Discussions?

Present your features and benefits to make sure the employer is sold on you before you bring up price. Regardless of the time or place of the offer, don’t accept immediately.

7.2 Evaluating the Offer Take benefits that are offered into account. Health and life insurance are important and expensive. Vacation, sick leave, personal holidays, time off, health insurance, life insurance, the 401(k) or pension plan, stock options (ESOPs), signing bonus, childcare/elder care assistance, tuition reimbursement, and relocation expenses are all considerations.

7.3 But Is It the Right Offer for YOU? Determine the value of the job offer and the pros and cons of the offer or offers. Salary should not always be the deciding factor.

Consider distance and commute time, option to work remotely, work environment, people with whom and for whom you will work, culture of the company, dress code, employee turnover, opportunity for personal development and career advancement, job function, social responsibility of the company, community involvement of the company, reputation of the company, stability of the company, travel requirements/opportunity, and relocation requirements/opportunity.

7.4 Negotiating an Offer You should not officially accept the offer until after you negotiate.

Employers will not withdraw an offer if you counteroffer. You can negotiate for vacation time, medical insurance, health care insurance premium waivers, signing bonus, performance bonus, and/or stock options.

7.5 Accepting the Offer Recap the final offer and ask for an offer letter. It is an agreement of the terms of the offer.

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7.5.1 Offer Letter An offer letter is standard for internships and full-time positions.

Carefully review the letter to ensure it has all of the elements to which you agreed.

7.5.2 A Personal Touch Send a handwritten thank-you note to everyone with whom you interviewed.

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Here’s My Choice……

Paula went with Option 1 and focused on Miami’s unique demographics and culture. Her team created a special pink-top Aluminitek can with a unique shape and included the Super Bowl logo and the word Miami written on pink script on the front. PepsiCo’s delivery trucks were inscribed with the Spanish words Celebremos Juntos (“Let’s Celebrate Together”), and employees got special hats to wear for the occasion. A lot of planning went into creating and scheduling events. Even though the game was in January 2020, the work started way back in February 2019 to create awareness of the campaign and excite stakeholders, including retailers that would be carrying the special cans.

Exhibit: The Super Bowl package

IV. END-OF-CHAPTER ANSWER GUIDE CHAPTER QUESTIONS AND ACTIVITIES  CONCEPTS: TEST YOUR KNOWLEDGE 12-1. What is CX? Why is it such an important part of retailing? Explain how companies measure CX. Customer experience (CX or CEX) describes customers’ overall assessments of their interactions with a good, service, or retail location. CX is important in retailing because it encompasses every interaction a customer has with a brand, influencing overall satisfaction and loyalty. A seamless and enjoyable CX across all touchpoints, whether via e-commerce or in-store retail, can make a brand stand out among competitors. Marketers might use customer journey mapping to measure CX. 12-2. Describe customer journey mapping and list the various steps involved in this process.

Customer journey mapping is a process used to identify and understand the different touchpoints where customers interact with a brand, product, or service. The goal is to improve the overall customer experience by identifying pain points and opportunities for enhancement. The steps involved in customer journey mapping include: 12-19 Copyright © 2025 Pearson Education, Inc.

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1. Identifying the buyer persona, which helps in understanding the target customer 2. Determining the customer’s goals and what they hope to achieve in their interactions 3. Mapping out all potential customer touchpoints across different channels 4. Identifying any pain points customers experience at these touchpoints 5. Prioritizing and addressing these pain points to improve the customer experience 12-3. Describe experiential merchandising, experiential shopping, destination retailing, and omnichannel marketing.

Experiential merchandising is a tactic whose intent is to convert shopping from a passive activity into a more interactive one, by better engaging the customer. Experiential shoppers regard shopping as entertainment. When retail experience includes surprise, excitement, and a unique experience, experiential shoppers are more likely to make impulsive purchase decisions. Destination retailing refers to a store that consumers view as distinctive enough to go out of their way to shop there. Omnichannel marketing is a retail strategy that provides a seamless shopping experience, whether the customer is shopping online from a desktop or mobile device, by telephone, or in a brick-and-mortar store.

12-4. What is beacon marketing? What are digital wallets?

Beacon marketing is a retail marketing strategy in which beacon devices are placed strategically throughout a store and emit a Bluetooth signal to communicate with shoppers’ smartphones as they browse the aisles of the store.

Digital wallets refer to the use of Bluetooth technology that connects with customer smartphones and allows customers to pay for items without cash or even swiping a credit card.

12-5. Explain retail store shrinkage and the ways shrinkage normally occurs. What is organized retail crime and retail return fraud? What are fencers, boosters and diverters? What is “sweethearting”? What is retail borrowing? What are some of the ethical issues in retailers’ treatment of consumers?

Shrinkage is the term retailers use to describe losses due to shoplifting, employee theft, and damage to merchandise. Shrinkage cost retailers $112.1 billion in 2022. Boosters steal merchandise; fencers sell it and resell it to diverters, who sell stolen products back to retailers. “Sweethearting” is an employee practice in which a cashier consciously undercharges, gives a cash refund, or allows a friend to walk away without paying for items. Sometimes a dishonest employee simply carries merchandise out the back door to a friend’s waiting car. Retail borrowing is the consumer practice of purchasing a product with the intent to return the nondefective merchandise for a refund after it has fulfilled the purpose for which it was purchased.

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On the other side of the retail ethics issue is how retailers and their employees treat customers. Although not providing equal access to consumers of different ethnic groups is illegal, behavior that discourages customers who appear economically disadvantaged or socially unacceptable is not.

12-6. What are concept stores? What is recommerce? What is flash retailing?

Concept stores seek to sell a lifestyle to a particular target audience through the use of customer interaction, discovery, and experience.

Recommerce includes resellers like consignment shops, antique stores, and online auctions.

Flash retailing or pop-up stores are often used for seasonal products or to try something new.

12-7. Distinguish the differences among merchandise assortment, merchandise breadth, and merchandise depth.

Merchandise assortment is the range of products that a store offers. It includes the overall categories of items available for purchase.

Merchandise breadth is the number of different product lines that a store offers. A store with a wide breadth offers many different types of product lines.

Merchandise depth is the variety of choices available within each product line. A deep assortment offers many options in a particular product category, such as different brands and models of a single type of product.

12-8. What is B2C e-commerce? What is m-commerce? What are some benefits of B2C ecommerce for consumers and for marketers? What are the limitations of B2C ecommerce? What are some ethical problems B2C and C2C retailers face?

Business-to-consumer (B2C) e-commerce is the online exchange between companies and individual consumers. M-commerce refers to promotional and other e-commerce activities transmitted over mobile phones and other mobile devices, such as smartphones and tablets.

Benefits of B2C e-commerce include: • E-commerce allows consumers and marketers to easily find and make exchanges in a global marketplace.

• From a consumer’s perspective, electronic marketing has increased convenience by breaking down the barriers caused by time and location.

• For some consumers, the Internet fulfills experiential needs.

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• • • •

Marketers are able to reach a large number of consumers cheaply via the Internet.

There are no geographic constraints.

Marketers can develop very specialized businesses.

One of the biggest advantages is that e-commerce allows the consumer to get price information.

For some companies, e-commerce allows for almost instantaneous delivery.

Limitations of B2C e-commerce include: • Consumers still may have to wait several days before receiving merchandise.

• Some websites are poorly designed, confusing, and irritating.

• Security is a major concern.

• Consumers are concerned about Internet fraud.

• There is an inability to “touch and feel” products.

• There is concern that e-commerce sales (and inventory requirements) only cannibalize existing store sales.

• If a country has a cash economy, it has a difficult time converting to e-commerce activities.

Digitally influenced purchases occur when consumers do online research before making a product purchase in a traditional store.

12-9 What is shrinkage? List several of the ways in which it can occur.

Shrinkage in retail refers to the loss of inventory. Shrinkage represents the difference between recorded inventory and actual inventory. Ways that shrinkage can occur include: • • • •

Shoplifting by customers Employee theft of merchandise Errors in inventory management or paperwork Vendor fraud or errors in shipping and receiving

12-10. What are intangibles? How do basic marketing concepts apply to the marketing of intangibles?

Intangibles are experience-based products that cannot be touched. The basic marketing concept applies to many types of products, including those we cannot touch. The concept of identifying needs and wants and developing goods/services that meet those needs and wants is just as crucial for intangibles as it is for tangible goods. Branding is also important when marketing intangibles.

12-11. What is a service? What are the important characteristics of services that make them different from goods? What are some ways marketers practice capacity management for services?

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Services are products that are intangible and that are exchanged directly from producer to customer. Generally, services are acts that accomplish some goal. They may be directed either toward people or toward an object or possession. Important service characteristics include (1) intangibility (they cannot be seen, touched, or smelled); (2) perishability (they cannot be stored); (3) variability (they are never exactly the same); and (4) inseparability from the producer (most services are produced, sold, and consumed at the same time).

Goods are tangible; examples include food or clothing, raw materials, tools, and machinery. Capacity management is the process by which organizations adjust their services in an attempt to match supply with demand. This strategy may mean adjusting the service, or it may mean adjusting the price of the service.

12-12 What is the SERVQUAL scale? Identify the factors that it measures.

The SERVQUAL scale is a tool used to evaluate the quality of service provided by a company. It measures five key dimensions of service quality: 1. Tangibles: The appearance of physical facilities, equipment, personnel, and communication materials 2. Reliability: The ability to perform the promised service dependably and accurately 3. Responsiveness: The willingness to help customers and provide prompt service 4. Assurance: The knowledge and courtesy of employees and their ability to convey trust and confidence 5. Empathy: The caring, individualized attention the firm provides to its customers 12-13. What do we mean by marketing people? Marketing places? Marketing ideas?

People are products and are marketed as such. A number of people hire personal image consultants to devise a marketing strategy for them; others undergo plastic surgery, physical conditioning, or cosmetic makeovers to improve their “market position” or “sell” themselves.

Place marketing strategies regard a city, state, country, or other locale as a brand and attempt to position this location so that consumers choose to visit.

Idea marketing is about gaining market share for a concept, philosophy, belief, or issue. ACTIVITIES: APPLY WHAT YOU’VE LEARNED 12-14. Creative Homework This activity requires that you go to one of the C2C e-commerce sites, such as eBay, Etsy, or Craigslist. Search the following categories: • Hair-care products such as hair color, shampoos, conditioners, and hair thickeners • Vintage and antique tablecloths • Antique furniture

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Your search is for items that you find suspicious, that may be counterfeit, that may have been sold without permission of the distributor, that are overpriced, or that in some other way are suspicious. Present the results of your study to your class.

Students can share their ideas for merchandising a product to provide an experience for customers.

12-15. In Class, 10–25 Minutes for Individuals You have been hired as a consultant to help revitalize a traditional, indoor shopping mall that currently has a lot of empty storefronts.

Your client—the mall owner—has asked you to help develop a plan that mixes traditional retailers with nontraditional tenants in an attempt to turn the mall into more of an experience destination. Identify some of the nontraditional tenants you would seek to complement the traditional retail stores. What advice would you give to the owners/managers of the existing retail stores as the mall begins this transformation?

Write a two- to three-sentence positioning statement that can be used to sell the transformed mall to consumers.

Student answers will vary. Encourage students to think about blending traditional retailers with innovative, experiential tenants. Explore how these elements can synergize to attract diverse crowds and enhance the mall’s overall appeal. Discuss adapting strategies for existing retailers to leverage this increased traffic. Consider asking students to create a new positioning statement that captures the mall’s transformed identity, aiming to resonate with a broader consumer base and reflect a dynamic shopping destination.

12-16. Creative Homework/Short Project In many areas, traditional supermarkets are experiencing increased competition from the limited assortment supermarkets, also called extreme value food retailers, such as German chains Aldi and Lidl. Develop a list of products that includes at least two items from the meat, dairy, produce, cleaning, paper, and snack categories. Visit a traditional supermarket and an extreme value food retailer.

Make notes on the price, sizes, variety available, and location in the store for each product in both stores. Analyze your notes and prepare a presentation that identifies differences in the two types of stores and the advantages and disadvantages for shoppers in both.

This exercise can be used as an out-of-class project to be done in small groups of students.

12-17. In Class, 10–25 Minutes for Teams Once viewed as irrelevant outliers in the retail landscape, secondhand apparel and thrift stores have emerged as a $53 billion industry in the United States, with 1.4 billion secondhand apparel items sold in 2021. Much of this growth comes from Gen Z customers, who prefer secondhand apparel due to its lower cost, minimized environmental footprint, and unique offerings. However, many secondhand and thrift stores still suffer from decades-old stereotypes as destinations exclusively for lower-income consumers. As a team, develop a brief retail concept for a secondhand apparel store in your town. Select and justify an ideal location for your store. Identify your primary competitors and ways in which

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Chapter 12: Deliver the Customer Experience you will position your brand to stand out. What are some ways in which you can use retailtainment to overcome challenges currently facing traditional retail stores?

Student answers will vary. Guide students through understanding the appeal of secondhand apparel to Gen Z, focusing on the environmental benefits and economic advantages. Discuss strategies to transform outdated perceptions of thrift stores by selecting strategic locations and incorporating innovative marketing techniques.

Encourage students to consider competitors and how to stand out by integrating retailtainment elements.

12-18. In Class, 10–25 Minutes for Teams You are currently a customer for a college education, a very expensive service product. You know that a service organization can create a competitive advantage by focusing on how the service is delivered after it has been purchased—making sure the service is efficiently and comfortably delivered to the customer. Develop a list of recommendations for your school for improving the delivery of its service. Consider both classroom and non-classroom aspects of the educational product.

Before beginning this exercise, students should review chapter material on the physical and social aspects of the service encounter. Some ideas to get students started include examining contact and admission services, registration processes, graduation or exit processes, classrooms, timing of classes, and so forth. (Answers to these will vary depending upon the school.) In addition, extra services such as social, dorms, job placement, career counseling, and psychological and trauma services might all be included in the student’s assessment.

12-19. Creative Homework/Short Project Assume you are working as an intern for the city or town where your college is located. You have been asked to prepare a marketing plan with the objective of making the city/town an important part of the overall college experience for potential students. First, list the special problems and challenges associated with marketing a place rather than a physical product. Then, outline your ideas for each of the four Ps. Place marketing refers to strategies regarding a city, state, country, or other locale as a brand. Marketers use the marketing mix to create a suitable identity so that consumers choose this brand over competing destinations when they plan their travel. Because of the huge amount of money tourism generates, the competition to attract visitors is fierce.

Every town or city has an economic development office charged with luring new businesses or residents. Students can develop strategies to market the city/town in which their college is located. They can discuss how the surrounding area is part of the overall college experience. For example, many students who like to hike and ski attend colleges in Colorado because of its outdoor opportunities.

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CONCEPTS: APPLY MARKETING METRICS Inventory management is an important aspect of retail strategy. Retail managers need to know when it is time to reorder and how much to order at a time.

As consumers buy a product day after day, the inventory level declines. The first question for retailers is how low they should allow the inventory level to decline before they place an order for more merchandise. A metric called reorder point identifies the inventory level in units that should trigger a reorder.

The simplest formula to determine the reorder point is the following: Reorder point = Daily usage rate × Lead time Usage rate is basically how quickly the inventory sells, and lead time is the length of time from reorder to delivery. Keep in mind that this formula assumes that demand and lead time are constant, but if consumer demand increases (or a shipment is delayed), you take a chance of losing sales because the product is out of stock. Thus, retailers tend to keep a little extra stock on hand—called “safety stock”—to guard against stockouts. Adding in safety stock, the formula becomes the following: Reorder point = (Daily usage rate × Lead time) + Safety stock Determining how much to order each time you reorder generally involves balancing the cost of placing an order with the cost of carrying (holding) inventory. Holding costs may include storage costs, damage/breakage, insurance, and the opportunity cost of tying up funds in inventory. You may recall learning about the economic order quantity (EOQ) calculation in a microeconomics course as the square root of 2 times annual demand times order cost divided by holding cost: EOQ = [ (2 x Annual demand x Order cost) / Holding cost]1/2 On The Beach sells an average of 10 boogie boards a day to tourists and locals. It typically takes 8 days to place an order and receive a new shipment of boogie boards from the supplier in China.

To be prepared for the possibility of extra sales or a late shipment, On The Beach would like to have safety stock equal to 7 days of sales. It costs $25 to place an order for boogie boards, and management estimates that the cost of storing a boogie board for one year is $3.

12-20. What is the reorder point for boogie boards for On The Beach? Assuming they operate 365 days per year, how many boogie boards should On The Beach order each time it reaches the reorder point? (Hint: If you do a web search for “economic order quantity calculator” you’ll find multiple options for easily calculating the EOQ for boogie boards using the information provided.)

Safety stock = 10 units × 7 days = 70 units.

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Reorder point = (10 × 8) + 70 = 150 units.

Annual demand = 10 units per day × 365 days = 3,650 units.

EOQ = [ (2 × 3,650 × 25) / 3 ]½ = 246.6 = 247 units. ►CHOICES: WHAT DO YOU THINK? 12-21. Critical Thinking We said at the beginning of this chapter that firms must focus on providing the customer with extraordinary CX, or customer experience. What are some suggestions for how the following retailers could provide an extraordinary CX? a. A coffee shop b. A high-end specialty apparel store c. An automobile dealer Answers will vary. Students should consider customer journey mapping, and how evaluating customers’ experiences at each touch point can lead to delight.

12-22. Ethics A teenage customer is returning a semi-formal dress a week after formal, and the clerk has noticed that it smells of perfume. Many retailers struggle to create return policies that minimize retail borrowing while still being flexible enough to provide peace of mind among customers. Consider the following types of retail stores and develop a return policy for each: a. A fan apparel shop that sells clothing and memorabilia for popular sports teams b. A local bakery that sells breads, pastries, and desserts c. A home appliance retailer that sells items such as washers, dryers, and refrigerators d. A local hardware store e. A dollar store that only sells goods under $10 Student answers will vary. Consider facilitating a discussion that encourages students to examine the balance between preventing retail borrowing and maintaining customer satisfaction through flexible return policies. For each type of store listed, ask students to consider the unique challenges and customer expectations related to returns. For example, the return policy for a sports team apparel shop might include limited-time returns around game seasons, whereas a bakery may not accept returns due to product perishability. For appliance and hardware stores, discuss the importance of warranties and the potential for restocking fees to discourage unnecessary returns. Finally, discuss the challenges of situations when low-cost items may not justify the cost of processing returns.

12-23. Critical Thinking There have been many media reports about a so-called “retail apocalypse” among brick-and-mortar chains. However, as described in the chapter, a more accurate observation is that the retail industry is going through a period of transformation. Identify a retail company you are familiar with that has recently closed stores. Brainstorm ways that the company could have reinvented itself and its stores to better engage customers and compete against e-commerce competitors.

Student answers will vary. Ask students to identify a retail company that has closed stores and brainstorm innovative ways the company could reinvent itself to enhance 12-27 Copyright © 2025 Pearson Education, Inc.

Part 4: Deliver and Communicate the Value Proposition

customer engagement and competitiveness. Ask students to consider adding experiential elements, enhancing in-store technology, or shifting toward more personalized services that online platforms cannot easily replicate. Discuss the importance of integrating online and offline experiences to create a seamless customer journey that leverages the strengths of both platforms. Encourage critical thinking about how traditional retailers can use their physical presence to offer unique, compelling shopping experiences that draw customers back to brick-and-mortar locations.

12-24. Critical Thinking The majority of consumers have made a purchase online. Retailers are making it easier than ever by accepting digital wallets, such as Apple Pay, Google Pay, PayPal, and other payment methods that help protect your information and make checking out faster and more convenient. So let’s say you use a digital wallet. How does having the digital wallet impact your decision to place an order? Do you find yourself ordering more often? Is it important to you to know how retailers are keeping your information secure? Why or why not?

Student answers will vary. Encourage students to share personal experiences and observations about the convenience and security of using digital wallets. Discuss whether or not the ease of use leads to more frequent purchases and the psychological aspects of spending “invisible” money. Discuss the security features of digital wallets and their importance to consumer confidence.

12-25. Critical Thinking Many retail stores now use proximity or beacon marketing to communicate with shoppers’ smartphones as they browse through a store. Think about service providers such as a restaurant, a spa, or your college. What are some creative ways service providers might use these innovations to improve the customers’ experience (CX)?

Student responses will vary, but should be focused on how to deliver an excellent experience. Every touchpoint matters.

