Class Notes For A Preface to Marketing Management, 14th Edition

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Chapter 01-Strategic Planning and the Marketing Management Process1-1Chapter 1Strategic Planning and the MarketingManagement ProcessHigh-Level Chapter OutlineI. IntroductionII.The Marketing ConceptIII.What is Marketing?IV.What is Strategic Planning?A.Strategic Planning and Marketing ManagementB.The Strategic Planning ProcessOrganizational MissionOrganizational ObjectivesOrganizational StrategiesChoosing an Appropriate StrategyOrganizational Portfolio PlanC.The Complete Strategic PlanV.The Marketing Management ProcessA.Situation AnalysisB.Marketing PlanningC.Implementation and Control of the Marketing PlanD.Marketing Information Systems and Marketing ResearchVI.The Strategic Plan,theMarketing Plan, andOtherFunctional Area PlansA.Marketing’s Role in Cross-Functional Strategic PlanningDetailed Chapter OutlineI.The Marketing Concept•The marketing concept means that an organization should seek to make a profit by servingthe needs of customer groups.•The purpose of the marketing concept is to rivet the attention of marketing managers onserving broad classes of customer needs(customer orientation),rather than on the firm’scurrent products (production orientation) or on devising methods to attract customers to

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Chapter 01-Strategic Planning and the Marketing Management Process1-2current products (selling orientation).•The principal task of the marketing function operating under the marketing concept is notto manipulate customers to do what suits the interest of the firm,but rather to find effectiveand efficient means of making the business do what suits the interest of the customer.•Effective marketing requires that consumer needs come first in organizational decisionmaking.•One qualification to this statement deals with the question of a conflict between consumerwants and societal needs and wants.II.What is Marketing?•Everyoneknows something about marketing because it has been a part oftheirlivessincetheyspenttheirfirst dollar.•Sinceeveryoneisinvolved in marketing,it seems strange that one of the persistentproblems in the field has been its definition.•The American Marketing Association defines marketing as,“the activity, set ofinstitutions, and processes for creating, communicating, delivering, and exchangingofferings that have value for customers, clients, partners, and society at large.”•This definition takes into account all parties involved in themarketing effort:members ofthe producing organization, resellers of goods and services, andcustomers or clients.•Major types of marketing includes:product,service,person,place,cause,andorganization(see Figure 1.1 for descriptionsand examples).III.What is Strategic Planning?•Before a production manager, marketing manager, and personnel manager candevelopplans for their individual departments,some larger plan or blueprint for the organizationshould exist.•Senior managers must look toward the future and evaluate the ability to shape theirorganization’s destiny in the years and decades to come.oThe output of this process is objectives andstrategiesdesigned to give theorganization a chance to compete effectively in the future.•The objectives and strategies established at the top level provide the context for planning ineach of the divisions and departments by divisional and departmental managers.A.Strategic Planning and Marketing Management•Some of themost successful business organizations are here today because many yearsago they offered the right product at the right time to a rapidly growing market.•Over three-quarters of the 100 largest U.S.corporations of 70 years ago have fallen

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Chapter 01-Strategic Planning and the Marketing Management Process1-3from the list.oTheir managements failed to recognize that business strategies need to reflectchanging environments and emphasis must be placed on developing businesssystems that allow for continuous improvement.•Present-day business managers realize that the true mission of the organization is toprovide value for three key constituencies: customers, employees, and investors.•Strategic planning includes all the activities that lead to the development of a clearorganizational mission, organizational objectives, and appropriate strategies to achievethe objective for the entire organization.•Strategic planning,if performed successfully, plays a key role in achievingequilibriumbetween the short and the long term by balancing acceptable financial performancewith preparation for inevitable changes in markets, technology, and competition aswell as in economic and political arenas.•The strategic planning process is depicted in Figure 1.2.•In the strategic planning process the organization gathers information about thechanging elements of its environment.•This information is useful in aiding the organization to adapt better to these changesthrough the process of strategic planning.B.The Strategic Planning Process•The output of strategic planning is the development ofastrategic plan.•Figure 1.2 indicates four components of a strategic plan: mission, objectives,strategies, and portfolio plan.Organizational Mission•The organization’s environment provides the resources that sustain theorganization, whether it is a business, a college or university, or a governmentagency.•Every organization exists to accomplish something in the larger environment andthatpurpose, vision, or mission usually is clear at the organization’s inception.•As time passes, the organization expands,and the environment and managerialpersonnel change. As a result, one or more things are likely to occur:oThe organization’soriginal purpose maybecome irrelevant as theorganization expands into new products, new markets, and even newindustries.oThe original mission may remain relevant, but managers begin to loseinterest in it.oChanges in the environment may make the original mission inappropriate.