12-26. Ethics With retail shrinkage on the rise, many companies are experimenting with new ways to prevent theft. In some areas, this involves putting more and more basic, essential products—such as over-the-counter medications and baby formula—behind locked cabinets. This approach can minimize shoplifting. However, it also has been noted to result in an overall decrease in sales because it makes shopping less convenient. How should retailers balance the need for consumer convenience with the need to prevent theft? At what point might anti-theft strategies backfire on retailers?

Student answers will vary. Consider asking students to debate the different strategies retailers can use to combat theft, particularly the impact of locking up essential items on consumer convenience and sales. Discuss the potential sales loss from such strategies and how it could affect customer loyalty and overall brand reputation. Encourage students to consider alternative anti-theft technologies or methods that could protect merchandise without alienating customers.

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Chapter 12: Deliver the Customer Experience

12-27. Critical Thinking Many developed countries, including the U.S., have in recent decades become primarily service economies; that is, there is relatively little manufacturing of goods, and most people in the economy are employed by service industries. Why do you think this has occurred? In what ways is this trend a good and/or a bad thing for a country? Do you think this trend will continue?

Students who have taken an economics course may have already studied this issue and will provide valuable insight. Some students may feel that economies shift and evolve, and the U.S. economy may shift back. Others may talk about dependency on foreign nations and the associated positives and negatives. Students also should consider fair wages, fair treatment of workers, international leadership, and so on. MINIPROJECT: LEARN BY DOING Miniproject 1 Assume you are the owner and operator of a local nutrition store that specializes in vitamins and supplements. You have decided to solicit customer feedback by including the link to a survey at the bottom of all customer receipts.

12-28. Using the SERVQUAL scale for guidance, develop five questions you would include in the customer feedback survey.

Student answers will vary. Guide students on how to construct survey questions based on the SERVQUAL scale. Recall that it measures service quality across five dimensions: tangibles, reliability, responsiveness, assurance, and empathy. Discuss the relevance of each dimension in the context of a nutrition store. For example, tangibles could involve questions about the cleanliness and layout of the store, while reliability might address whether products are consistently in stock. Responsiveness could be gauged by asking customers about their satisfaction with the speed of service they received. Assurance might focus on the knowledge and courtesy of the staff, and empathy could seek feedback on how well the staff understands customer needs.

12-29. Identify the advantages and disadvantages of using this process for customer feedback within a retail environment.

Student answers will vary. Encourage a discussion about the advantages and disadvantages of soliciting customer feedback via surveys linked on receipts. Advantages might include direct insights from customers about their shopping experience, which can guide improvements in service and product offerings. Highlight how real-time feedback can help quickly identify and resolve issues. Discuss potential low response rates, which can skew results if only a small, possibly unrepresentative segment of customers provides feedback. Consider the challenge of designing effective surveys that accurately capture customer sentiment without leading or biasing responses.

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Part 4: Deliver and Communicate the Value Proposition

Miniproject 2 Theme and entertainment parks like Universal Studios fall in the middle of the goods/services continuum—half goods and half services. To be successful in this highly competitive market, how must a park must position its product? Visit the websites of three of the top theme park organizations: Walt Disney World (www.disneyworld.disney.go.com), Six Flags parks (www.sixflags.com), and Universal’s Orlando Theme Park ((https://www.universalorlando.com/web/en/us#non-floridaresident).

12-30. How is this positioning communicated through the website?

Theme parks such as those mentioned sell both tangible goods and service. Can the students name the several services (some will be core and some will be augmented)?

Each theme park has different approaches to positioning. Can the students pick out the differences? Do the national websites have much to do with local establishments and services? This should make a good discussion question.

12-31. What changes or improvements would you recommend for each website?

Students are directed to visit websites of several popular theme parks. During these visits, students are then asked to consider target markets and positioning strategies for the various organizations. Once these sites have been visited (and associated text material reviewed), students will be prepared to answer the questions above.

V. MARKETING IN ACTION CASE: REAL CHOICES AT LULULEMON ATHLETICA Summary of Case Athleisure retailer Lululemon Athletica is fighting the trend of bricks-and-mortar closures through experiential retailing. At its 25,000-square-foot experiential store in Chicago, customers can dine at an onsite restaurant and then work off those calories by taking a yoga class.

Lululemon’s approach with these experiential stores may at first seem like the “retailtainment” approach other retailers have employed, but it is differentiated by the level of involvement it offers and the customers’ level of engagement with the company’s products. Additionally, a strategic partnership with Peloton, international expansion, and an expanded men’s line all support Lululemon’s robust growth. Revenues hit $8.1 billion in 2022, earning the company a spot on the Fortune 500 list.

Suggestions for Presentation This case could be assigned for various online or in-class discussion activities.

Online Suggestions 12-30 Copyright © 2025 Pearson Education, Inc.

Chapter 12: Deliver the Customer Experience

Review the in-store engagement opportunities at Chicago’s Lululemon experiential store (https://shop.lululemon.com/stores/us/chicago/lincoln-park). What activities would you expect to be most popular? How could this list of activities be expanded to attract more prospective and current customers into the store?

In-Class Suggestions In teams, have students design their own experiential retail event for a Lululemon store. Remind them to consider factors that leverage the strengths and uniqueness of the Lululemon brand, such as wellness, community, and high-quality athletic wear. Each group should outline the event’s theme, activities, target audience, and marketing tactics that they will use to draw customers into the store.

Questions for Discussion 12-32. Lululemon’s experiential stores offer customers an opportunity to use its products with other customers. Choose a favorite brand and describe a retail format for that brand that could provide an experience similar to the Lululemon store experience.

Students might be inspired to think of brand-specific retail opportunities by first considering other retail stores that offer in-store community engagement opportunities: • • • • •

Bass Pro Shops Home Depot (home improvement) PGA superstore Build-a-Bear Workshop Williams Sonoma (cooking supplies)

Brands that do not currently have dedicated retail stores but could potentially have some form of brand-sponsored retail with community engagement opportunities: • • • • •

Dell computers (programming or other training on the use of computer technology) Black & Decker tools (home maintenance/building projects) Prince tennis rackets (tennis workshops) OXO cookware (group cooking classes) Shimano fishing reels (lure tying or casting technique classes)

12-33. Lululemon’s partnership with Peloton aims to position the two brands to complement each other. What are the benefits and risks of associating the Lululemon brand with another brand? Identify other possible brands that may fit in with the lifestyle that Lululemon is trying to promote in its experiential stores.

Student answers will vary. Encourage students to explore both the strategic benefits and potential risks that come with brand affiliation. Highlight how the partnership can enhance brand visibility, attract a broader customer base, and provide new sales opportunities, as Peloton’s fitness enthusiasts may be drawn to Lululemon’s high-quality 12-31 Copyright © 2025 Pearson Education, Inc.

Part 4: Deliver and Communicate the Value Proposition

workout apparel. However, also consider the risks, including brand dilution if Peloton faces negative publicity or if the partnership fails to resonate with Lululemon’s core customers. Ask students to brainstorm other potential brand collaborations. Some suggestions could include Whole Foods, Fitbit, Garmin, or Equinox.

12-32 Copyright © 2025 Pearson Education, Inc.

Chapter 12: Deliver the Customer Experience

12-34. Lululemon’s competitor Dick’s Sporting Goods is embarking on its own type of experiential retail formats, including its House of Sports concept (see https://www.dickssportinggoods.com/s/marketing/houseofsport). Compare the Lululemon and Dick’s Sporting Goods approaches and evaluate the effectiveness of the two concepts. Which strategy best promotes long-term customer engagement and loyalty? Explain your decision.

Student answers will vary. Ask students to analyze the unique features and customer engagement strategies of both brands. What is similar and what is different? Encourage students to consider target demographics, types of experiences offered, and how each approach aligns with the brand’s identity. Discuss which strategy is more effective in creating long-term customer engagement and loyalty.

WEB RESOURCE lululemon.com

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Chapter 13: Promotion I: Planning and Advertising

Chapter 13 Promotion I: Planning and Advertising I. CHAPTER OVERVIEW Marketing communication can take many forms from creative slogans printed on t-shirts, to chalk art printed on university sidewalks, to newspaper advertisements. The list can go on and on and is limited only by imagination. Chapter 13 focuses on the process of integrated marketing communication designed to influence target markets and create successful marketing. Students are introduced to the communication model. Many students enrolled in this course probably believed that the entire term would be spent on advertising—believing that marketing communications (or promotions) and advertising is the same thing. In this chapter, the difference becomes apparent.

This chapter teaches the basics of advertising and consumer sales promotion. Students learn about creating advertising campaigns and the basics of consumer sales promotion. This information, combined with the remaining elements of promotion, discussed in Chapter 14, give students a great foundation for truly understanding how an integrated marketing communication process works.

II. CHAPTER OBJECTIVES 13-1. Understand the communication process and the traditional promotion mix.

13-2. Describe the steps in traditional and multichannel promotion planning.

13-3. Explain what advertising is, describe the major types of advertising, discuss some of the major criticisms of advertising, and describe the process of developing an advertising campaign and how marketers evaluate advertising.

13-4. Understand the elements of direct marketing.

13-5. Understand how to increase your chances of getting a great job or internship by developing an effective résumé and cover letter, how to get these to the right people, and how you can make yourself stand out among other applicants.

III. CHAPTER OUTLINE p. 488

REAL PEOPLE, REAL CHOICES—HERE’S MY PROBLEM AT THE PITCH AGENCY After a series of business decisions across promotions, operations, and menu innovation, Burger King was posting U.S. sales gains when competitors were failing. By mid-2015 Burger King was outperforming McDonald’s and Wendy’s by significant margins in sales. However, the brand was lagging its main competitors in imagery. In the third quarter we turned our attention to refining our advertising strategy and optimizing communications.

Mass communications for quick-serve restaurants (QSRs) must drive traffic quickly, often to promote specific menu items with immediate and ambitious sales gains. We needed to find a way to 13-1 Copyright © 2025 Pearson Education, Inc.

Exhibit: Sara Bamossy

Part 4: Deliver and Communicate the Value Proposition

develop and implement long-range brand planning. My role was to create a strategy that would enable Burger King to tell a consistent brand story with the flexibility to support a wide range of new and core menu items. As the brand evolved, The King was introduced to bring a younger audience and later he was retired in favor of a broader reaching “Taste is King” campaign.

The question became, what’s next for BK marketing?

As CSO (Chief Strategy Officer) of Pitch, Sara Bamossy partnered with Burger King to get the ultimate strategy, with inputs from data mining, consumer research, and competitive analysis. We reached a key decision point for the Burger King brand: Should we bring back The King or find a new road?

Should Burger King’s new long-range strategy take advantage of latent equity in a past icon?

Sara considered her options: 1. Leave The King in the past where he belongs.

2. Bring back The King as an instantly recognizable icon.

The vignette ends by asking the student which option he/she would choose.

p. 489

Sarah chose option #2.

1.

COMMUNICATION MODELS IN A DIGITAL WORLD THAT IS “ALWAYS ON” Promotion is the coordination of marketing communication efforts to influence attitudes or behavior. This function is the last of the famous four Ps of the marketing mix, and it plays a vital role. Of course, virtually everything an organization says and does is a form of marketing communication.

Technology has transformed advertising and as we move into Web 3.0, or Web3, wherein users will have more control over their own data and artificial intelligence will allow for a more seamless connection between physical products and digital experiences, opportunities for connecting with current and potential customers will continue to expand.

p. 490

Marketing communication performs one or more of four roles: • It informs consumers about new goods and services.

• It reminds consumers to continue using certain brands.

• It persuades consumers to choose one brand over others.

• It builds relationships with customers.

13-2 Copyright © 2025 Pearson Education, Inc.

Chapter 13: Promotion I: Planning and Advertising

Integrated marketing communication (IMC) is the process that marketers use “to plan, develop, execute, and evaluate coordinated, measurable, persuasive brand communication programs over time to targeted audiences.” p. 490

To achieve marketing communication goals, marketers use a multichannel promotional strategy where they combine traditional marketing communications (advertising, sales promotion, public relations, and direct marketing) activities with social media and other online buzz-building activities.

p. 490

Models of Marketing Communication • The traditional communication model, is a “one-to-many” view in which a marketer sends messages to many consumers through advertising, including mass media; out-of-home, such as billboards; and Internet advertising.

•

The importance of the updated “many-to-many” model of marketing communication has increased because of social media and its use in word-of-mouth communication, whereby consumers look to each other for information and recommendations.

•

Marketers also talk one to one with consumers and business customers.

p. 491 p. 440

p. 491

p. 492

1.1.

The Communication Process Promotional strategies can succeed only if customers understand what we’re trying to say. The communication process is a good way to understand the basics of how any kind of message works.

In this perspective, a source transmits a message through some medium to a receiver who (we hope) listens and understands the message.

1.1.1. The Source Encodes A person or organization, the source has an idea to communicate to a receiver. Encoding means we can translate our idea into different forms to convey the desired meaning.

1.1.2. The Message The message is the actual content of that physically perceivable form of communication that goes from the source to a receiver.

1.1.3. The Medium

13-3 Copyright © 2025 Pearson Education, Inc.

Figure 13.1 Snapshot: Three Models of Marketing Communication

Figure 13.2 Process: Communication Process

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p. 492

No matter how the source encodes the message, it must then transmit that message via a medium, a communication vehicle that reaches members of a target audience.

1.1.4. The Receiver Decodes A receiver is there to get the message. Decoding is the process whereby a receiver assigns meaning to a message; that is, she translates the message she sees or hears back into an idea that makes sense to him or her.

1.1.5. Noise The communication model also acknowledges that noise— anything that interferes with effective communication—can block messages.

1.1.6. Feedback To complete the communication loop, the source gets feedback from receivers.

p. 493

p. 494

1.2. Updated Web 2.0 Communication Web 2.0 refers to the Internet that allows receivers to play a role as the sources. Web 2.0 changed the way we look at the communications process.

• The One-to-Many Model: This model is the traditional form of mass communication whereby a broadcaster sends a message to a very large audience • The One-to-One Model: This format describes messages that are up close and personal. This is the oldest way to communicate, but it’s still important in many marketing contexts today.

• The Many-to-Many Model: This format describes the social media revolution that allows almost everyone to engage in a constant conversation with almost everyone else.

Outbound marketing refers to messages that come from the organization and are intended for those who have agreed to receive them. Inbound marketing refers to messages that come to the organization from others outside. An ethical bribe is a fancy term for an opt-in incentive to join an email mailing list.

1.3. The Promotion Mix Marketers use the term promotion mix to refer to the communication elements that the marketer controls.

• Media advertising • Sales promotion 13-4 Copyright © 2025 Pearson Education, Inc.

Exhibit: Fabreze

Chapter 13: Promotion I: Planning and Advertising

• Public relations • Personal selling • Direct marketing • Out-of-home advertising • Point-of-purchase advertising • Social media • Digital/Internet advertising The challenge is to be sure that the promotion mix works in harmony with the overall marketing mix to combine elements of promotion with place, price, and product to position the firm’s offering in people’s minds. p. 495 Marketers have a lot more control over some kinds of marketing communication messages than they do others. As Figure 13.3 shows, mass-media advertising and sales promotion are at one end of the continuum, where the marketer has total control over the message she delivers. At the other end is word-of-mouth (WOM) communication, where everyday people rather than the company run the show. WOM is a vitally important component of the brand attitudes consumers form and of their decisions about what and what not to buy. Sandwiched between the ends we find personal selling and direct marketing, where marketers have some but not total control over the message they deliver, and public relations, where marketers have even less control.

1.4.

Mass Communication: The One-to-Many Model

Mass communications elements of the promotion mix include messages intended to reach many prospective customers at the same time.

p. 496

Advertising is, for many, the most familiar and visible element of the promotion mix. It is nonpersonal communication from an identified sponsor using the mass media. The most important advantage of advertising is that it reaches large numbers of consumers at one time.

Consumer sales promotion includes programs such as contests, coupons, or other incentives that marketers design to build interest in or encourage purchase of a product during a specified period. Unlike other forms of promotion, sales promotion intends to stimulate immediate action (often in the form of a purchase) rather than build long-term loyalty.

Public relations describes a variety of communication activities that seek to create and maintain a positive image of an 13-5 Copyright © 2025 Pearson Education, Inc.

Table 13.1 A Comparison of Elements of the Traditional Promotion Mix

Figure 13.3 Snapshot: Control Continuum

Part 4: Deliver and Communicate the Value Proposition

organization and its products among various publics, including customers, government officials, and shareholders.

1.5.

Personal Communication: The One-to-One Model

p. 496

Sometimes marketers want to communicate with consumers on a personal, one-on-one level. The immediate way for a marketer to make contact with customers is simply to tell them how wonderful the product is. This is part of the personal selling element of the promotion mix mentioned previously. It is the direct interaction between a company representative and a customer. The interaction can occur in person, by phone, or even over an interactive computer link. Behavioral targeting makes it possible for an online source to tailor a message to a specific consumer based upon what that person has viewed in the past.

p. 496

Salespeople are a valuable source of communication because customers can ask questions and the salesperson can immediately address objections and describe product benefits. Marketers also use direct mail, telemarketing, and other direct marketing activities to create personal appeals. Like personal selling, direct marketing provides direct communication with a consumer or business customer.

p. 496

2.

AN OVERVIEW OF PROMOTION PLANNING Just as with any other strategic decision-making process, the development of this plan includes several steps.

2.1.

Step 1: Identify the Target Audience(s) An important part of overall marketing planning is to identify the target audience(s). Remember, IMC marketers recognize that we must communicate with a variety of stakeholders who influence the target market. Of course, the intended customer is the most important target audience and the one that marketers focus on the most.

Figure 13.4 Process: Steps to Develop the Promotion Plan

2.2. p. 497 p. 497

p. 497

Step 2: Establish the Promotion Objectives The whole point of communicating with customers and prospective customers is to let them know in a timely and affordable way that the organization has a product to meet their needs. In most cases, it takes a series of messages that move the consumer through several stages.

The marketer “pushes” the consumer through a series of steps, or a hierarchy of effects from initial awareness of a product to brand loyalty. The task of moving the consumer up the hierarchy becomes more difficult at each step.

13-6 Copyright © 2025 Pearson Education, Inc.

Figure 13.5 Snapshot: The Hierarchy of Effects

Chapter 13: Promotion I: Planning and Advertising

p. 498

2.2.1. Create Awareness Make the target market aware that the product is on the market.

Some retailers engage in upcycling which involves transforming the look of a thrifted item but still using it for its intended purpose.

Exhibit: Hulken

2.2.2. Inform the Market Provide knowledge about the benefits that the new product has to offer to position it relative to other products.

2.2.3. Create Desire Create favorable feelings toward the product and to convince at least some of the members of the group that they prefer the product.

2.2.4. Encourage Purchase and Trial Get people who are interested to try the product.

2.2.5. Build Loyalty Get customers to stay with the product after they purchase it.

2.3.

Step 3: Determine and Allocate the Marketing Communication Budget While setting a budget for marketing communication might seem easy—you just calculate how much you need to accomplish your objectives—in reality it’s not that simple. We need to make three distinct decisions to set a budget:

p. 499

p. 499

2.3.1. Budget Decision 1: Determine the Total Marketing Communication Budget Most firms rely on two budgeting techniques: top-down and bottom-up. Top-down budgeting techniques require top management to establish the overall amount that the organization allocates for promotion activities. The most common top-down technique is the percentage-of-sales method in which the promotion budget is based on last year’s sales or on estimates for the present year’s sales. The percentage may be an industry average provided by trade associations that collect objective information on behalf of member companies. The advantage of this method is that it ties spending on promotion to sales and profits. Unfortunately, this method can imply that sales cause promotional spending rather than viewing sales as the outcome of promotional efforts.

13-7 Copyright © 2025 Pearson Education, Inc.

Figure 13.6 Process: Steps in Developing the Marketing Communication Budget

Part 4: Deliver and Communicate the Value Proposition

p. 499

The competitive-parity method is a fancy way of saying “keep up with the Joneses.” This method assumes that the same dollars spent on promotion by two different firms will yield the same results, but spending a lot of money does not guarantee a successful promotion. Firms certainly need to monitor their competitors’ promotion activities, but they must combine this information with their own objectives and capacities.

The problem with top-down techniques is that budget decisions are based more on established practices than on promotion objectives. Another approach is to begin at the beginning: identify promotion goals and allocate enough money to accomplish them. That is what bottom-up budgeting techniques attempt.

This bottom-up logic is at the heart of the objective-task method which is gaining in popularity. Using this approach, the firm first defines the specific communication goals it hopes to achieve, such as increasing by 20 percent the number of consumers who are aware of the brand. It then tries to figure out what kind of promotional efforts—how much advertising, sales promotion, buzz marketing etc.—it will take to meet that goal.

p. 499

p. 499

2.3.2. Budget Decision 2: Decide on a Push or a Pull Strategy A push strategy means that the company wants to move its products by convincing channel members to offer them and entice their customers to select these items—it pushes them through the channel. This approach assumes that if consumers see the product on store shelves, they will be enticed to make a trial purchase. In this case, promotion efforts will “push” the products from producer to consumers by focusing on personal selling, trade advertising, and trade sales promotion activities such as exhibits at trade shows.

In contrast, a company that relies on a pull strategy is counting on consumers to demand its products. This popularity will then convince retailers to respond by stocking these items. In this case, efforts focus on media advertising and consumer sales promotion to stimulate interest among end consumers who will “pull” the product onto store shelves and then into their shopping carts.

2.3.3. Budget Decision 3: Allocate the Budget to a Specific Promotion Mix Once the organization decides how much to spend on promotion and whether to use a push or a pull strategy, it must divide its 13-8 Copyright © 2025 Pearson Education, Inc.

Chapter 13: Promotion I: Planning and Advertising

p. 500

budget among the elements in the promotion mix. Although advertising used to get the lion’s share of the promotion budget, today sales promotion and digital marketing such as buzz building and the use of social media we talked about earlier in this chapter are playing a bigger role in marketing strategies.

2.4.

Step 4: Design the Promotion Mix Designing the promotion mix is the most complicated step in marketing communication planning. It includes determining the specific communication tools that will be used, what message is to be communicated, and the communication channel(s) to be employed.

The message should ideally accomplish four objectives (though a single message can rarely do all of these): It should get attention, hold interest, create desire, and produce action. These communication goals are known as the AIDA model.

2.5. p. 500

p. 500

Step 5: Evaluate the Effectiveness of the Communication Program The final step to manage marketing communications is to decide whether the plan is working. It is not so easy. There are many random factors in the marketing environment.

As a rule, various types of sales promotion are the easiest to evaluate because they occur over a fixed, usually short period, making it easier to link to sales volume. Advertising researchers measure brand awareness, recall of product benefits communicated through advertising and even the image of the brand before and after an advertising campaign. The firm can analyze and compare the performance of salespeople in different territories, although again it is difficult to rule out other factors that make one salesperson more effective than another does.

Public relations activities are more difficult to assess because their objectives relate more often to image building than sales volume.

2.6 Multichannel Promotional Strategies Many marketers opt for multichannel promotional strategies where they combine traditional advertising, sales promotion, and public relations activities with online buzz-building activities.

Multichannel strategies boost the effectiveness of either online or offline strategies used alone. In addition, multichannel strategies allow marketers to repeat their messages across various channels; this lets them strengthen brand awareness and it provides more opportunities to convert customers. Multichannel campaigns 13-9 Copyright © 2025 Pearson Education, Inc.

Part 4: Deliver and Communicate the Value Proposition

need to provide a customer experience that will engage the customer and add something of value (in addition to the product) to the customer’s life.

3. ADVERTISING Advertising is so much a part of marketing that many people think of the two as the same thing. Remember, product, price, and distribution strategies are just as important as marketing communications.

Advertising is nonpersonal communication an identified sponsor pays for that uses mass media to persuade or inform an audience.

TV everywhere (also known as authenticated streaming) is a term that describes using your Internet-enabled device, like a tablet or smart phone, to stream content from your cable or satellite provider.

Another major shift in the media landscape has been the addition of music streaming services. Streaming services providers including offerings from Apple and Amazon as well as standalone services such as Pandora and Spotify. Spotify alone has over 360 million active users each month.

3.1.

Types of Advertising Based on Marketing Goals The advertisements an organization runs can take many forms. p. 502

3.1.1. Product Advertising With product advertising, the message focuses on a specific good or service. Most of the advertising we see or hear is product advertising.

3.1.2. Institutional Advertising Institutional advertising promotes the activities, personality, or point of view of an organization or company. Corporate advertising promotes the company as a whole instead of the firm’s individual products.

p. 502

Some institutional messages state an organization’s position on an issue to sway public opinion, a strategy we call advocacy advertising. However, some firms have recently been accused of “purpose pandering”—only communicating about social issues for attention and not authentically supporting the cause.

13-10 Copyright © 2025 Pearson Education, Inc.

Figure 13.7 Snapshot: Types of Advertising

Chapter 13: Promotion I: Planning and Advertising

p. 503

p. 503

Public service advertisements (PSAs) are advertisements the media runs free of charge. These messages promote not-for-profit organizations that serve society in some way, or they champion an issue such as increasing literacy or discouraging drunk driving.

3.1.3. Retail and Local Advertising Both major retailers and small, local businesses advertise to encourage customers to shop at a specific store or use a local service.

3.2.

Who Creates Advertising?

An advertising campaign is a coordinated, comprehensive plan that carries out promotion objectives and results in a series of advertisements placed in various media over a period.

Although a campaign may be based around a single ad idea, most use multiple messages with all ads in the campaign having the same look and feel.

Although some firms create their own advertising in-house, in many cases several specialized companies work together to develop an advertising campaign. Typically, the firm retains one or more outside advertising agencies to oversee this process. A limited-service agency provides one or more specialized services, such as media buying or creative development. In contrast, a full-service agency supplies most or all of the services a campaign requires, including research, creation of ad copy and art, media selection, and production of the final messages. An interactive agency or digital agency is a limitedservice agency that provides a variety of services for digital marketing.

p. 504

An in-house agency is staffed with company employees and uses an agency model to provide the company with the traditional marketing services of external agencies.

In-house agencies have tapped into the benefits of programmatic advertising, or programmatic ad buying.

Big or small, an advertising agency hires a range of specialists to craft a message and make the communication concept a reality:

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Account management: The account executive, or account manager, is the “soul” of the operation. This person supervises the day-to-day activities on the account, and is the primary liaison between the agency and the client. The account executive has to ensure that the client is happy while he verifies that people 13-11 Copyright © 2025 Pearson Education, Inc.

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within the agency execute the desired strategy. The account planner combines research and account strategy to act as the voice of the consumer in creating effective advertising.

Creative services: Creatives are the “heart” of the communication effort. These people actually dream up and produce the ads.

Research and marketing services: Researchers are the “brains” of the campaign. They collect and analyze information that will help account executives develop a sensible strategy.

Media planning: The media planner is the “legs” of the campaign. He helps to determine which communication vehicles are the most effective, and recommends the most efficient means to deliver the ad by deciding where, when, and how often it will appear.

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3.3.

User-Generated Content The latest promotional craze is to let your customers actually create your advertising for you, do-it-yourself (DIY) ads. Usergenerated content includes the millions of online consumer comments, opinions, advice, consumer-to-consumer discussions, reviews, photos, images, videos, podcasts and webcasts, and product-related stories available to other consumers through digital technology. Marketers crowdsource content and encourage customers to have fun with their products.

3.4.

Ethical Issues in Advertising

Some people claim advertising is manipulative or advertising is deceptive and untruthful. Companies are vulnerable to claims against them for hidden fees, or drip pricing. Drip pricing occurs when a company advertises a certain price at the beginning of the purchase process, but by the time the consumers are ready to pay, additional charges or fees have “dripped” onto the total.

In addition to fining firms for deceptive advertising, the FTC also has the power to require firms to run corrective advertising; messages that clarify or qualify previous claims.

Other ads, although not illegal, may create a biased impression of products when they use puffery—claims of superiority that neither sponsors nor critics of the ads can prove are true or untrue. Many consumers today are concerned about greenwashing, a practice in which companies promote their 13-12 Copyright © 2025 Pearson Education, Inc.

Chapter 13: Promotion I: Planning and Advertising

products as environmentally friendly when in truth the brand provides little ecological benefit.

Firms have also faced backlash for pinkwashing. Like greenwashing, this practice is implemented by those being disingenuous. Pinkwashing has been used to call out practices that are linked to breast cancer awareness, gender equality, and LGBTQ+ inclusion.

Other concerns are advertising has a diversity problem. To prevent faux pas some television shows hire cultural consultants to ensure inclusion of different cultures and that those cultures are portrayed authentically and respectfully.

Advertising has also been accused of being offensive and in bad taste. Other critics maintain that advertising causes people to buy things they don’t really need.

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3.5.

Develop the Advertising Campaign The following is a description of the steps in creating an advertising campaign:

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3.5.1. Step 1: Understand the Target Audience The best way to communicate with an audience is to understand as much as possible about them and what turns them on and off.

An ad that uses algospeak—coded words, phrases, and emojis that have developed as a result of social media users’ tactics to evade content moderation algorithms on social media—or other types of text slang and Internet shorthand (e.g., CYT about to link with another Swiftie IRL) may relate to teenagers but not to their parents, and this strategy may backfire if the ad copy reads like an “ancient” 40-year-old trying to sound like a 20-year-old.

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3.5.2. Step 2: Establish Message and Budget Objectives Advertising objectives should be consistent with the overall communications plan. Advertising objectives will generally include objectives for both the message and the budget.

• Set Message Objectives Advertising can inform, persuade, and remind.

• Set Budget Objectives Advertising is expensive. An objective of many firms is to allocate a percentage of the overall communication budget to advertising.

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Figure 13.8 Process: Steps to Develop an Advertising Campaign

Part 4: Deliver and Communicate the Value Proposition

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3.5.3. Step 3: Create the Ads The creation of the advertising begins when an agency formulates a creative strategy, which gives the advertising “creative” (art directors, copywriters, photographers, and others) the direction and inspiration they need to begin the creative process. The strategy is summarized in a written document known as a creative brief; a rough blueprint that guides but does not restrict the creative process. It provides only the most relevant information and insights about the marketing situation, the advertising objective, the competition, the advertising target and, most importantly, the message that the advertising must deliver.

Advertising Appeals An advertising appeal is the central idea of the ad and the basis of the advertising messages. It is the approach used to influence the consumer. Informational appeals are based on a unique selling proposition (USP) that gives consumers a clear, singleminded reason why the product is better at solving a problem.

Generally, we think of appeals as informational or emotional. Of course, not all ads fit into these two appeal categories. Wellestablished brands often use reminder advertising just to keep their name in people’s minds or be sure that consumers repurchase the product as necessary. Sometimes advertisers use teaser ads or mystery ads to generate curiosity and interest in a to-be-introduced product.

Execution Formats Execution format describes the basic structure of the message.

Some of the more common formats, sometimes used in combination, include: • Comparison: A comparative advertisement explicitly names one or more competitors.

• Demonstration: The ad shows a product “in action” to prove that it performs as claimed: “It slices, it dices!”

• Brand Storytelling: Modern storytelling commercials are like 30-second movies with plots that involve the product in a peripheral way.

• Testimonial: A celebrity, an expert, or a “man in the street” states the product’s effectiveness. The use of a celebrity endorser is a common but expensive strategy.

• Slice of life: A slice-of-life format presents a (dramatized) scene from everyday life.

• Lifestyle: A lifestyle format shows a person or persons attractive to the target market in an appealing setting. The

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Figure 13.9 Snapshot: Creative Elements of Advertising

Chapter 13: Promotion I: Planning and Advertising

•

advertised product is “part of the scene,” implying that the person who buys it will attain the lifestyle.

Rich media: Rich media advertising provides digital ads that have advanced features.

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Tonality Tonality refers to the mood or attitude the message conveys.

Some common tonalities include: • Straightforward: Straightforward ads simply present the information to the audience in a clear manner.

• Humor: Humorous, witty, or outrageous ads can be an effective way to break through advertising clutter.

• Dramatic: A dramatization, like a play, presents a problem and a solution in a manner that is often exciting and suspenseful—a difficult challenge in 30 or 60 seconds.

• Romantic: Ads that present a romantic situation can be especially effective at getting consumers’ attention and at selling products people associate with dating and mating.

• Sexy: Some ads appear to sell sex rather than products.

Sex appeal ads are more likely to be effective when there is a connection between the product and sex (or at least romance).

• Apprehension/fear: Some ads highlight the negative consequences of not using a product. In general, fear appeals can be successful if the audience perceives there to be an appropriate level of intensity in the fear appeal.

Creative Tactics and Techniques • Animation and Art: Not all ads are executed with film or photography.

• Cast: Sometimes celebrities are used to endorse products or services. Representation, or the ability for consumers to see themselves in the ad, is key to the future of advertising.

• Sonic branding: Sonic branding, or audio branding, is used to set the brand apart using sound.

• Jingles: Jingles are original words and music written specifically for advertising executions.

• Slogans: Slogans link the brand to a simple linguistic device that is memorable (jingles do the same but set the slogan to music).

3.5.4. Step 4: Pretest What the Ads Will Say Advertisers try to minimize mistakes by getting reactions to ad messages before they actually place them. Much of this pretesting, the research that goes on in the early stages of a 13-15 Copyright © 2025 Pearson Education, Inc.

Exhibit: Fragrance ads

Part 4: Deliver and Communicate the Value Proposition

campaign, centers on gathering basic information that will help planners be sure they’ve accurately defined the product’s market, consumers, and competitors.

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p. 512

3.5.5. Step 5: Choose the Media Type(s) and Media Schedule Media planning is a problem-solving process for getting a message to a target audience in the most effective way. Planning decisions include audience selection and where, when, and how frequent the exposure should be. Thus, the first task for a media planner is to find out when and where people in the target market are most likely to be exposed to the communication.

There is no such thing as one perfect medium for advertising.

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3.5.6. Step 6: Evaluate the Advertising With so many messages competing for the attention of frazzled customers, it is especially important for firms to evaluate their efforts to increase the impact of their messages.

Posttesting means conducting research on consumers’ responses to advertising messages they have seen or heard as opposed to pretesting, which as we have seen collects reactions to messages before they are actually placed in “the real world.”

Three ways to measure the impact of an advertisement: • Unaided recall tests by telephone survey or personal interview whether a person remembers seeing an ad during a specified period without giving the person the name of the brand.

• An aided recall test uses the name of the brand and sometimes other clues to prompt answers.

• Attitudinal measures probe a bit more deeply by testing consumers’ beliefs or feelings about a product before and after they are exposed to messages about it.

3.6.

Where to Say It: Traditional Mass Media The following is a list of the major categories of media. Table 13.2 summarizes some of the pros and cons of each type.

Exhibit: New products Table 13.2 Pros and Cons of Media Vehicles

3.6.1. Television TV can reach many people, but it is expensive. Upfront TV ad pricing is buying and selling national TV advertising time for the entire broadcast year, October through September. It locks in pricing and reserves the best time slots.

3.6.2. Radio Radio ads are flexible and can be recorded quickly. Less people listen to traditional radio because they adopted subscriptions.

Exhibit: Print ad 3.6.3. Newspapers The newspaper is one of the oldest communication platforms.

Subscriptions are down.

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3.6.4. Magazines The global magazine industry declined by 5.16 percent from 2019 to 2020.

3.7. Comparing Traditional Media Vehicles Marketers need information about the content of media vehicles they are considering when they develop a media schedule.

Media planners use reach or ratings to plan the target market’s exposure to the ads. Frequency is the average number of times an individual or household is exposed to the message.

Gross rating points (GRPs) are a measure of quantity of media included in the media plan. Media planners use a measure called cost per thousand (CPM) to reflect the cost to deliver a message to 1,000 people.

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3.8.

Where to Say It: Branded Entertainment Product placement, or embedded marketing, is the placement of brands, logos, or a product itself into entertainment venues.

Branded entertainment, or branded content, is a form of advertising in which marketers integrate products into the storylines of entertainment venues.

The industry implements techniques such as in-game advertising and advergaming. Roblox, an online game platform with over 70 million daily active users, now offers advertisers multiple options for in-game advertising. Advergaming involves brand placements in video games.

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Native advertising is sponsored messages that mimic or resemble the normal content of the media vehicle where they appear. In print publications this typically labeled an advertorial.

3.9. Where to Say It: Support Media Support media reach people who may not have been exposed to mass-media advertising. It reinforces messages from traditional media.

3.9.1. Directory Advertising Directory advertising is information-focused advertising, like the yellow pages.

3.9.2. Out-of-Home Media

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Exhibit: Roblox

Chapter 13: Promotion I: Planning and Advertising

Out-of-home media are communication media that reach people in public places. Billboards, transit advertising, place-based media advertising, and street furniture are all out-of-home media.

Exhibit: Sphere billboard in Las Vegas

3.9.3. Place-Based Media Place-based media transmit messages in public places, like movie theaters and airports.

Digital signage is out-of-home media that enable the source to change the message. p. 519

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3.10. Where to Say It: Digital Media Digital media refers to any media that are digital rather than oldschool analog.

Owned media includes websites, blogs, Facebook, and Twitter accounts that are owned by an advertiser.

Paid media are most similar to traditional media and include display ads, sponsorships, and paid keyword searches.

Earned media is word of mouth or buzz created by consumers on social media.

Figure 13.10 Snapshot: Owned, Paid, and Earned Digital Media

3.10.1. Website Advertising Online advertising accounts for $78 billion a year. Americans spend more time on their mobile devices than they do watching TV. Banners, buttons, pop-up ads, and pre-roll ads are all types of website advertising.

3.10.2. Email Advertising Email advertising transmits messages to very large numbers of inboxes and is one of the easiest ways to communicate with consumers. One downside is spam. Permission marketing is recommended.

3.10.3. Social Media Advertising Social media advertising is advertising that is executed within the confines of social media channels, such as Facebook, Instagram, and Twitter.

3.10.4. Search Engines Search engines are Internet programs that search for documents with specified keywords. Search marketing techniques involve the use of Internet search engines.

p. 521

Sponsored search ads appear at the top or beside the search results.

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3.10.5. Mobile Advertising 13-19 Copyright © 2025 Pearson Education, Inc.

Exhibit: Google Trends search analytics

Part 4: Deliver and Communicate the Value Proposition

Mobile advertising is a form of advertising that is communicated via a handset. Text message advertising is one form of mobile advertising.

Mobile apps monetize their product with in-app advertising.

QR code advertising engages consumers via their mobile phones. The conversion rate is one metric marketers use to track ad performance. p. 522

3.10.6. Video Sharing: Check It Out on YouTube Vlogs are video recordings and a type of video sharing.

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3.11. Ethical Issues in Digital Media Advertising Ad fraud, click fraud, and ad blocking falsify the number of views or click-through or block ads at the network level.

A study that looked at mobile hijacking found consumers had unknowingly downloaded zombie apps.

3.12. When and How Often to Say It: Media Scheduling Media schedule is a plan that specifies the exact media to use and when to use it.

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3.13. Disruption in Advertising Disruption of advertising over the past nine decades shows the evolution of advertising and our lives.

4. DIRECT MARKETING Direct marketing is a form of one-to-one marketing communication to a consumer or business recipient that is designed to generate a response in the form of an order.

4.1. Mail Order A catalog is a collection of products offered for sale in book form, usually consisting of product descriptions accompanied by photos of the items.

4.2. Direct Mail Direct mail is a brochure or pamphlet that offers a specific good or service at one point in time.

4.3. Telemarketing Telemarketing is direct marketing an organization conducts over the telephone. The FTC established limits on the use of telemarketing.

4.4. Direct-Response Advertising Direct-response advertising is a direct marketing approach that allows the consumer to respond to a message by immediately contacting the provider to ask questions or order the product.

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Figure 13.11 Snapshot: Media Schedule for an Accessibility App

Figure 13.12 Snapshot: Key Forms of Direct Marketing

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Direct-response TV (DRTV) is advertising on TV that seeks a direct response, including short commercials of less than 2 minutes, 30-minute or longer infomercials, and home shopping networks.

Infomercials are half-hour or hour-long commercials that resemble a talk show but actually are sales pitches.

4.5. M-Commerce M-commerce refers to the promotional and other e-commerce activities transmitted over mobile phones and other mobile devices, such as smartphones and tablets with phone capabilities.

M-commerce through text messages is known as a short message service (SMS) marketing.

5. BRAND YOU: DEVELOPING A PERSONAL MARKETING COMMUNICATION PLAN 5.1. Step 1: Your Job Search: What “Media” to Use Possible media to use in your job search include: • Networking • Online job boards and recruiting sites • Social networking sites • Company websites • Direct mail • Career fairs 5.1.1. Networking Networking is important and needs regular cultivation. Join and create a profile on LinkedIn. Have professional-looking business cards made with your name and contact information. Join professional associations. Consider an internship or volunteering.

5.1.2. Online Job Boards and Recruiting Websites Online job boards and recruiting websites are generally the least likely to respond to your application with an offer for an interview.

5.1.3. Social Networking Sites Many companies use Facebook to recruit for entry-level jobs.

LinkedIn.com and Jobster.com can provide contacts in your target industry.

5.1.4. Company Websites Many companies post job openings on their websites.

5.1.5. Direct Mail If you have specific companies that you are interested in, send them a letter and let them know your value proposition.

5.1.6. Career Fairs Career fairs can be extremely productive, especially if you develop an action plan.

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5.2 Step 2: Advertising: Developing Your Marketing Communication Messages Think of the cover letter and résumé as things that should stand out and get the attention of a recruiter or manager.

Be totally honest.

You need to include more than a simple list of what you have done. To advertise effectively, you need to outline the benefits you can provide. You need to describe the skills, knowledge, and competencies you have gained.

You can also include the skills and knowledge you have gained from your classes.

Provide evidence of what you are saying.

Include an honest appraisal of your personal characteristics that an employer might want.

Keep your résumé to one page.

Make sure your résumé includes identifying information.

Make sure the résumé looks good; contains no spelling, punctuation, or grammatical errors; and is on white or neutral colored paper.

Here’s My Choice……

Sara went with Option 2 and decided to bring the King back.

However, this time, in order to use his full potential, the team decided to strategically leverage pop culture and buzz to pave the way for promotions. The King is at his best when he acts as a beacon for the brand in the real world. His natural role is to be a hero who surprises and delights his fans.

Exhibit: The King photo op

IV. END-OF-CHAPTER ANSWER GUIDE CHAPTER QUESTIONS AND ACTIVITIES  CONCEPTS: TEST YOUR KNOWLEDGE 13-1. What is promotion? What is integrated marketing communication (IMC)? What are multichannel promotional strategies?

Promotion is the coordination of marketing communication efforts to influence attitudes or behavior. This function is the last of the famous four Ps of the marketing mix, and it plays a vital role. Of course, virtually everything an organization says and does is a form of marketing communication. Many marketing experts now believe a successful promotional strategy should blend several diverse forms of marketing communication. Integrated marketing communication is the process that marketers use to plan, develop, execute, and evaluate coordinated, measurable, persuasive brand communication programs over time to targeted audiences. The IMC approach argues that consumers encounter a company or a brand in many different ways before, after, and during a purchase. Consumers see these 13-22 Copyright © 2025 Pearson Education, Inc.

Chapter 13: Promotion I: Planning and Advertising

points of contact or touchpoints—a TV commercial, a company website, a coupon, an opportunity to win a sweepstakes, or a display in a store—as a whole—as a single company that speaks to them in different places and different ways.

IMC marketers understand that to achieve their marketing communication goals, they must selectively use some or all of these touchpoints to deliver a consistent message to their customers in a multichannel promotional strategy where they combine traditional advertising, sales promotion, and public relations activities with online buzz-building activities. That is a lot different from most traditional marketing communication programs of the past that made little effort to coordinate the varying messages consumers received.

Today, these traditional methods still work in some circumstances. However, many other options are available that often mesh better with our “wired” 24/7 cultures. When you take a break from posting to your friends on Facebook, you’ll recognize that you also learn about products and services from your own social network in addition to ads, billboards, or coupons. For this reason we need to consider an updated communication model where marketing messages are what we think of as many-to-many.

13-2. List and describe the elements of the communication process.

The communication process begins with the source, who encodes an idea into a message via various mediums, such as TV, radio, or social media. The receiver then decodes the message, interpreting it based on their own perceptions. Noise can interfere at any stage, distorting the message. Feedback from the receiver back to the source completes the loop, allowing the source to understand the impact of the message and make adjustments if necessary.

13-3. List the elements of the promotion mix and describe how they are used to deliver personal and mass appeals.

• • • • •

Advertising is nonpersonal communication from an identified sponsor using the mass media.

Sales promotions are marketing activities that are used to stimulate immediate sales by providing extra value or generating interest in a product.

Public relations consists of marketing efforts or activities to portray an organization and its products positively by influencing the perceptions of various publics, including customers, government officials, and shareholders.

Personal selling is direct interaction between a company representative and a customer that can occur in person, by phone, or even by interactive computer link.

Direct marketing: Marketers also use direct mail, telemarketing, and other direct marketing activities to create personal appeals. Like personal selling, direct marketing provides direct communication with a consumer or business customer.

13-4. List and explain the steps in promotion planning.

Step 1: Identify the Target Audience(s)

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Part 4: Deliver and Communicate the Value Proposition

An important part of overall marketing planning is to identify the target audience(s).

Remember, IMC marketers recognize that we must communicate with a variety of stakeholders who influence the target market. Of course, the intended customer is the most important target audience and the one that marketers focus on the most.

Step 2: Establish the Communication Objectives The whole point of communicating with customers and prospective customers is to let them know in a timely and affordable way that the organization has a product to meet their needs.

In most cases, it takes a series of messages that move the consumer through several stages.

The marketer “pushes” the consumer through a series of steps, or a hierarchy of effects, from initial awareness of a product to brand loyalty. The task of moving the consumer up the hierarchy becomes more difficult at each step. The steps are as follows: create awareness, inform the market, create desire, encourage purchase and trial, and build loyalty.

Step 3: Determine and Allocate the Marketing Communication Budget Although setting a budget for marketing communication might seem easy—you just calculate how much you need to accomplish your objectives—in reality it’s not that simple.

We need to make three distinct decisions to set a budget: determine the total promotion budget, decide on a push or a pull strategy, allocate the budget to a specific promotion mix.

Step 4: Design the Promotion Mix Designing the promotion mix is the most complicated step in marketing communication planning. It includes determining the specific communication tools that will be used, what message is to be communicated, and the communication channel(s) to be employed. The message should ideally accomplish four objectives (though a single message can rarely do all of these): it should get attention, hold interest, create desire, and produce action. These communication goals are known as the AIDA model.

Step 5: Evaluate the Effectiveness of the Communication Program The final step to manage marketing communications is to decide whether the plan is working. It is not so easy. There are many random factors in the marketing environment.

13-5. Explain the hierarchy of effects and how it is used in communication objectives.

The marketer “pushes” the consumer through a series of steps, or a hierarchy of effects, from initial awareness of a product to brand loyalty. The task of moving the consumer up the hierarchy becomes more difficult at each step. Many potential buyers may drop out along the way, leaving fewer of the target group inclined to go the distance and become loyal customers. Each part of this path entails different communication objectives to “push” people to the next level: 1. Create awareness: The first step is to make members of the target market aware that there is a new brand of cologne on the market.

2. Inform the market: The next step is to provide prospective users with knowledge about the benefits the new product has to offer—to position it relative other colognes.

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Chapter 13: Promotion I: Planning and Advertising

3. Create desire: The next task is to create favorable feelings toward the product and to convince at least some members of this group that they would rather splash on some Hunk instead of other colognes.

4. Encourage purchase and trial: As the expression goes, “How do ya know ’til ya try it?” The company now needs to get some of the men who have become interested in the cologne to try it.

5. Build loyalty: Of course, the real test is loyalty: To convince customers to stay with Hunk after they have gone through the first bottle. Promotion efforts must maintain ongoing communications with current users to reinforce the bond they feel with the product.

13-6. What is a push strategy? What is a pull strategy? How are they similar? Different?

A push strategy aims to move products through the channel by convincing channel members, such as retailers and wholesalers, to offer them and entice customers to select these items. It focuses on “pushing” products through personal selling, trade advertising, and trade sales promotions.

A pull strategy focuses on creating consumer demand through marketing communications aimed directly at consumers. It aims to “pull” consumers to products.

Both strategies seek to move products from the producer to the consumer and involve allocating the marketing communication budget to achieve this goal. However, they differ in their target focus and methods. Push strategies influence channel members, whereas pull strategies create direct consumer demand through advertising and promotions.

13-7. What is advertising? Identify the different media that may be used in advertising.

Advertising is a nonpersonal communication paid for by an identified sponsor who is using mass media to persuade or inform. Advertising informs, reminds, and creates (persuades) consumer desire. In other words, advertising is intended to bring about some change in its audience, whether to create awareness of a product, to change the way we think about it, or to get us to run out and buy it immediately.

Different media that may be used in advertising include: • TV • Radio • Newspapers • Magazines • Directories • Out-of-home media • Internet websites • Place-based media • Branded entertainment • Video games • Mobile phones 13-25 Copyright © 2025 Pearson Education, Inc.

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13-8. Firms may seek the help of full-service or limited-service advertising agencies for their advertising. Describe each. What is an interactive, or digital, agency? What is an in-house agency? Explain what has led to an increase in in-house agencies in recent years.

A limited-service agency provides one or more specialized services, such as media buying or creative development. In contrast, a full-service agency supplies most or all of the services a campaign requires, including research, creation of ad copy and art, media selection, and production of the final messages. Interactive or digital agencies specialize in digital media. An in-house agency manages things using employees, who may use programmatic advertising. The increase in in-house agencies in recent years can be attributed to the benefits of programmatic advertising. Programmatic ad buying, which uses algorithms and software to buy digital advertising, has driven firms to establish in-house agencies to gain greater efficiency, speed, control, and cost savings.

13-9. What is consumer-generated advertising, and what are its advantages? What is crowdsourcing, and how is it used in advertising? What is native advertising?

The latest promotional craze is to let your customers actually create your advertising for you. User-generated content (UGC), also known as consumer-generated media (CGM) includes the millions of online consumer comments, opinions, advice posts, consumer-toconsumer discussions, reviews, photos, images, videos, podcasts and webcasts, and product-related stories available to other consumers through digital technology. Marketers that embrace this strategy understand that it is OK to let people have fun with their products. Some marketers encourage consumers to contribute their own do-it-yourself (DIY) ads. Crowdsourcing is a practice in which firms outsource marketing activities (such as selecting an ad) to a community of users (i.e., a crowd). The idea behind crowdsourcing is that if you want to know what consumers think and what they like, the most logical thing to do is to ask them. Native advertising has marketing material that mimics or resembles the content of the website that it is posted on.

13-10. List three pros and three cons for each of the following types of advertising: TV, radio, magazine, out-of-home, Internet, and video game.

•

Pros and cons for various types of advertising include: TV Pros: • TV is extremely creative and flexible.

• Network TV is still a cost-effective way to reach a mass audience.

• TV can provide entertainment and generate excitement.

Cons: • The message is quickly forgotten, unless it is repeated often.

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• •

The audience is increasingly fragmented.

Rising costs have led to more and shorter ads, causing more clutter.

Radio Pros: • Radio is good for selectively targeting an audience—stations are heavily programmed to appeal to specific demographics and psychographics.

• Radio can reach customers on a personal and intimate level.

• It has a relatively low cost for producing and running spots repeatedly.

Cons: • Listeners often don’t pay full attention to what they hear.

• It is not appropriate for products that must be seen or demonstrated to be appreciated.

• Small audiences of individual stations mean ads must be placed with many different stations and repeated frequently.

Magazines Pros: • Audiences can be narrowly targeted by specialized magazines, typically psychographics.

• High credibility and interest level provide a good environment for ads.

• Advertising has a long life (permanency) and is frequently passed along to other readers.

Cons: • With the exception of direct mail, it is the most expensive form of advertising.

• Long deadlines and production schedule reduce flexibility.

• The advertiser must generally use several magazines to reach the majority of a target market.

Out-of-Home Pros: • Most of the population can be reached at a low cost.

• It is good for supplementing other media.

• There is high frequency when signs are located in heavy traffic areas.

Cons: • It is hard to communicate complex messages because of short exposure time.

• It is difficult to measure the advertisement’s audience.

• It is disliked in many communities; local, state, and federal regulations may limit options.

Internet Pros: • With the Internet you can target specific audiences and individualize messages.

• It is interactive—consumers can participate in the ad campaign and create do-it-yourself ads.

• Websites can facilitate both marketing communication and transactions.

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Cons: • Limited to Internet users only.

• Banners, pop-ups, unsolicited email, and the like can be unwanted and annoying.

• It is difficult to measure ads’ effectiveness after clicks and impressions.

Video Games Pros: • Companies can customize their own games or incorporate brands into existing popular games.

• Some game producers now actively pursue tie-ins with brands.

• Millions of gamers play an average of 40 hours per game before they tire of it.

Cons: • Audience is limited to gamers and those who may watch gameplay.

• It can be expensive to integrate into popular games.

• There is limited control over how the brand is presented within the game context.

13-11. Describe the steps in developing an advertising campaign. What is a creative brief? What is meant by the appeal, execution format, tonality, and creative tactics and techniques used in an ad campaign?

An advertising campaign is a coordinated, comprehensive plan that carries out promotion objectives and results in a series of advertisements placed in media over a certain time period. Various departments of an advertising agency may be called upon to become involved in the development of an advertising campaign.

Steps in the development of an advertising campaign include: 1. Understand the target audience.

2. Establish message and budget objectives.

• Set message objectives.

• Set budget objectives.

3. Create the ads.

4. Pretest what the ads will say.

5. Choose the media type(s) and media schedule.

The creation of the advertising begins when an agency formulates a creative strategy, which gives the advertising “creative” (art directors, copywriters, photographers, and others) the direction and inspiration they need to begin the creative process. The strategy is summarized in a written document known as a creative brief—a rough blueprint that guides but does not restrict the creative process. It provides only the most relevant information and insights about the marketing situation, the advertising objective, the competition, the advertising target, and, most importantly, the message that the advertising must deliver.

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Chapter 13: Promotion I: Planning and Advertising

An advertising appeal is the central idea of the ad and the basis of the advertising messages.

It is the approach used to influence the consumer. Execution format describes the basic structure of the message. Some of the more common formats, sometimes used in combination, include: • Comparison: A comparative advertisement explicitly names one or more competitors.

• Demonstration: The ad shows a product “in action” to prove that it performs as claimed: “It slices, it dices!”

• Testimonial: A celebrity, an expert, or a “person on the street” states the product’s effectiveness. The use of celebrity endorser is a common but expensive strategy.

• Slice of life: This format presents a (dramatized) scene from everyday life.

• Lifestyle: This format shows a person or persons attractive to the target market in an appealing setting. The advertised product is “part of the scene,” implying that the person who buys it will attain the lifestyle.

Tonality refers to the mood or attitude the message conveys. Some common tonalities include: • Straightforward: Straightforward ads simply present the information to the audience in a clear manner.

• Humor: Humorous, witty, or outrageous ads can be an effective way to break through advertising clutter.

• Dramatic: A dramatization, like a play, presents a problem and a solution in a manner that is often exciting and suspenseful—a difficult challenge in 30 or 60 seconds.

• Romantic: Ads that present a romantic situation can be especially effective at getting consumers’ attention and at selling products people associate with dating and mating.

• Sexy: Some ads appear to sell sex rather than products. Sex appeal ads are more likely to be effective when there is a connection between the product and sex (or at least romance).

• Apprehension/fear: Some ads highlight the negative consequences of not using a product. In general, fear appeals can be successful if the audience perceives there to be an appropriate level of intensity in the fear appeal.

Creative tactics and techniques include the following: • Animation and art: Not all ads are executed with film or photography.

• Celebrities • Music, jingles, and slogans: Jingles are original words and music written specifically for advertising executions. Slogans link the brand to a simple linguistic device that is memorable. (Jingles do the same but set the slogan to music.)

13-12. What is digital media? What are owned, paid, and earned media? What are the different advertising activities or techniques included in website advertising, mobile advertising, and video sharing?

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The term digital media refers to any media that are digital rather than analog. The more popular types of digital media that advertisers use today include websites, mobile phones, and digital video such as on YouTube.

Website advertising: • Banners are rectangular graphics at the top or bottom of web pages; they were the first form of web advertising.

• Buttons are small banner-type advertisements that a company can place anywhere on a page.

• A pop-up ad is an advertisement that appears on the screen while a web page loads or after it has loaded.

• Search engines and directory listings are ways for people to find web pages of interest to them. A web search engine is a program that searches for documents with specified keywords. Unlike search engines, a web directory does not display lists of web pages based on key words but instead lists sites by categories and subcategories.

• Email advertising that transmits messages to very large numbers of inboxes simultaneously is one of the easiest ways to communicate with consumers—it is the same price whether you send 10 messages or 10,000. One downside to this platform is the explosion of spam. The industry defines this practice as sending unsolicited email to five or more people not personally known to the sender. Many websites that offer email give surfers the opportunity to refuse unsolicited email. This permission marketing strategy gives the consumer the power to opt in or opt out.

• The Mobile Marketing Association defines mobile advertising as “a set of practices that enables organizations to communicate and engage with their audience in an interactive and relevant manner through and with any mobile device or network.”

Video sharing describes the strategy of uploading video recordings or vlogs to sites such as YouTube so that thousands or even millions of other viewers can check them out. For marketers, YouTube provides vast opportunities to build relationships with consumers.

13-13. What are different types of branded content? How do marketers use branded entertainment and support media, such as directories, out-of-home media, and place-based media, to communicate with consumers?

Branded content includes brand placement and branded entertainment, where brands are integrated into entertainment venues, such as movies, TV shows, and video games, to create memorable associations and emotional connections with audiences. Marketers use branded entertainment to make the brand an integral part of the storyline, enhancing recall and influence on purchasing behavior. Support media such as directory advertising, out-ofhome media, and place-based media reach consumers in public and specific environments.

Directory advertising targets consumers seeking information before purchase, while out-ofhome media like billboards and transit ads reinforce messages to a broad audience. Placebased media, including digital signage in locations like airports and health clubs, allows for interactive and personalized advertising, engaging consumers directly.

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Chapter 13: Promotion I: Planning and Advertising

3-14. Compare and contrast advergaming and in-game advertising.

Advergaming involves the creation of brand-specific video games designed to promote a brand, making the brand’s products, logos, or messages central to the gaming experience.

In-game advertising places brand advertisements within existing video games, such as static billboards or dynamic ads that change in real-time.

13-15. How do marketers pretest their ads? How do they posttest ads? What are the dangers of not pretesting?

Although it is clear that advertising does increase sales, advertisers need to conduct research to determine whether specific advertisements are effective. One method of doing this is to conduct pretesting or copy testing (a procedure that measures whether an ad is received, comprehended, and responded to in the desired manner). Versions of this form of testing include concept testing, testing of TV advertising, and finished ad testing.

Advertisers often need more solid evidence that a campaign is producing a return on their investment. In order to do this, advertisers can conduct posttest research to make sure that ads are doing well. Three ways to measure the impact of an advertisement are unaided recall (can consumers remember ads—no prompting is allowed), aided recall (prompting is allowed to aid consumers in remembering ads), and attitudinal measures (probes deeper by examining consumers’ beliefs or feelings about the product before and after being exposed to messages about it).

The dangers of not pretesting ads include unexpected public backlash and costly mistakes.

The 2017 Dove advertising campaign for sulfate-free body wash, where a Black woman removed her shirt to reveal a smiling White woman underneath, is frequently cited as a case of failure to pretest. This ad was perceived as racist by many consumers, and Dove faced immediate consumer pushback.

13-16. What is media planning? How do media planners use reach, frequency, gross rating points, and cost per thousand in developing effective media schedules?

After they choose the advertising media, the planner then creates a media schedule that specifies the exact media the campaign will use as well as when and how often the message should appear. The media schedule outlines the planner’s best estimate of which media will be most effective to attain the advertising objective(s) and which specific media vehicles will do the most effective job. There are also a number of quantitative factors that the media planner uses to develop the media schedule. Reach is the percentage of the target market that will be exposed to the media vehicle at least once during a given period, usually four weeks. Frequency is the average number of times that an individual or a household will be exposed to the message. Note that this is the average. Gross rating points (GRPs) are a measure of the quantity of media included in the media plan. To compare the relative costeffectiveness of different media and of spots run on different vehicles in the same medium, media planners use a measure they call cost per thousand (CPM). This figure reflects the cost to deliver a message to 1,000 people.

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Part 4: Deliver and Communicate the Value Proposition

13-17. Describe continuous, pulsing, and flighting media schedules.

A continuous schedule maintains a steady stream of advertising throughout the year. This is most appropriate for products that we buy on a regular basis. A pulsing schedule varies the amount of advertising throughout the year based on when the product is likely to be in demand. Flighting is an extreme form of pulsing in which advertising appears in short, intense bursts alternating with periods of little to no activity. It can produce as much brand awareness as a steady dose of advertising at a much lower cost if the messages from the previous flight were noticed and made an impact.

13-18. What is algospeak? How might algospeak influence the promotions marketers create?

Algospeak refers to words, phrases, and emojis that have developed as a result of social media users’ tactics to evade content moderation algorithms on social media. Context clues are key to understanding algospeak. This coded language allows users to communicate without triggering automated moderation systems.

Algospeak might influence promotions by necessitating that marketers understand and potentially incorporate these coded forms of communication to resonate with audiences, especially younger users who are adept at using and interpreting such language. For instance, using algospeak could make an ad more relatable and engaging for teenagers.

However, it also could backfire if it appears inauthentic or forced, because the ad might seem like an “ancient” attempt by marketers to sound trendy.

13-19. What are the different types of sonic branding? Provide examples of each.

Sonic branding is the strategic use of sound to express a brand’s identity. Different types of sonic branding include tones, voices, and jingles. Examples include the Microsoft Windows “The Wave” sound (tone), Amazon’s Alexa (voice), and “Every kiss begins with Kay” (jingle). ACTIVITIES: APPLY WHAT YOU’VE LEARNED 13-20.Creative Homework/Short Project Spend an hour or two watching programming that includes advertising. This may include network TV or ad-supported streaming such as Hulu or FreeVee. Make a list of 10 or more ads you see. Tell what brand and product is being advertised and classify each ad according to the following: 1. Appeal USP Emotional Reminder Teaser of mystery ad 2. Execution format Comparison Demonstration Storytelling 13-32 Copyright © 2025 Pearson Education, Inc.

Chapter 13: Promotion I: Planning and Advertising

Testimonial Slice of life 3. Tonality Straightforward Humor Dramatic Romantic Sex Apprehension/fear Romantic appeal What did you learn from this project?

This question can be used as an out-of-class project.

13-21. Creative Homework/Short Project Assume you are the director of marketing for a firm that markets spices and seasonings from around the world . You are developing a promotion plan. Develop suggestions for each of the following items and explain your reasons for each. a. b. c. d.

Marketing communication objectives The method you will use for determining the communication budget The use of a push strategy or a pull strategy Elements of the traditional promotion mix you will use

Student answers will vary. Encourage students to start by clearly defining the marketing communication objectives, such as increasing brand awareness, driving online sales, or enhancing customer loyalty. For determining the communication budget, suggest they explore various methods of budgeting. Discuss the strategic implications of using a push strategy, which focuses on promoting products to retailers and distributors, versus a pull strategy, which targets end consumers directly. Finally, ask them to consider how elements of the traditional promotion mix—including advertising, sales promotion, public relations, personal selling, and direct marketing—can be integrated and leveraged effectively to meet their objectives.

13-22. Creative Homework/Short Project Your company has developed a new hair care line designed to hydrate and reduce frizziness. Using the hierarchy of effects, develop communications objectives for your product for consumers who may be at each stage in the hierarchy. Make sure your objectives are quantitative, specific, and within a time frame.

The marketer “pushes” the consumer through a series of steps, or a hierarchy of effects, from initial awareness of a product to brand loyalty. The task of moving the consumer up the hierarchy becomes more difficult at each step. Many potential buyers may drop out along the way, leaving fewer of the target group inclined to go the distance and become loyal customers. Each part of this path entails different communication objectives to “push” people to the next level: 13-33 Copyright © 2025 Pearson Education, Inc.

Part 4: Deliver and Communicate the Value Proposition

1. Create Awareness: The first step is to make members of the target market aware that there is a new hair care product on the market.

2. Inform the Market: The next step is to provide prospective users with knowledge about the benefits the new product has to offer—to position it relative to other hair care products.

3. Create Desire: The next task is to create favorable feelings toward the product and to convince at least some members of this group that they would rather use this hair care product over its competitors.

4. Encourage Purchase and Trial: As the expression goes, “How do ya know ’til ya try it?” The company now needs to get some of those interested in the hair care product to try it.

5. Build Loyalty: Of course, the real test is loyalty: to convince customers to stay with the hair -care product hand cream after they have gone through the first bottle. Promotion efforts must maintain ongoing communications with current users to reinforce the bond they feel with the product.

13-23. For Further Research (Individual) Many digital entertainment platforms offer multiple pricing plans, often with exposure to advertising being a distinguishing factor. For example, Spotify, Paramount+, and Peacock all offer customers an option to eliminate or minimize exposure to commercials by paying for their highest-level plans. This creates an interesting situation, as those who are most likely capable of paying for premium, ad-free plans are also typically consumers with higher disposable incomes that some advertisers are looking to reach.

Assume you work for an advertising agency that represents a high-end luxury brand.

Explain if and how you would use entertainment platforms that make it so easy for higherincome consumers to eliminate their exposure to traditional commercials. Would you still advertise on these platforms? Why or why not? What other options do you have for reaching these listeners or viewers? Be creative and think outside the box. Share your ideas in a one-page report.

Student answers will vary. Ask students to think critically about the dual nature of premium ad-free options on digital entertainment platforms and the demographic that opts for these plans. Encourage them to analyze whether the remaining audience on these platforms still holds value for a high-end, luxury brand. If deciding to continue advertising, discuss leveraging innovative ad formats, such as sponsored content, product placements in streaming movies/shows, or interactive ads that seamlessly integrate with the viewing experience. Suggest considering alternative avenues for reaching affluent consumers, such as exclusive events, influencer partnerships, personalized digital experiences, or highquality content marketing.

13-24. For Further Research (Individual) A recent study found that over a third of consumers worldwide have boycotted a brand because it did not represent their identity in its marketing communications. Gather examples of firms that have been boycotted. Note the industry, the cause, and the participating communities. How did the brands respond? How 13-34 Copyright © 2025 Pearson Education, Inc.

Chapter 13: Promotion I: Planning and Advertising

long did the boycott last?

Student answers will vary. Encourage students to explore various industries, such as fashion, technology, and food and beverage, to demonstrate that these boycotts are not exclusive to any one industry. Ask them identify the specific causes and to note the communities involved in the boycotts. Encourage a detailed examination of the brands’ responses, focusing on whether they issued public apologies, made policy changes, or implemented new marketing messages. Additionally, have students track the duration of each boycott and analyze its impact on the brand’s reputation and sales. If students need assistance, the following companies may make good case studies for this question: Pepsi, H&M, Bud Light, Nike, Gillette, Target, Starbucks, Chick-fil-A, and Dove.

13-25. Creative Homework/Short Project As we discussed in this chapter, many consumers are highly critical of advertising. To better understand this, conduct a short survey of (1) your college classmates and (2) a different group of consumers, such as your parents and their friends. In the survey, ask the respondents about the criticisms of advertising discussed in this chapter—that is, that advertising (1) is manipulative, (2) is deceptive and untruthful, (3) is offensive and in bad taste, (4) creates and perpetuates stereotypes, and (5) causes people to buy things they don’t really need. Be sure to ask respondents to give you examples of ads that they feel fall in these categories. Develop a report that summarizes your results and compares the attitudes of the two consumer groups.

Student findings and answers will vary. Consider starting by explaining the survey’s objectives and the main criticisms of advertising. To best help students design clear surveys, consider dividing them into groups to gather responses from specific audiences (classmates, friends, parents, etc.) and instruct them on effective survey techniques. After data collection, guide students in compiling, analyzing, and comparing the attitudes of the groups. Facilitate class discussions where groups present their findings. Encourage questions and critical thinking on societal views of advertising and marketer responsibilities. CONCEPTS: APPLY MARKETING METRICS

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Part 4: Deliver and Communicate the Value Proposition Media vehicle

Rating

Cost per ad or insertion

Number of insertions

GRPs for this number of insertions

Young Sheldon

30

$500,000

4 (1 per weekly episode)

30 × 4 = 120

NCIS

20

$400,000

4 (1 per weekly episode)

20 × 4 = 80

CBS Evening News

12

$150,000

12 × 20 = 240

People Magazine

5

$40,000

20 (1 per weeknight news program) 4 (one per weekly publication)

Better Homes and Garden Magazine

12

$30,000

1 (1 per monthly publication)

12 × 1 = 12

USA Today

4

$10,000

12 (3 ads per week)

4 × 12 = 48

5 × 4 = 20

You learned that media planners use a variety of metrics to help in making decisions on what TV show or which magazines to include in their media plans. Two of these are gross rating points (GRPs) and cost per thousand (CPM). GRP is a measure of the quantity of people in your target audience reached with your advertising, and CPM is a measure of the cost effectiveness of different media vehicles.

You have done some research on your target audience and have identified two options for spending your $500,000 budget for advertising next month: (1) four commercials (one per week) aired during The Voice or (2) 12 ads (three per week) in the print version of the Wall Street Journal (WSJ). For the purposes of this exercise, assume that 30 percent of your target audience would see the ad on The Voice at least once while 15 percent of your target audience would see the ad in the WSJ at least once. NBC is quoting you $125,000 per 30-second spot on The Voice, which has an average audience of 6 million viewers. WSJ charges $80,000 for a full-page ad in the print version, which has a total circulation of 550,000.

13-26. Using the given information, calculate the CPM for a single ad for each media vehicle. In general, which vehicle is the most cost effective for reaching 1,000 people?

CPM = Total cost of ad / Audience size in thousands CPM (The Voice) = $125,000 / 6,000 = $20.83 CPM (WSJ) = $80,000 / 550 = $145.45 In general, The Voice is the most cost effective for reaching 1,000 people.

13-27. Calculate the GRP for each option based on the given information. Which option allows you to reach the greatest number of people in your target audience?

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Chapter 13: Promotion I: Planning and Advertising

The WSJ allows you to reach the greatest number of people in your target audience.

13-28. What other factors besides CPM and GRP might impact your decision about the best media vehicle for your company?

Student answers will vary and may include reach, frequency, or audience profile/characteristics. CHOICES: WHAT DO YOU THINK? 13-29. Critical Thinking Many people categorize advertising into two groups: older, traditional media and newer, digital media. However, as digital media continues to mature—many younger consumers have grown up in entirely digital worlds—some forms of digital media are becoming outdated. Identify and analyze which digital media outlets may be losing relevance. Are these forms of media being replaced by something else? What should current advertisers be aware of when it comes to incorporating these types of older digital media into integrated marketing campaigns?

Student answers will vary. Encourage students to consider the evolution of digital media and identify which platforms or outlets may be losing relevance, such as traditional banner ads, pop-ups, and email spam. Prompt them to analyze why these forms are becoming outdated—possibly due to ad-blockers, consumer fatigue, or shifts in user behavior toward more engaging formats. Encourage them to explore what is replacing these older formats, such as native advertising, programmatic ads, or personalized content. Discuss the importance for advertisers to stay current with trends, understand their target audience, and integrate newer, more effective digital strategies into their campaigns.

13-30. Critical Thinking User-generated advertising content is on the rise. Some marketers encourage consumers to contribute their own ads through social media or website platforms.

How do you think this content benefits the marketer? How does it benefit other consumers?

Are there any potential downsides to the practice? How can brands engage in user-generated communications while still protecting their brands?

Students will have various opinions about these issues, especially because more and more consumers rely on online ratings and comments when purchasing products and services.

Discuss the need for a robust moderation system to review content before it goes live.

Encourage students to think about ways to incentivize high-quality contributions.

13-31. Critical Thinking Advertising and other forms of marketing communications have changed radically during the last decade or so as a result of digital technology. List some of these changes. What about each of these changes has benefitted consumers? Harmed consumers?

Benefitted marketers? Harmed marketers? What changes would you recommend?

Students can discuss the advantages and disadvantages of digital marketing communications.

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13-32. Ethics Firms are increasing their use of search engine marketing in which they pay search engines such as Google and Bing for priority position listings. Social media sites such as YouTube generate revenue by offering to sell “search words” to firms so that their posting appears on top. Are such practices ethical? Are consumers being deceived when a firm pays for priority positioning?

Students will have various opinions about these issues. The question is whether they believe that such search engines, media sites, and TV programs/movies should restrict such practices. However, one could argue that any search engine, social media site, TV program, or movie has the right to set up their business/product as they see fit as long as it does not harm consumers. Therefore, how exactly would consumers be harmed from such practices listed in this way?

13-33. Ethics You learned that greenwashing occurs when companies promote their products as environmentally friendly when in truth the brand provides little ecological benefit. Find and describe some examples of greenwashing in a magazine, online, or in a TV ad. What do you think is the likelihood of the ad causing consumers to buy a brand they would not otherwise buy for each? Discuss whether these types of ads should or should not be made illegal. How do these ads fair against the FTC’s Green Guides?

Student answers will vary. Encourage students to critically analyze the persuasive elements in each ad, such as emotional appeals, misleading claims, and the use of eco-friendly imagery. Ask them to consider the potential impacts on different consumer segments, particularly those who are environmentally conscious but may not have the time or resources to verify claims. Discuss the ethical implications and whether such ads should be made illegal, emphasizing the importance of truth in advertising and consumer protection.

Ask students to compare these ads against the FTC’s Green Guides, which provide guidelines for marketers on how to make truthful and substantiated environmental claims.

How well do these ads comply with those standards? MINIPROJECT: LEARN BY DOING 13-34. This miniproject is designed to help you develop your skills in marketing communication planning. Working with one or more of your classmates, complete the following suggested activities.

Select a cause that you feel could benefit from a public service advertisement (PSA) campaign. (Recall that PSAs often focus on social or health issues.)

Assume you are developing components for a multichannel marketing communication program for your PSA campaign. Your campaign can assume a mix of donated advertising, free promotional outlets, and paid advertising.

1. What are the objectives of your communication plan?

2. What are two types of traditional marketing communications you would seek as outlets for your message? Provide details and be specific. Why are these the best for this type 13-38 Copyright © 2025 Pearson Education, Inc.

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3.

4.

5.

6.

of outreach advertising?

You will be using website advertising, mobile advertising, video sharing, and branded entertainment. Design these specific activities providing details.

Look over your recommendations and check to see if your plans: a. Work together to be one integrated program of communication b. Provide a platform that will engage individuals to join in sharing your cause with others c. Educate or raise awareness for your cause If they do not, revise your program.

Make a presentation of the plan to your class.

Students can work in teams to answer the questions. Each team can present its findings to the class. The responsibilities for the project should be shared equally. Instructors may wish to extend the deadline for this assignment, so students have many opportunities to have team meetings, develop a communications plan, and create ads.

Encourage students to start by clearly defining the objectives of their PSA campaign, such as raising awareness, educating the public, or inspiring action. Remind them to ensure that all components of their plan are cohesive and mutually reinforcing (integrated), create opportunities for audience engagement and sharing, and effectively communicate the core message of the cause. Advise them to critically review and refine their plan before presenting it to the class, ensuring it meets all outlined goals and criteria. Students may wish to pre-test their campaign with other students at their university before presenting to the class.

V. MARKETING IN ACTION CASE: REAL CHOICES AT NESTLÉ Summary of Case Known primarily for supporting cryptocurrencies like Bitcoin, blockchain acts as a decentralized ledger that bolsters transaction transparency and security. Nestlé’s adoption of this technology targets the inefficiencies and fraud prevalent in digital advertising, where multiple intermediaries from media agencies to tech platforms eat into ad budgets. Such actions significantly reduce the share of revenue share that reaches publishers—from 85 cents per dollar to just 40 cents. By verifying each transaction, blockchain technology minimizes unauthorized or redundant intermediaries and promises substantial cost savings by ensuring that ads are seen by real people instead of bots. Nestlé is also leveraging blockchain beyond advertising to trace the origin of its coffee beans and enhance supply chain transparency—a strategy that industry giants like Walmart and Toyota are also using for logistical improvements. Despite its promising applications, the widespread adoption of blockchain in digital advertising depends on the cooperation of all parties involved. Some intermediaries may resist the transparency that blockchain enforces, requiring influential market players like Nestlé to implement stringent standards and contractual stipulations to foster the technology’s adoption. With digital advertising set to grow significantly, Nestlé’s proactive approach could launch a broader shift towards more accountable and efficient advertising practices.

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Suggestions for Presentation This case could be assigned for various online or in-class discussion activities.

Online Suggestions Watch the graphical explanation of blockchain found at http://graphics.reuters.com/TECHNOLOGY-BLOCKCHAIN/010070P11GN/index.html and prepare a simple explanation of how blockchain works that you could share with a nontechnical friend.

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Chapter 13: Promotion I: Planning and Advertising

In-Class Suggestions In small groups, discuss the issue of fraud in the digital channel, which results in unreliable statistics (and charges) related to digital advertising. As a future marketer, would this make you reluctant to use digital advertising as part of your promotional mix? Why or why not? How important would it be to deal with this fraud, whether through technologies like blockchain or via some other strategy like government regulation?

Questions for Discussion 13-35. The success of a blockchain approach is largely dependent on the cooperation of the many parties in the ad-buying process. What arguments could Nestlé and other likeminded companies use to convince reluctant intermediaries to get on board with a blockchain strategy?

Similar to the benefits of cooperation among members of a supply chain, the players in the advertising process all benefit in the long run from a reliable and accurate billing process. If the integrity of digital ad billing continues to be suspect, advertisers may abandon (or at least reduce the use of) digital advertising in favor of traditional forms of advertising that use long-standing approaches for billing that are considered more trustworthy. Nestlé and other like-minded companies could try to convince intermediaries that even though employing blockchain will have financial costs, the intermediaries will benefit through increased billings or at least by keeping nervous advertisers from eschewing digital advertising, resulting in decreased billings.

13-36. Beyond those mentioned above, what other steps could be taken to reduce both cost and fraud in the digital advertising process? In your answer, consider options such as self-regulation of the industry, government regulation, and organizational governance approaches.

Advertisers have a long tradition of self-regulation through voluntary membership in advertising industry organizations. Although these are not explicitly focused on regulating digital advertising, any of these could choose to play a role in doing so.

• • • • • • • • •

Advertising Self-Regulatory Council (ASCR)1 National Advertising Division of the Council of Better Business Bureaus (NAD)1 National Advertising Review Board (NARB)1 The Children’s Advertising Review Unit (CARU) under the Children’s Online Privacy Protection Act (COPPA)1 American Association of Advertising Agencies1 American Advertising Federation1 Association of National Advertisers2 Direct Marketing Association2 Interactive Advertising Bureau (IAB) in conjunction with the Council of Better Business Bureaus (CBBB)2

Another voluntary group, the Media Rating Council, is more specifically focused on issues 13-41 Copyright © 2025 Pearson Education, Inc.

Part 4: Deliver and Communicate the Value Proposition

of measurement. According to its website, the MRC’s purpose is: • • •

To secure for the media industry and related users measurement services that are valid, reliable, and effective.

To evolve and determine minimum disclosure and ethical criteria for media measurement services.

To provide and administer an audit system designed to inform users as to whether such measurements are conducted in conformance with the criteria and procedures developed.3

Several government agencies could also play a role in regulating digital advertising.

Congressional oversight committees can put pressure on various players in the digital advertising process through hearings and investigations. Agencies involved in advertising regulation include: • • • • •

Federal Trade Commission (FTC) Federal Communications Commission (FCC) Food and Drug Administration (FDA) U.S. Postal Service Bureau of Alcohol, Tobacco, Firearms and Explosives4

Organizations involved in creating and disseminating digital advertising can also create standards of their own. Meta has been trying to improve its accountability practices, albeit with pressure from both advertisers and federal regulators. Its website outlines steps the company is taking to improve accountability.5 13-37. How might blockchain integration in digital advertising impact smaller businesses that don’t have the same size advertising budgets as corporate advertisers like Nestlé?

What advice would you give to a small business that is interested in leveraging blockchain’s effectiveness and transparency in digital marketing?

Student answers will vary. Encourage students to evaluate the resource disparities between large corporations like Nestlé and smaller businesses. Discuss the opportunities for increased transparency as well as the challenges and costs of blockchain adoption. Suggest practical strategies for small businesses to integrate blockchain. This could include forming partnerships to access shared blockchain services, investing in education to understand blockchain’s potential, initiating small-scale pilot projects to gauge impact, and utilizing ready-made blockchain tools for cost-effectiveness.

WEB RESOURCE Nestlé.com

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1

George Belch and Michael Belch, Advertising/Promotions Management Advertising and Promotion: An Integrated Marketing Communications Perspective (11th ed.). 2018. New York: McGraw Hill Education.

2 IAB, “Self-Regulatory Program for Online Behavioral Advertising,” April 7, 2014, https://www.iab.com/news/selfregulatory-program-for-online-behavioral-advertising/ (accessed June 13, 2024).

3 Media Rating Council. (n.d.). http://mediaratingcouncil.org (accessed June 13, 2024).

4 Belch and Belch, 2018.

5 Meta, “Accountability and New Choices for Marketers,” (n.d.). https://www.facebook.com/business/news/accountability-and-new-choices-for-marketers (accessed June 13, 2024).

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Chapter 14: Promotion II: Social Media Platforms and Other Promotion Elements

Chapter 14 Promotion II: Social Media Platforms and Other Promotion Elements I. CHAPTER OVERVIEW The previous chapter focused on traditional forms of advertising and other communication methods in the one-to-many model. In this chapter, we first look at social media that provides many-to-many marketing communication and then at two types of one-to-one communication: direct marketing and personal selling. Finally, we will learn about public relations. Public relations is the final element of the promotion mix and includes a variety of communication activities.

Some of these such as lobbying are one-to-one. Others, such as press releases distributed to the news media for publication, follow the one-to-many model. Increasingly, PR professionals are not only engaged in guerrilla marketing but also are moving quickly online to join in the many-tomany model.

II. CHAPTER OBJECTIVES 14-1. Understand how marketers communicate using an updated communication model that incorporates new social media and buzz marketing activities.

14-2. Explain what sales promotion is and describe the different types of consumer and B2B sales promotion activities.

14-3. Understand the important role of personal selling, the different types of sales jobs, and the steps in the creative selling process.

14-4. Explain the role of public relations and the steps in developing a public relations campaign.

14-5. Understand the importance of networking in managing a successful career.

III. CHAPTER OUTLINE

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p. 546

REAL PEOPLE, REAL CHOICES─HERE’S MY PROBLEM AT BRANDMOVERS Andrew built Brandmovers into a major digital sales promotion company. Brandmovers specializes in digital promotions including: • Contests, sweepstakes, instant wins • Social/UGC promotions • Digital rewards and affinity programs • Product launch campaigns Ideally, clients would commit to a budget for a yearly retainer. In essence, the more hours Brandmovers devoted to a project, the more the agency earned. The agency could hire new talent and budget the operations according to the needs of the client. But clients preferred to hire an agency like Brandmovers for specific sales projects. Brandmovers’ technology portfolio delivered online sales promotions. How could the company leverage these insights to expand and develop a better match between resources and client demand?

The vignette ends by asking the student which option he/she would choose.

1. Explore additional markets that could benefit from digital promotional marketing.

2. Build a digital loyalty marketing platform.

3. Capitalize on the company’s success to date and put Brandmovers up for sale.

p. 547

Andrew chose option #2.

1. SOCIAL MEDIA MARKETING Most of us are “on” 24/7 these days. Authors Charlene Li and Josh Bernoff refer to the changing communication landscape as the groundswell: “a social trend in which people use technology to get the things they need from each other, rather than from traditional institutions like corporations.” Today’s consumers increasingly get their information and news via their social interaction with friends and family—they even get their entertainment from one another.

Internet advertising spending is expected to exceed $690 billion by 2024. Advertisers are spending less on traditional media because they no longer see it as quite as effective when they talk to customers. Consumers are engaged in media multitasking or second screening.

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Exhibit: Andrew Mitchell

Chapter 14: Promotion II: Social Media Platforms and Other Promotion Elements

p. 548

The abundance of streaming services and the proliferation of cord-cutting, where consumers cancel their traditional cable subscriptions and rely on streaming, and the growth of C2C shopping sites, are of interest to marketers.

1.1. Social Media Social media are an important part of the updated communications model. This term refers to Internet-based platforms that allow users to create their own content and share it with others who access these sites.

Brand ambassadors, or brand evangelists are loyal customers recruited to communicate with and sell to other consumers for a brand they care a great deal about.

Exhibit: Mobile 1.2. Social Networks devices Social networks are sites used to connect people with other similar people. Social networks such as Facebook and LinkedIn are some of the most popular sites on the Internet with millions of users from around the globe.

p. 549

Social networks make it easy for marketers to reach influential people such as journalists and consumers who are opinion leaders.

However, even more important is the opportunity social networks provide to create a brand community. A brand community is a group of social network users who share an attachment to a product or brand, interact with each other, and share information about the brand. Members of a brand community might cosplay (or costume play).

1.2.1. Facebook Facebook is the most popular of all social networking sites.

Facebook had 3 billion daily active users when they wrote the book, but continues to lose college-aged users, who spend more time on Instagram, Snapchat, and YouTube. Facebook also lost advertisers due to boycotts in response to its handling of hate speech. Students access social media sites from their phones.

p. 550

1.2.2. Instagram Instagram, a social networking site dedicated to sharing photos and short videos, allows brands to connect with consumers through their own accounts and those of influencers via sponsored posts.

1.2.3. Threads Threads is the newest offering from Meta and has quickly become the fastest-growing app in history following its summer 2023 release. This new app for “sharing text updates and joining 14-3 Copyright © 2025 Pearson Education, Inc.

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public conversations” offers an easy sign-up process for Instagram users, who can bring over their profile and account followers as well.

1.2.4 YouTube YouTube is a free online video platform that is used by 2.7 billion users worldwide and features channels from consumers and businesses. YouTube is a popular place of product reviews and unboxing videos.

p. 551

1.2.5. TikTok TikTok is a social networking site that hosts short-form videos.

Videos may last for 15 seconds and are typically accompanied by music. TikTok has become attractive to brands and influencers.

Branding opportunities include in-feed video ads and hashtag challenges. It has 1.2 billion monthly active users.

TikTok users are able to create their own content or respond to others. A response can include a comment or a stitch. Stitches allow users to play a portion of another user’s video before following with their own content.

Exhibit: TikTok

TikTok is controversial and several countries, including the U.S., have sought to ban or restrict its usage. In 2024, Congress sent a bill to President Biden that he signed restricting TikTok in the U.S.. However, the impact of the legislation remains uncertain.

1.2.6. Snapchat Snapchat promotes itself as the fastest way to share a moment. It allows users to share snaps that are only available for a limited period of time (until seen or 24 hours if in a story). It has a “Discovery” area that features content from major brands and media outlets. It is the most popular social network among U.S. teenagers.

p. 551

1.2.7. Twitch Twitch is the social networking site for live streaming and the most used streaming platform for broadcasting video games. It also hosts videos from cooks, artists, vloggers, and musicians.

1.2.8. X (formerly known as Twitter) Exhibit: Twitch X is a free micro-blogging service that lets users post short text messages. Unlike other social media, X is a broadcast medium, which means that marketers can send messages to hundreds of thousands of people at a time. X has 166 million monetizable daily active users (mDAUs). It increased its 140-character limit to 14-4 Copyright © 2025 Pearson Education, Inc.

Chapter 14: Promotion II: Social Media Platforms and Other Promotion Elements

280 characters in 2017. After being purchased by Elon Musk in 2022 the platform now has paying subscribers who can use 4,000 characters per post. Many users abandoned the platform after Musk took over. p. 552

Marketers need to monitor X to understand what consumers say about their products.

1.2.9. Pinterest Pinterest is an image-based social network founded in 2009 that is both a visual discovery engine and a social media outlet. With 1 billion site visits in just one month, Pinterest is one of the most visited Internet sites. The platform hosts over 84 million users in the U.S. and is the 15th most popular social media platform worldwide. Its brand value has grown over 50 percent since 2021.

1.2.10. Virtual Worlds Exhibit: Pinterest Virtual worlds, or the metaverse, are online, highly engaging digital environments where avatars—graphic representations of users—live and interact with other avatars in real time.

In virtual worlds, residents can hang out at virtual clubs, shop for clothing and bling for their avatars, buy furniture to deck out virtual homes, and yes, even go to college in virtual universities.

Some people find it hard to believe, but it is common for people to spend real money to buy digital products that do not exist in the real world. Indeed, virtual goods, digital products consumers buy for use in online contexts, are booming, and are expected to grow to $8 billion by 2030.

Exhibit: Virtual worlds 1.2.11. Social Commerce Social commerce refers to consumer decision-making activities that occur in, or are influenced by, someone’s social network.

Consumers search for product information via social media.

Pinterest has buyable pins and YouTube has shoppable ads.

Snapchat has a shoppable show called “The Drop” and has updated its Augmented Reality Lens with a shoppable option.

p. 554

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1.2.12. Product Review Sites Product review sites are social media sites that enable people to post stories about their experiences with products and services.

Marketers hope that product review sites create a connection between the consumer and the brand. Product review sites give users both positive and negative information about companies.

Common product review sites include: • TripAdvisor 14-5 Copyright © 2025 Pearson Education, Inc.

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• • • • • • • •

Yelp Trustpilot Angi Home Advisor Thumbtack TaskRabbit Swagbucks Review Stream

Exhibit: TaskRabbit

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1.3.

Location-Based Social Networks and Mobile Apps Location-based social networks integrate sophisticated GPS technology (like the navigation system you may have in your car) that enables users to alert friends of their exact whereabouts via their mobile phones.

Augmented reality (AR) is a view of a physical, real world that is enhanced or altered by computer-generated sounds, videos, graphics, or GPS data.

Instacart allows users to order groceries from your phone, tablet, or computer. Bitmoji allows users to customize avatars. Signal Private Messenger allows users to send and receive encrypted Exhibit: Duolingo messages and calls.

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1.4.

The Internet of Things This term refers to the network of physical things, vehicles, devices, and buildings in which designers have embedded sensors, electronics, and network connectivity. With this technology, “things” can collect data and communicate it to each other—the many to many of things.

1.5. Disruption in Storytelling The art of storytelling typically involves characters, setting, plot, conflict, and resolution. Short-form storytelling includes tweets, snaps, Instagram posts, and TikTok videos. Keep marketing communications short and sweet.

2. SALES PROMOTION Sales promotions are programs that marketers design to build interest in or encourage purchase of a good or service during a specified period.

p. 556

Table 14.1: Marketers are increasing their total marketing communication budget allocated to sales promotions. Large stores can pressure Consumer Sales manufacturers to provide deals and discounts. Consumer loyalty Promotion 14-6 Copyright © 2025 Pearson Education, Inc.

Chapter 14: Promotion II: Social Media Platforms and Other Promotion Elements

is declining. Promotions may motivate price-conscious customers Techniques: A to switch brands.

Sampler p. 556

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p. 557

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Marketers target sales promotion activities either to ultimate consumers or to members of the channel such as retailers that sell their products. Thus, we divide sales promotion into two major categories: consumer-oriented sales promotion and trade-oriented sales promotion.

2.1.

Sales Promotion Directed Toward Consumers For consumer sales promotion, the major reason for this is that most promotions temporarily change the price/value relationships. Figure 14.1 Snapshot: 2.1.1. Price-Based Consumer Sales Promotion Types of Many sales promotions emphasize short-term price reductions or Consumer Sales rebates that encourage people to choose a brand, during the deal Promotions period. If used too frequently, consumers become conditioned to purchase only when the product is at a low promotional price.

• Coupons are certificates redeemable for money off on a purchase and are the most common price promotion.

• Price deals, refunds, and rebates are temporary price reductions to stimulate sales. This price deal may be printed on the package itself, or it may be a price-off flag or banner on the store shelf. Alternatively, companies may offer rebates that allow the consumer to recover part of the purchase price via mail-ins to the manufacturer.

• Frequency programs, also called loyalty or continuity programs, offer a consumer a discount or a free product for multiple purchases over time.

• Special/bonus packs involve giving the shopper more products instead of lowering the price. A special pack also can be in the form of a unique package such as a reusable decorator dispenser for hand soap.

2.1.2. Attention-Getting Consumer Sales Promotions Attention-getting consumer promotions stimulate interest in a company’s products. Some typical types of attention-getting promotions include the following: • Contests and sweepstakes: a contest is a test of skill, while a sweepstake is based on chance.

• Premiums are items offered free to people who have bought a product.

• Product sampling encourages people to try a product by distributing trial-size and sometimes regular-size versions Exhibit: Sales promotion SMS in stores, in public places such as student unions, or through the mail.

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2.2.

Trade Sales Promotion: Targeting the B2B Customer Figure 14.2 Trade sales promotions target the B2B customer—located Snapshot: Trade somewhere within the supply chain.

Sales Promotions Table 14.2 2.2.1. Discount Promotions Characteristics of Discount promotions (deals) reduce the cost of the product to the Trade Sales distributor or retailer or help defray its advertising expenses. One Promotion type of promotion is a price break, which could be in the form of Approaches a merchandising allowance or a case allowance that provides a discount based on sales volume.

Some large retailers purchase large quantities of a product during a discount period and warehouse them, a practice called forward buying. Sometimes they engage in diverting, selling stockpiled goods at a profit to other retailers.

2.2.2. Co-Op Advertising Another type of trade allowance is co-op advertising. These programs offer to pay a portion, usually 50 percent, of the cost of any retailer advertising that features the manufacturer’s product.

2.2.3. Sales Promotion to Increase Industry Visibility Other types of trade sales promotions increase the visibility of a manufacturer’s products to channel partners within the industry.

Forms of sales promotion include the following: • Trade shows • Promotional products • Point-of-purchase (POP) displays • Incentive programs Push money is a bonus paid by a manufacturer to a salesperson, customer, or distributor for selling its product. p. 561

3.

PERSONAL SELLING: ADDING THE PERSONAL TOUCH TO THE PROMOTION MIX Personal selling occurs when a company representative interacts directly with a customer or prospective customer to communicate about a good or service. This form of promotion is a far more intimate way to talk to customers.

Jobs in selling and sales management often provide high upward mobility if you are successful, because firms value employees who understand customers and who can communicate well with 14-8 Copyright © 2025 Pearson Education, Inc.

Exhibit: Trade show

Exhibit: Promotional products with logos

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them. p. 561

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3.1.

The Role of Personal Selling in the Marketing Mix Personal selling also is likely to be crucial in business-to-business contexts where the firm must interact directly with a client’s management to close a deal or when intense negotiations about price and other factors will occur before the customer signs on the dotted line. In consumer contexts, inexperienced customers may need the hands-on assistance that a professional salesperson Figure 14.3 provides.

Snapshot: Factors That Influence a Some drawbacks limit the role personal selling plays in the Firm’s Emphasis marketing communication mix. First, when the dollar amount of on Personal individual purchases is low, it does not make sense to use Selling personal selling—the cost per contact with each customer is very high compared to other forms of promotion.

p. 563

3.2.

Technology and Personal Selling All sorts of technologies can enhance the personal selling process, and clearly today, the smartphone is the communication hub of the relationship between salesperson and client.

p. 563

Customer relationship management (CRM) software is one technological advance. Cloud computing changed information storage. Partner relationship management (PRM) links information between selling and buying firms.

Others are teleconferencing, videoconferencing, and improved corporate websites that include FAQ pages that answer many customer inquiries. VoIP (voice-over Internet protocol) is being used for day-to-day correspondence between salespeople and customers (e.g., Skype).

p. 563

Privacy and Zoom bombing may be a concern. Technological advances and changing cultural values mean salespeople telecommute from a virtual office. Smart sales organizations can find the right blend of technology and personal touch, tailored to their particular clientele and product offerings, which make the most of building strong customer relationships.

p. 564

Social selling is the practice of using social media to engage in the selling process. Twitter and LinkedIn are among the most popular platforms for social selling.

p. 564

3.3.

Future Trends in Professional Selling Professional selling continues to evolve. Huge advances in new technology continue to rock the sales industry. Three trends of 14-9 Copyright © 2025 Pearson Education, Inc.

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note are the influence of artificial intelligence (AI), the rising influence of millennials as both buyers and sellers, and accountbased selling, the practice of choosing the best way to sell to B2B individual customers.

3.4.

Types of Sales Jobs There are several different types of sales jobs from which to choose. Each type has its own unique characteristics.

An order taker is a salesperson that processes transactions the customer initiates. Many retail salespeople are order takers, but often wholesalers, dealers, and distributors employ salespeople to assist their business customers. Because little creative selling is involved in order taking, this type of sales job typically is the lowest-paid sales position.

In contrast, a technical specialist contributes considerable expertise in the form of product demonstrations, recommendations for complex equipment, and setup of machinery. The technical specialist provides sales support rather than actually closing the sale. p. 565

Then there is the missionary salesperson whose job is to stimulate clients to buy. Like technical specialists, missionary salespeople promote the firm and encourage demand for its goods and services but do not actually take orders.

The new-business salesperson is responsible for finding new customers and calls on them to present the company’s products.

As you might imagine, gaining the business of a new customer usually means that the customer stops doing business with one of the firm’s competitors (and they won’t give up without a fight).

New-business selling requires a high degree of creativity and professionalism, so this type of salesperson is usually very well paid.

In a long-term relationship-building role, this type of salesperson is an order getter. Order getters are usually the people most directly responsible for a particular client’s business; they may also hold the title of “account manager.”

p. 565

Increasingly, firms find that the selling function works best via team selling. A selling team may consist of a salesperson, a technical specialist, someone from engineering and design, and other players who work together to develop products and programs that satisfy the customer’s needs. Key account refers to 14-10 Copyright © 2025 Pearson Education, Inc.

Figure 14.4 Snapshot: Types of Sales Jobs

Chapter 14: Promotion II: Social Media Platforms and Other Promotion Elements

very large customer organizations with the potential for providing significant sales revenue. When the company includes people from a range of areas, it often calls this group a crossfunctional team. p. 566

3.5.

Two Approaches to Personal Selling Selling has moved from a transactional, hard-sell approach to an approach based on relationships with customers.

3.5.1. Transactional Selling: Putting on the Hard Sell Hard-sell tactics reflect transactional selling, an approach that focuses on making an immediate sale with little concern for developing a long-term relationship with the customer. As customers, the hard sell makes us feel manipulated, resentful, and it diminishes our satisfaction and loyalty.

p. 566

3.5.2. Relationship Selling: Building Long-Term Customers Relationship selling is the process by which a salesperson secures, develops, and maintains long-term relationships with profitable customers.

Securing a customer relationship means converting an interested prospect into someone who is convinced that the good or service holds value for her. Developing a customer relationship means ensuring that you and the customer work together to find more ways to add value to the transaction. Maintaining a customer relationship means building customer satisfaction and loyalty— thus, you can count on the customer to provide future business and stick with you for the long haul.

p. 566

3.6.

The Creative Selling Process Successful salespeople understand and engage in a series of activities to make positive transactions happen. A salesperson’s chances of success increase when she undergoes a systematic series of steps we call the creative selling process.

p. 566

3.6.1. Step 1: Prospect and Qualify Prospecting is the process by which a salesperson identifies and develops a list of prospects or sales leads (potential customers).

Leads come from existing customer lists, telephone directories, commercially available databases, and of course through diligent use of web search engines like Google.

Another way to generate leads is through cold calling, in which the salesperson simply contacts prospects “cold,” without prior introduction or arrangement. It always helps to know the prospect, so salespeople might rely instead on referrals. Current clients who 14-11 Copyright © 2025 Pearson Education, Inc.

Figure 14.5 Process: Steps in the Creative Selling Process

Part 4: Deliver and Communicate the Value Proposition

are satisfied with their purchase often recommend a salesperson to others—yet another reason to maintain good customer relationships.

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After they identify potential customers, salespeople need to qualify these prospects to determine how likely they are to become customers.

3.6.2. Step 2: Preapproach In the preapproach stage, you compile background information about prospective customers and plan the sales interview.

Salespeople can draw information about a prospect from a variety of sources.

3.6.3. Step 3: Approach After the salesperson lays the groundwork with the pre-approach, it is time to approach, or contact, the prospect. The salesperson tries to learn even more about the prospect’s needs, create a good impression, and build rapport. During the approach, the customer decides whether the salesperson has something to offer that is of potential value.

3.6.4. Step 4: Sales Presentation Many sales calls involve a formal sales presentation, which lays Exhibit: out the benefits of the product and its advantages over the Automation competition. The focus of the sales presentation should always be on ways the salesperson, her goods and services, and her company can add value to the customer (and in a business-to-business setting, to the customer’s company).

3.6.5. Step 5: Handle Objections The effective salesperson anticipates objections—reasons why the prospect is reluctant to make a commitment—and she has prepared to respond with additional information or persuasive arguments. Actually, the salesperson should welcome objections because they show that the prospect is at least interested enough to consider the offer and seriously weigh its pros and cons.

3.6.6. Step 6: Close the Sale But there still comes a point in the sales call at which one or the other party has to move toward gaining commitment to the objectives of the call—presumably a purchase. This is the decision stage, or close.

• A last objection close asks customers if they are ready to purchase and then addresses any concerns they have about the product.

• An assumptive or minor points close means a salesperson acts as if the purchase is inevitable with only a small detail or two to be settled.

• A standing-room-only or buy-now close suggests the opportunity might be missed if the customer hesitates.

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p. 568 p. 568

3.6.7. Step 7: Follow-Up The follow-up after the sale includes arranging for delivery, payment, and purchase terms. It also means the salesperson makes sure the customer received delivery and is satisfied. Follow-up also allows the salesperson to bridge to the next purchase. Once a relationship develops, the selling process is only beginning. Even as one cycle of purchasing ends, a good salesperson already lays the foundation for the next one.

p. 569

4.

PUBLIC RELATIONS Public relations (PR) is the communication function that seeks to build good relationships with an organization’s publics; these include consumers, stockholders, legislators, and other stakeholders in the organization.

p. 569

The basic rule of good PR is, Do something good, and then talk about it. The big advantage of this kind of communication is that when PR messages are placed successfully, they are more credible than if the same information appeared in a paid advertisement.

Public relations strategies are crucial to an organization’s ability to establish and maintain a favorable image. Proactive PR activities stem from the company’s marketing objectives. For example, marketers create and manage publicity which is unpaid communication about an organization that gets media exposure.

p. 569

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As many of the other functions of public relations blend into buzz marketing activities, perhaps the most important function it still “owns” is crisis management. This refers to the process of managing a company’s reputation when some negative and often unplanned event threatens the organization’s image. Even a single negative event can cause permanent damage to a company, the success of its products, and its stockholder equity.

4.1.

Plan a PR Campaign A public relations campaign is a coordinated effort to communicate with one or more of the firm’s publics. This is a three-step process that develops, executes, and evaluates objectives.

Marketing communication experts know that PR strategies are best used in conjunction with advertising, sales promotion, and personal selling to send a consistent message to customers and other stakeholders. As part of the total marketing communication plan, they often rely on PR to accomplish the following objectives: • Introduce new products to retailers and consumers.

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Figure 14.6 Snapshot: Objectives and Tactics of Public Relations

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• • • • • •

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Exhibit: Influence government legislation.

Microsoft’s AI Enhance the image of an organization.

Copilot Provide advice and counsel for top management.

Enhance the image of a city, region, or country.

Manage a crisis.

Call attention to a firm’s involvement with the community.

• Bring attention to a social issue. Ben & Jerry’s spends as much as 20 percent of its discretionary marketing dollars on corporate activism or social marketing.

4.2.

PR Tactics All PR activities strive for the same goal—to create and maintain the positive image the organization needs.

Exhibit: Ben & Jerry’s 4.2.1. Press Release The most common way for PR specialists to communicate is by a press release. This is a report of some event or activity that an organization writes and sends to the media in the hope that it will be published free. A newer version of this idea is a video news release (VNR) that tells the story in a film format instead. Some of the most common types of press releases include the following: Timely topics deal with topics in the news. Universities publish research project stories to highlight breakthroughs by faculty researchers. Consumer information releases provide information to help consumers make product decisions.

4.2.2. Internal PR and External Stakeholders Internal PR activities target employees; they often include company newsletters and closed-circuit television to keep people informed about company objectives, successes, or even plans to “downsize” the workforce. Often company newsletters also are distributed outside the firm to suppliers or other important publics.

Investor relations activities focus on communications to those whose financial support is critical; this is especially vital for publicly held companies.

Lobbying means talking with and providing information to government officials to persuade them to vote a certain way on pending legislation or even to initiate legislation or regulations that would benefit the organization.

p. 572

4.2.3. Speech Writing and Corporate Communications An important job of a firm’s PR department is speech writing; specialists provide speeches for company executives to deliver.

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Chapter 14: Promotion II: Social Media Platforms and Other Promotion Elements

While some executives do actually write their own speeches, it is more common for a speechwriter on the PR staff to develop an initial draft of a speech to which the executive might add his own input. PR specialists also provide input on corporate identity materials, such as logos, brochures, building design, and even stationery that communicates a positive image for the firm.

One of the tasks of the PR professional is to develop close media relations to insure the organization will receive the best media exposure possible for positive news, such as publicizing the achievements of an employee who has done some notable charity work or for a product it developed that saved someone’s life. p. 572

4.2.4. Sponsorships and Special Events Sponsorships are PR activities through which companies provide financial support to help fund an event in return for publicized recognition of the company’s contribution. A related task is to plan and implement special events.

p. 572

4.2.5. Brand Ambassadors and Evangelists Many marketers realize that they cannot create buzz by themselves; they recruit loyal customers as brand ambassadors or brand evangelists to help them. These zealous consumers can be the best salespeople a company can ever find. They often work without pay. They are heavy users, take a product seriously, care a great deal about it, and want it to succeed. In addition, they know the target audience better than anyone since they are a part of it.

p. 573

4.2.6. Guerrilla Marketing Organizations with tiny advertising budgets need to develop innovative and cheap ways to capture consumers’ attention.

Guerrilla marketing activities are an increasingly popular way to accomplish this objective. No, this term does not refer to marketers making monkeys out of themselves (that’s “gorilla marketing”). A guerrilla marketing strategy involves “ambushing” consumers with promotional content in places where they do not expect to encounter these messages. Ambient advertising is a popular type of guerrilla marketing. This term describes the placement of messages in nontraditional media.

p. 573

4.3.

Buzz Marketing The many-to-many communication model relies on consumers like you to talk to one another about goods, services, and organizations. Marketers think of buzz as everyday people helping their marketing efforts when they share their opinions with their friends and neighbors.

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Companies today spend millions to create consumer positive buzz.

Firms like Dell have named word-of-mouth (WOM) marketing managers, and the WOMMA (Word-of-Mouth Marketing Association). The membership roster includes most of the top consumer-brand companies. Techniques to encourage consumers to spread information about companies and their products come under a variety of names such as word-of-mouth marketing, viral marketing, buzz marketing, and evangelist marketing.

Exhibit: Heinz p. 574

p. 574

Tryvertising is advertising by sampling that is designed to create buzz about a product. F-commerce is e-commerce that takes place on Facebook.

People like to share their experiences, good or bad, with others.

Truly happy customers will share their excitement about a brand.

Unfortunately, the unhappy ones will be even more eager to tell their friends about their unpleasant experiences.

Brand polarization is the gap between good buzz and bad buzz.

p. 574

4.3.1. Viral Marketing One form of buzz building is viral marketing. This term refers to marketing activities that aim to increase brand awareness or sales by consumers passing a message along to other consumers, hopefully in an exponential fashion—much like your roommate passes a cold onto you and you pass it along to all your other friends. Today, most viral marketing tactics are subtler and consist of marketers’ use of video clips, interactive games, or other activities that consumers will find so interesting or unique that they want to share them with their friends using digital technology.

p. 575

Memes are ideas with staying power that move from person to person competing for attention along the way.

p. 575

4.3.2. Ethical Problems in Buzz Marketing Just as firms are discovering there are a myriad of opportunities for buzz marketing, there are equally large opportunities for unethical or at least questionable marketing behavior. Some of these are as follows: • Activities designed to deceive consumers.

• Deepfakes: Global advertisers have used these deepfakes—digital simulations, often of celebrities—to cast commercials and generate buzz. Sometimes these usages are unauthorized. Sock puppeting (A company executive or other biased source poses as someone else to plug a 14-16 Copyright © 2025 Pearson Education, Inc.

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p. 575 • • •

product in social media.) Another form of sock puppeting is so-called paid influencer programs that attempt to start Table 14.3 online conversations about brands when they encourage Measuring the bloggers to write about them.

Effectiveness of Direct buzz marketing at children or teens.

PR Tactics Buzz marketing activities that damage property.

Social marketing that upsets consumers and partners.

p. 575

4.4.

Evaluation of a PR Campaign One of the barriers to greater reliance on PR campaigns is evaluation; compared to many other forms of marketing communications, it’s difficult to devise metrics to gauge their effectiveness. Table 14.3 describes some of the most common PR measurement techniques.

p. 577

5. BRAND YOU: HOW NETWORKING CAN HELP YOU ACHIEVE YOUR CAREER GOALS 5.1. Networking–How It Works • Keep in touch.

• Always help people in your network, even when it’s not convenient.

• Develop strong relationships with people in your network and then expand your network via the networks of members of your network.

5.2. Where to Start Networking • Have business cards made with your name and contact information.

• Join a professional association.

• Talk to speakers in class, at conferences, and at professional meetings.

• Email or call authors of articles in trade journals or magazines.

5.3. How LinkedIn Can Help You Build Your Network Create a LinkedIn profile. Include relevant work experiences, including internships, volunteer experience, and involvement on and off campus. Reach out to your network.

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5.4. Other Ways to Enhance Networking Have business cards, join a professional organization, volunteer, consider an internship, clean up social media.

Here’s My Choice……

Andrew went with Option 2 and decided to build a digital loyalty marketing platform. This would address numerous pain points currently in the business. First, it would solve the “feast or famine” dilemma that project work creates. As clients’ businesses grow,

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the new platform would grow with them because they pay a subscription based on the number of transactions customers make within the program. In addition, the same basic platform would scale to multiple clients, so the new entity would not need to hire as many new people to get the job done. Unlike project work where clients rarely request a duplication of what already exists, the new platform could reuse the same technology for multiple applications.

IV. END-OF-CHAPTER ANSWER GUIDE CHAPTER QUESTIONS AND ACTIVITIES  CONCEPTS: TEST YOUR KNOWLEDGE 14-1. What is groundswell? Why is it an important concept for marketers to understand?

Groundswell is a social trend in which people use technology to get the things they need from each other, rather than from traditional institutions like corporations. Groundswell is essential for marketers to understand because it reflects a shift in how consumers gather information and make purchasing decisions. Consumers increasingly rely on each other’s opinions and recommendations shared through social media, online reviews, and other digital platforms. This means that marketers need to engage with consumers in these digital spaces, foster positive word-of-mouth, and build authentic relationships to effectively influence consumer behavior.

14-2. What are some ethical challenges in buzz marketing?

Just as firms are discovering there are a myriad of opportunities for buzz marketing, there are equally large opportunities for unethical or at least questionable marketing behavior.

Some of these are as follows: • Activities designed to deceive consumers • Directing buzz marketing at children or teens • Buzz marketing activities that damage property • Stealth marketing activities that deliberately deceive or lie on behalf of clients 14-3.

One form of buzz building is viral marketing. This term refers to marketing activities that aim to increase brand awareness or sales by consumers passing a message along to other consumers, hopefully in an exponential fashion—much like your roommate passes a cold onto you and you pass it along to all your other friends. Today, most viral marketing tactics are subtler and consist of marketers’ use of video clips, interactive games, or other activities that consumers will find so interesting or unique that they want to share them with their friends using digital technology. Why does the FTC work to protect consumers from deception? What are some practices it has implemented?

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The FTC (Federal Trade Commission) works to protect consumers from deception to ensure a fair marketplace where consumers can trust the information they receive about products and services. Deceptive marketing practices can harm consumers by leading them to make uninformed decisions. To combat deception, the FTC has implemented several practices, including the Guides Concerning the Use of Endorsements and Testimonials in Advertising. This guideline requires endorsers to disclose any material connections to the brands they promote, including payments received or free products provided by the company. Additionally, the FTC actively monitors advertising claims to ensure they are truthful and not misleading. It takes action against companies that the agency believes make false or unsubstantiated claims about their products.

14-4. What is social media? How would marketers decide whether to use platforms such as Facebook, Instagram, TikTok, Snapchat, or YouTube?

Social media refers to internet-based platforms that enable users to create, share, and engage with content and connect with others. Marketers decide which social media platforms to use based on their target audience and the nature of their content. For example, Facebook and Instagram are ideal for reaching a broad and diverse audience with visual content, while TikTok is popular for engaging younger audiences with short, creative videos. Snapchat can be used for temporary content and targeting younger demographics, and YouTube is suitable for long-form video content and tutorials.

Marketers must align their platform choice with their marketing goals, audience preferences, and content type to maximize engagement and effectiveness.

14-5. What is social commerce?

Social commerce refers to consumer decision-making activities that occur in, or are influenced by, someone’s social network—particularly online.

14-6. What is sales promotion? Explain some of the different types of price-based consumer sales promotions marketers frequently use. Explain some of the different types of attention-getting consumer sales promotions marketers frequently use. Describe some of the types of trade sales promotion frequently used by marketers.

Sales promotions are programs that marketers design to build interest in or encourage purchase of a good or service during a specified time. Sales promotion is divided into two major categories: consumer-oriented sales promotion and trade-oriented sales promotion.

Marketers target sales promotion activities either to ultimate consumers or to members of the channel such as retailers that sell their products.

Attention-getting consumer promotions stimulate interest in a company’s products. Some typical types of attention-getting promotions include the following: • Contests and sweepstakes: A contest is a test of skill, whereas a sweepstake is based on chance.

• Premiums are items offered free to people who have bought a product.

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•

Sampling encourages people to try a product by distributing trial-size and sometimes regular-size versions in stores, in public places such as student unions, or through the mail.

Trade sales promotions include: • Discount promotions (deals) reduce the cost of the product to the distributor or retailer or help defray its advertising expenses.

• Co-op advertising programs offer to pay a portion, usually 50 percent, of the cost of any retailer advertising that features the manufacturer’s product.

• Other forms of sales promotion include trade shows, promotional products, pointof-purchase displays, and incentive programs.

14-7. How is artificial intelligence affecting marketing communications?

Artificial intelligence (AI) is influencing marketing communications by prioritizing customers and enhancing salesperson productivity. AI helps salespeople identify which accounts they are most likely to finalize deals with each day, thereby focusing their efforts more efficiently. Additionally, AI automates time-consuming tasks such as logging emails and generating invoices, allowing salespeople to spend more time anticipating customer needs. AI-powered chatbots are increasingly popular for connecting with customers, providing immediate responses and assistance. As AI continues to advance, its role in streamlining and improving marketing communications is expected to grow, making interactions more personalized and effective.

14-8. What is relationship selling? How does it differ from transactional selling?

Relationship selling is a form of personal selling in which the salesperson seeks to develop a mutually satisfying relationship with the customer so the parties can work together to satisfy each other’s needs. This process tends to build long-term relationships.

Transactional selling is a form of personal selling that focuses on making an immediate sale with little or no attempt to develop a relationship with the customer. This approach is often associated with the hard sell or high-pressure selling process.

14-9. Explain these steps in the creative selling process: prospecting, qualifying, the approach, the sales presentation, and the follow-up after the sale. How can you overcome a customer’s objections?

Prospecting is the process of identifying and developing a list of potential customers, called prospects or sales leads. Salespeople qualify prospects to determine how likely they are to become customers. The preapproach consists of compiling background information about prospective customers and planning the sales interview. After the salesperson lays the groundwork with the preapproach, it is time to approach, or contact, the prospect. The salesperson tries to learn even more about the prospect’s needs, create a good impression, and build rapport. The sales presentation lays out the benefits of the product and its advantages over the competition. The focus should be on ways to add value to the 14-20 Copyright © 2025 Pearson Education, Inc.

Chapter 14: Promotion II: Social Media Platforms and Other Promotion Elements

customer. The effective salesperson anticipates objections and responds with additional information or persuasive arguments. The follow-up after the sale includes arranging for delivery, payment, and purchase terms. Even as one cycle of purchasing ends, a good salesperson already lays the foundation for the next one.

14-10. What is the purpose of public relations? How does it differ from advertising? What are some of the traditional activities that are part of PR? The purpose of PR is to build good relationships between an organization and its various publics and to establish and maintain a favorable image. Advertising, on the other hand, is nonpersonal communication from an identified sponsor using the mass media. The most important advantage of advertising is that it reaches large numbers of consumers at one time.

PR is useful to introduce new products; influence legislation; enhance the image of a city, region, or country; polish the image of an organization; provide advice and counsel; and call attention to a firm’s community involvement. PR specialists often use print or video news releases to communicate timely topics, research stories, and provide consumer information. Internal communications with employees include company newsletters and internal TV programs.

Other PR activities include investor relations, lobbying, speech writing, developing corporate identity materials, media relations, arranging sponsorships and special events, and guerrilla marketing activities, including ambient advertising.

14-11. What are three ethical concerns related to buzz marketing? Briefly explain each.

Three ethical concerns related to buzz marketing are deceptive activities, deepfakes, and sock puppeting. Deceptive activities occur when companies create false or misleading endorsements, violating consumer trust. Deepfakes involve using AI to create realistic but fake digital simulations—often of celebrities—without their authorization. Sock puppeting refers to company executives or biased sources posing as impartial consumers to promote products on social media. This can manipulate public opinion and undermine transparency. ACTIVITIES: APPLY WHAT YOU’VE LEARNED 14-12. Creative Homework/Short Project Think about a business or place that you and your classmates might visit. You might, for example, think about (1) an online store for vinyls, (2) a night spot where you and your friends might hang out on the weekends, or (3) a paintball playground. Assume you have been hired as a marketing consultant by that business. You believe that the business would benefit from nontraditional marketing.

Develop several ideas for social media tactics that you feel would be successful for the client. Describe in detail each idea, how it should be implemented, and your reasons for it being a successful communication strategy.

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The chapter nicely lists several different buzz-building activities. These word-of-mouth (WOM) marketing messages are more credible and thus more valuable when unpaid consumers create their own messages. Using the various examples of buzz-building activities in the chapter, have the students brainstorm how they could develop ideas that would create the buzz.

14-13. In Class, 10–20 Minutes for Teams A coffee shop near campus is debating between advertising via traditional cable TV or via streaming platforms, such as Paramount+ and Hulu. Discuss your individual experiences with streaming services. Are there any cordcutters in your group? What platforms do you use? How do experiences vary between traditional platforms and streaming ones? Develop a brief recommendation for this local advertiser. Should they switch? What are your reasons for your recommendation?

Students should be encouraged to share their experiences with classmates and then provide recommendations or a rationale for their recommendation.

14-14. In Class, 10–25 Minutes for Teams Assume that you are a member of the marketing department for a firm that produces several varieties of pinback buttons. Your assignment is to develop recommendations for consumer and trade sales promotion activities for the buttons. Develop an outline of your recommendations for these sales promotions. In a roleplaying situation, present and defend your recommendations to your manager.

Students will have fun coming up with creative ideas for sales promotions.

14-15. In Class, 10–25 Minutes for Teams Timing is an important part of a sales promotion plan.

Trade sales promotions must be properly timed to ensure channel members fully maximize the opportunity to sell your product. Assume that the introduction of pinback buttons in question 14-14 is planned for August 30. Place the activities you recommended in your answer to question 14-14 onto a 12-month calendar of events. (Hint: the calendar needs to start before the product introduction.) In a role-playing situation, present your plan to your manager. Be sure to explain the reasons for your timing of each trade sales promotion element.

Students will enjoy using this exercise as a role-play.

14-16. In Class, 10–25 Minutes for Teams Your team has been hired by a beverage company that is expanding its product line to include premixed, nonalcoholic “mocktails.” The company would like to promote its product in bars, night clubs, and coffee shops using brand ambassadors. Your team has been asked to train the brand ambassadors prior to interacting with consumers. What information will you relay to the brand ambassadors? What advice do you have for them while they are in the field? What are some of the key messages you would like them to relay to consumers? What should they avoid doing while engaging with consumers? Share your overall plan with the class in the form of a brief presentation.

Student answers will vary. Consider discussing the importance of product knowledge, ensuring ambassadors are familiar with features, flavors, ingredients, and benefits.

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Emphasize the need for a deep understanding of the brand’s story, mission, and values to help ambassadors connect authentically with consumers. Encourage students to brainstorm effective engagement techniques, such as initiating conversations, actively listening to consumer feedback, and creating a welcoming atmosphere. Highlight the importance of conveying key messages. Use role-playing exercises or group discussions to make the session interactive and practical—in particular, ask students to develop the short “elevator speech” they will use as they approach potential consumers.

14-17. Creative Homework/Short Project You work for a local bakery that specializes in cupcakes and cake pops. Your boss is interested in having you set up social media accounts for the bakery. Consider carefully which social media sites would be most effective and why. Devise a short presentation for your boss so that they can weigh the various options you recommend.

Students can prepare this question individually and share their responses with the class.

14-18. Creative Homework/Short Project Assume you work for a local cookie shop that is known for infusing unique ingredients such as cardamom, turmeric, and ginger into its cookies.

Your assignment is to develop recommendations for using social commerce for the shop.

Is social commerce a viable option for the shop? Develop an outline of your recommendations. In a role-playing situation, present and defend your recommendations to your manager.

Students can prepare this question individually and share their responses with the class.

Their responses should reflect their understanding of social commerce.

14-19. Creative Homework/Short Project Recall the last encounter you had with a salesperson.

Describe when the salesperson entered the picture and the role they played during your buying experience. What type of sales approach did they use? Did the salesperson focus on expediting the sale or building a long-term relationship with you? Was this approach appropriate for the purchase you were considering? After the sale, would you recommend the salesperson to a friend or family member? Why or why not?

Students can share their shopping experiences. Transactional selling focuses on making an immediate sale with no concern for developing a long-term relationship with the customer.

Relationship selling involves securing, developing, and maintaining long-term relationships with profitable customers.

14-20. Creative Homework/Short Project Assume your college has agreed to allow a student club to host a small music festival at the campus gym or arena. The college also has granted permission for event sponsorships to be sold as part of the club’s fundraising efforts.

Develop a brief sponsorship plan for the event. What types of businesses or organizations would you approach for sponsorships? How would you sell the concept of sponsorships to these businesses? How would you price various levels of sponsorship? What would sponsors receive in terms of recognition or promotion?

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Student answers will vary. Discuss how to identify potential sponsors, such as local businesses, restaurants, or national brands. Is there any alignment between the brands’ target audiences and the event’s attendees? Encourage students to brainstorm how to create appealing sponsorship packages, detailing various levels of sponsorship (e.g., gold, silver, bronze) and corresponding benefits (e.g., logo placement, shout-outs during the event, inclusion in promotional materials). Discuss strategies for pitching the sponsorship concept to businesses, emphasizing the value of reaching a concentrated demographic of students and community members. Highlight the importance of pricing sponsorships competitively and providing clear recognition and promotional benefits for sponsors. Discuss the difference between sponsorship as promotion and sponsorship as community outreach. Use role-playing exercises to help students practice crafting and delivering their sponsorship pitches.

14-21. Creative Homework/Short Project You have been contacted by the director of a local animal shelter that has just rescued an almost unbelievable 95 dogs and cats from a dangerous hoarding situation. The incident made regional headlines and generated a significant increase in interactions on the shelter’s social media platforms and applications for pet adoptions, and an outpouring of monetary and supply donations. The director explains that the shelter is very appreciative of the generous community support. However, it wants to turn the recent attention into an opportunity to engage donations, volunteers, and pet adoptions throughout the year when the shelter isn’t necessarily making news headlines. Identify some approaches that would allow the shelter to convert all this new attention into a longer-term plan for community engagement and outreach. Present your ideas in the form of a letter to the shelter director.

Student letters will vary. Discuss the importance of maintaining momentum and public interest generated by the initial rescue event. Encourage students to brainstorm ongoing strategies to engage the community, such as hosting regular adoption events, creating volunteer opportunities, and launching fundraising campaigns. Discuss the role of social media and digital platforms in keeping the community informed and involved, including ideas for regular updates, success stories, and engaging content that highlights the shelter’s needs and achievements. Emphasize the importance of building partnerships with local businesses, schools, and other organizations to support the shelter’s initiatives.

14-22. In Class, 10–25 Minutes for Teams Assume that you are the head of PR for a national airline. A passenger has claimed that an airline employee forcibly removed them from the plane for no reason and in the process injured their back, which has resulted in many doctor visits and medical bills. Another passenger videoed the incident, and it has now appeared online. As the director of public relations for the airline, what specific recommendations do you have for how the company should handle the crisis?

Ask the students to reread the sections on proactive PR and crisis management. If the airline had a crisis management plan in place, the answers to the question could be found 14-24 Copyright © 2025 Pearson Education, Inc.

Chapter 14: Promotion II: Social Media Platforms and Other Promotion Elements

there. If a plan does not exist, and the danger of negative publicity is evident, the goal will be to manage the flow of information to address concerns so that stakeholders do not panic. It will be necessary to handle this issue in a timely fashion. ►CONCEPTS: APPLY MARKETING METRICS As you learned in this chapter, account management software (including cloud-based applications like Salesforce.com) is an important tool for customer relationship management (CRM) in sales organizations. Such systems also offer an important benefit to sales managers by providing a variety of metrics they can use to evaluate salesperson performance and identify training and developmental needs for individual salespeople or entire sales teams. The following list briefly describes some of the possible metrics: • Sales expense ratio: Calculated by dividing a salesperson’s total expenses ($) by their total sales ($) • Sales per contact: Calculated by dividing total sales by the total number of contacts with customers and prospects • Sales per prospect: Calculated by dividing total sales by the number of prospects contacted by the salesperson • Sales per active account: Calculated by dividing total sales by the number of existing customer accounts • Order cancellation ratio: Calculated by dividing the number of canceled orders by the total number of orders reported 14-23. For each of the preceding metrics, briefly explain the aspect(s) of salesperson effectiveness that could explain significantly larger (or smaller) numbers for a particular salesperson.

Sales expense ratio: A significantly larger ratio could be explained by poor expense management, weak closing skills, a larger than normal territory area, a lower customer density, overly demanding customers, or a higher ratio of prospects (more expensive) to existing accounts (less expensive).

Sales per contact: If a salesperson has a smaller number of very large customers, this ratio would be larger than average. A salesperson with stronger suggestion selling and trading up skills would also have a higher sales per contact.

Sales per prospect: The most obvious explanation for a low sales per prospect is poor prospecting or closing skills. It may also indicate inadequate screening of prospects derived from marketing sources.

Sales per active account: A low sales per active account ratio could be explained by poor selling and/or closing skills or a territory with a larger than normal percentage of small accounts.

Order cancellation ratio: A high order cancellation ratio may be caused by inappropriate sales behaviors such as high-pressure techniques or overpromising benefits, or by inadequate follow-up service by the salesperson.

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14-24. Suppose one of the salespeople at your organization had the lowest sales expense ratio and the second lowest sales per active account last year. During that same period, this salesperson had an average sales per contact rating combined with the highest sales per prospect and order cancellation ratios on the sales team. How would you explain these results? What recommendations would you offer this salesperson in their performance review?

The lowest sales expense ratio combined with the lowest sales per active account suggests that the salesperson may not be calling on active accounts frequently enough. This interpretation is supported by the average sales per contact figure, which indicates that when the salesperson contacts the customer, they purchase as expected. Adding in the highest sales per prospect and the highest order cancellation ratios indicates that the salesperson may be focused on acquiring new customers at the expense of servicing existing customers and that the salesperson may be using aggressive overpromising to convince new customers to place an order.

In their performance review, I would recommend that the salesperson increase the call frequency for existing accounts and spend more time with prospective accounts to make sure they have a realistic picture of the product’s benefits before they place an order.

Additional follow-up with new customers to make sure the onboarding process went smoothly might help reduce order cancellations. ►CHOICES: WHAT DO YOU THINK? 14-25. Critical Thinking Have you ever interacted with a company or a brand on social media–– such as liking a page on Facebook, tagging them on Instagram, and so on? Why did you choose to do so? If you have ever posted a comment or question, did the company respond to you? How effectively do you think companies in general manage their social media accounts and interact with consumers?

Students can share their experience of interacting with a company or a brand on social media.

14-26. Critical Thinking Companies sometimes teach consumers a “bad lesson” with the overuse of sales promotions. As a result, consumers expect the product always to be “on deal” or have a rebate available. What are some examples of products for which you think marketers have overused discounts and/or rebates, causing customers to buy only “ondeal”? How do you think companies can prevent this?

Students can discuss this question in small groups and share their experiences.

14-27. Ethics Many companies hire social media influencers to promote products to their followers. Unlike traditional advertising, consumers may not always recognize this type of promotion as paid advertising. What responsibilities do influencers have to inform their followers about any payments they have received from companies? How should 14-26 Copyright © 2025 Pearson Education, Inc.

Chapter 14: Promotion II: Social Media Platforms and Other Promotion Elements

influencers handle products that they may have received for free even if there is no additional compensation?

Student answers will vary. Encourage students to discuss the potential impacts on consumer trust and brand credibility if influencers do not disclose their relationships with companies. Discuss the Federal Trade Commission (FTC) guidelines that require influencers to disclose any material connections with brands, including payments and free products. Use real-life examples of both proper disclosures and failures to disclose to illustrate the consequences of each.

14-28. Critical Thinking Snapchat has joined other social media sites by introducing shoppable videos. Do you feel that such revenue-generating activities make these sites less attractive to users? If you know brands are placing videos on a site in order for you to buy directly from the video, are you likely to change your behavior in clicking or using the site? Are there other ways these websites can generate revenue?

Shoppable videos are designed to blend seamlessly with social media content, offering convenience and immediacy in purchasing. Although these features can enhance the shopping experience, they might also make platforms feel overly commercial. This could potentially deter some users who prefer ad-free environments. Many users might not change their behavior significantly because the integration of shopping features into social media is often somewhat subtle. However, the perception of these sites can shift if users feel bombarded by commercial content. To diversify revenue, platforms can also offer premium subscriptions for ad-free experiences, offer exclusive content or features, or leverage data analytics to provide targeted advertising that more closely aligns with user preferences.

14-29. Critical Thinking In general, professional selling has evolved from hard selling to relationship selling. Do some organizations still use the hard-sell style? If so, provide examples and explain. What do you think the future holds for these organizations? Are there examples of businesses where the hard sell will continue to be successful? If so, what kind of businesses?

Students can discuss the effectiveness of the hard sell.

14-30. Critical Thinking A jury class action lawsuit was filed against Burger King claiming its Whopper had 35 percent less beef than advertised. Similar suits have been filed against Arby’s, Wendy’s, McDonald’s, and Taco Bell. Taco Bell, understanding the potential damage to its brand, immediately went on the defense and filed a countersuit. In addition, Taco Bell’s CEO posted a video statement and essentially released its recipe for seasoned beef, which contains 88 percent beef that is 100 percent USDA inspected. Was this enough for Taco Bell to do to avert a PR crisis? What else could it have done?

Student answers will vary. Encourage students to consider various strategies Taco Bell could employ to manage the crisis, such as immediate transparency, proactive communication, and addressing consumer concerns head-on. Discuss the steps Taco Bell 14-27 Copyright © 2025 Pearson Education, Inc.

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took, including filing a countersuit, releasing a detailed statement from the CEO, and providing the recipe for their seasoned beef. Highlight the importance of swift, honest, and clear communication in rebuilding trust and credibility with consumers. Use this example to explore broader crisis management principles, such as preparing a crisis management plan and the role of social media in disseminating the company’s response.

14-31. Critical Thinking Using any news sources available to you, explore recent consumer data breaches that made headlines. Select three cases that you find the most interesting. How did each company react to the breach? How did they communicate with consumers? Based on the marketing skills that you have developed, how would you rate each company’s public relations regarding the breach? What did it do well? What ways could it have done better? How do you think these cases affect consumer trust and behavior?

Student answers will vary. Encourage students to evaluate the effectiveness of company responses, considering factors such as transparency, timeliness, and the methods of communication used. Highlight the importance of maintaining consumer trust and the role of PR in mitigating the negative impact of data breaches. Use these examples to explore best practices in crisis communication and the importance of having a prepared crisis management plan.

14-32.Creative Homework/Short Project Choose a product or service that interests you—it can be anything from a tech gadget to trendy clothes to your favorite snack. Then take time to read online reviews for that product. Reviews can be on the manufacturer or service provider’s website or on retail/marketplace websites. Analyze the reviews and discuss how they may impact sales to new consumers who are using the reviews for pre-purchase advice. Prepare a short report for your class that outlines a summary of the reviews, any consistent findings, and overall consumer attitudes toward the product or service. Include your advice on how manufacturers or service providers should respond to the reviews you discovered.

Student answers will vary. Encourage students to summarize the reviews, identifying any consistent findings, common themes, and overall consumer attitudes toward the product or service. Discuss how these reviews might impact potential sales and consumer decisionmaking processes. Highlight the importance of online reviews in today’s digital age and how they can serve as powerful marketing tools or sources of feedback for companies.

Engage students in discussions about how manufacturers or service providers should respond to both positive and negative reviews, emphasizing the importance of addressing customer concerns and showcasing responsiveness.

14-33. Critical Thinking Some critics denounce PR specialists, calling them “spin doctors” whose job is to hide the truth about a company’s problems. What is the proper role of PR within an organization? Should PR specialists try to put a good face on bad news? How does social media continue to change the nature of public relations and the role of PR specialists?

Students will probably have strong opinions about this question. In light of many of the Internet and accounting scandals of the early 2000s, this issue has come to the forefront.

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To balance the discussion, remind the students of the many good things PR does. Ask students to think about their own university. Could it afford a major promotional effort?

How does PR help balance out the budget as well as spread good word? What role would social media play?

The students can have fun with this even as group exercises. Remind them to review the chapter materials before their outline is developed. This would be an excellent in-class presentation for credit. MINIPROJECT: LEARN BY DOING Miniproject 1 The purpose of this miniproject is to help you understand the advantages of following the creative selling process: 14-34. With several of your classmates, create a new product in a category that most college students buy regularly (e.g., toothpaste, shampoo, pens, pencils, energy drinks—anything that interests you that might be sold through a convenience store like 7-Eleven). Make up a new brand name and some creative features and benefits of the new product you come up with.

Students can work in small groups to make up a new brand of a product that they buy regularly.

14-35. Assume you are a salesperson trying to sell your product to an organizational buyer like 7Eleven for adding to their product lines. Develop a plan for executing each of the steps in the creative selling process. Make sure that you cover all the bases of how you would go about selling your product.

Students should review the steps in the creative selling process as it applies to organizational buyers.

14-36. Report on your plan to your class and ask the other students for feedback on whether your approach will convince the 7-Eleven buyer to make a purchase. Alternatively, with a classmate demonstrate your plan in a role-playing exercise.

Through these three questions, the groups will need to create a new product in a category that most college students use on a routine basis. Make up a new brand name and some creative features and benefits of the new product. This would be a great in-class or out-ofclass exercise for the students. They will develop the name, features, and benefits of the product and develop a plan for executing a sales call to a buyer at a 7-Eleven store. Finally, they will report their selling plan to the class.

Instructors may wish to extend the deadline for this assignment, so students have ample time to complete the assignment and develop a report.

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Miniproject 2 One of the more difficult parts of developing a marketing communication plan that includes a variety of traditional and new media activities is coordination. This project will provide you with an opportunity to explore the difficulties of this.

Assume you are the CMO for the Glam Face Shield Company. You are responsible for developing a marketing communication plan for your firm’s new low-profile face shield for people who perform their job in a dangerous work environment where there are safety hazards that can harm any part of their face. You have decided that your program could best be developed if it includes the following: • Traditional TV advertising • Brand ambassadors and evangelists • A mobile app • An interactive brand website with a game, information about your product, and one or more other interactive devices • Digital advertising on various platforms • Consumer sales promotion 14-37. Design each of these communication program elements with detailed descriptions, including timing and venues.

Students can work in small groups to design each of the communication program elements.

14-38. Each of these activities must be tied to the other activities. Now describe all of these connections.

Once the students have designed the communication program elements, they can suggest ways to tie each one to other activities.

14-39. To be successful today, a firm must do more than just provide consumers with information.

Their marketing communication activities must engage the consumer, must provide something of value (in addition to information about the product), and must make the customer’s life better. Describe how your communication activities will do these things.

This would make an excellent small-group project. Students can develop a marketing communication plan, and each group can present the plan to the entire class.

Instructors may wish to extend the deadline for this assignment, so students have ample time to complete the assignment and develop a report.

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Chapter 14: Promotion II: Social Media Platforms and Other Promotion Elements

V. MARKETING IN ACTION CASE: REAL CHOICES AT DOVE Summary of Case Dove’s #DetoxYourFeed campaign is a modern example of a marketing strategy that leverages social media to point out the medium’s potential harms, particularly regarding self-esteem among young women. By producing content that both critiques and utilizes social media, Dove skillfully walks the fine line between advocacy and promotion, reinforcing its firm commitment to body positivity and social responsibility. The campaign’s use of deepfake technology combined with emotionally resonant messages underscores the damaging influence of unrealistic beauty standards that are frequently amplified online. This dual approach not only heightens awareness but also ignites crucial conversations between parents and their children, ultimately reinforcing the brand’s purpose-driven marketing. Despite criticisms of hypocrisy of using social media to criticize social media, Dove maintains its stance by offering added-value resources like a Confidence Kit for parents. This blend of digital and physical media ensures a broader reach and reinforces the campaign’s impact, while parent company Unilever's support demonstrates a larger corporate commitment to addressing a pressing social issue.

Suggestions for Presentation This case could be assigned for various online or in-class discussion activities.

Online Suggestions As a class, explore the #DetoxYourFeed campaign on Dove’s social media platforms. Analyze how Dove uses visuals, captions, videos, and user interactions to convey its message about the negative impact of social media on self-esteem. What elements make the campaign engaging and effective? What criticisms or challenges can students identify in the campaign’s execution? Ask students to suggest ways in which Dove could enhance its social media strategy to better connect with its target audience.

In-Class Suggestions Divide the class into small groups and have each group adopt a brand and develop a minicampaign for a purpose cause, using Dove’s approach as a model. Each group should choose an issue, such as mental health, environmental sustainability, or anti-bullying, and compile ideals for a marketing plan that includes social media posts, video content, and an out-of-home element.

After presenting their campaigns, discuss the strengths and weaknesses of each plan.

Questions for Discussion 14-40. Explore the potential risks and rewards for a brand like Dove when engaging in advocacy advertising and other types of social marketing campaigns that critique societal issues while also promoting products using the same social media platforms.

Student answers will vary. Facilitating discussion on this topic should involve exploring real-world examples and encouraging students to suggest strategies for balancing advocacy with promotion. Engaging in advocacy advertising presents Dove with both substantial rewards and significant risks. On the rewarding side, campaigns like #DetoxifyYourFeed 14-31 Copyright © 2025 Pearson Education, Inc.

Part 4: Deliver and Communicate the Value Proposition

can enhance brand loyalty and foster a positive brand image by aligning with values that resonate deeply with Dove’s target audience. By addressing relevant societal issues, Dove differentiates itself from competitors and strengthens emotional connections with consumers. This potentially leads to long-term customer relationships and increased sales.

However, there are inherent risks in this approach. The brand might face accusations of hypocrisy if its commitment to the advocated causes is perceived as inauthentic or profitdriven. Additionally, there is a risk of alienating segments of the consumer base who may disagree with the brand’s stance on certain issues. Transparency, consistency in messaging, and alignment with the brand’s core mission and values are essential in maintaining consumer credibility and trust.

14-41. Dove’s advertising partner, Ogilvy, claims that the #DetoxYourFeed campaign makes social media more positive. Identify and analyze the metrics or key performance indicators that could validate such a statement.

Student answers will vary. Encourage students to consider KPIs that can be used to measure this type of campaign. Engagement rates measure how actively users are interacting with the campaign content, including likes, shares, comments, and overall participation. Sentiment analysis is another vital metric, allowing the evaluation of the tone and nature of the conversations generated by the campaign. An overwhelming majority of positive mentions and supportive comments could suggest success in creating a positive social media environment. Additionally, the campaign’s impact on self-reported selfesteem levels among the target audience can be assessed through surveys conducted before and after the campaign. Monitoring the reach and utilization of educational resources, such as the Confidence Kit, through download statistics and engagement metrics will also indicate the campaign’s efficacy in spreading its message. Long-term metrics, such as increased brand loyalty and trust, can be monitored through customer feedback and repeat purchase rates.

14-42. Dove expanded the #DetoxYourFeed campaign beyond digital platforms, including the use of a physical billboard display at a mall. Discuss the rationale behind integrating out-of-home and online media and the impact of this integration on Dove’s overall promotional mix.

Student answers will vary. Encourage students to consider the benefits and challenges of integrated media. Discuss the strategic rationale and the potential for achieving the campaign’s objectives. Integrating out-of-home media with online efforts can create a strategic advantage by presenting a cohesive and comprehensive marketing message that is maximized in both reach and impact. The physical billboard display captures the attention of a broader audience, including those less active on social media (likely parents). The billboard can drive curiosity and encourage people to seek out the campaign online, increasing social media engagement and amplifying the message. Additionally, this multichannel strategy can generate media coverage and positive public relations.

14-32 Copyright © 2025 Pearson Education, Inc.

Chapter 14: Promotion II: Social Media Platforms and Other Promotion Elements

WEB RESOURCES https://www.dove.com/us/en/home.html https://www.dove.com/us/en/stories/campaigns/detoxify.html

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