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Chapter 01-Strategic Planning and the Marketing Management Process1-4•The result of any or all three of these conditions is a“drifting”organization,without a clear mission, vision, or purpose to guide critical decisions.oWhen this occurs, management must search for a purpose or emphaticallyrestate and reinforce the original purpose.•The mission statement, or purpose, of an organization is the description of itsreason for existence.oIn essence, the mission statement defines the direction in which theorganization is heading and how it will succeed in reaching its desired goal.•The basic questions that must be answered when an organization decides toexamine and restate its mission are:oWhat isthebusiness?oWho isarethecustomers?oWhat do customers value?oWhatwillthebusiness be?•In developing a statement of mission, management must take into account threekey elements: the organization’s history, its distinctive competencies, and itsenvironment.oTheorganization’shistory—in formulating a mission, the criticalcharacteristics and events of the past must be considered.oThe organization’s distinctive competencies—theseare things that anorganization does well.oThe organization’s environment—itdictates the opportunities, constraints,and threats that must be identified before a mission statement is developed.•When completed, an effective mission statement will befocused on marketsrather than products, achievable, motivating, and specific.•Focusedon Markets Rather than ProductsoIn recent years, a key feature of mission statements hasbeenanexternalrather thaninternalfocus.oIn other words, the mission statement should focus on the broad class ofneeds that the organization is seeking to satisfy (external focus), not on thephysical product or service that the organization is offering at present(internal focus).•AchievableoThe mission statement should open a vision of new opportunities but shouldnot lead the organization into unrealistic ventures far beyond itscompetencies.oIt should open a vision of new opportunities but should not lead theorganizationinto unrealistic ventures far beyond its competencies.•MotivationaloOne of the side (but very important) benefits of a well-defined mission is the

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Chapter 01-Strategic Planning and the Marketing Management Process1-5guidance it provides employees and managers working in geographicallydispersed units and on independent tasks.oIt provides a shared sense of purpose outside the various activities takingplace within the organization.•SpecificoThe mission statement must be specific to provide direction and guidelinesto management when they are choosing between alternative courses ofaction.oHowever,itdoes not provide direction for management.OrganizationalObjectives•Organizational objectivesare the end point of an organization’s mission and arewhat it seeks through the on-going, long-run operations of the organization.•Theorganizational mission is distilled into a finer set of specific and achievableorganizational objectivesthat must bespecific, measurable, action commitmentsby which the mission of theorganization is to be achieved.•If formulated properly, they can accomplish the following:oTheycanbe converted into specific action.oTheywillprovide direction.oTheycanestablish long-run priorities for the organization.oTheycanfacilitate management control.•Organizational objectives are necessary in all areas that may influence theperformanceand long-run survival of the organization.•Obviously, during the strategic planning process conflicts are likely to occurbetween various functional departments in the organization.•The important point is that management must translate the organizational missioninto specific objectives that support the realization of the mission.Organizational Strategies•Strategyinvolves the choice of major directions the organization will take inpursuing its objectives.•As many as70 percent of strategic plansfail becausethestrategiesarenot welldefinedand,thus,couldnotto be implemented effectively.•OrganizationalStrategiesBasedon Products and MarketsoOne means to developingorganizational strategies is to focus on thedirections the organization can take in orderto grow.oThe four paths an organization can take in order to grow are marketpenetration, market development, product development, and diversification

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Chapter 01-Strategic Planning and the Marketing Management Process1-6(Figure 1.4).•MarketPenetration StrategiesoThese strategies focus primarily on increasing sales of present products topresent customers.oTactics used to implement a market penetration strategy might include pricereductions,advertising that stresses the many benefits of the product,packagingthe product in different-sized packages, or making it available atmore locations.•MarketDevelopment StrategiesoAn organizationwouldseek to find new customers foritspresent productsthrough market development.oMarket development strategies involve much, much more than simplygetting the productto a new market.•Product Development StrategiesoThe new products developed would be directed primarily to presentcustomers.•DiversificationoThis strategy can lead the organization into entirely new and even unrelatedbusinesses.oIt involves seeking new products (often through acquisitions) for customersnot currently being served.•OrganizationalStrategiesBased on Competitive AdvantageoMichael Porterdevelopedthismodelfor formulating organizational strategythat is applicable across a widevariety of industries.oPorter suggests that firms shouldfirst analyze their industryand thendevelop either a cost leadership or a strategy based ondifferentiation.oUsing a cost leadership strategy, a firm would focus on being the low-costcompany in its industry.oUsing a strategy based on differentiation, a firm seeks to be unique in itsindustry or market segment along particular dimensions that the customersvalue.•OrganizationalStrategiesBased on ValueoAs competition increases, the concept of “customer value”has becomecritical for marketers.oIt focuses not only on customer needs, but also on the question,How cananorganizationcreate valuefortheir customersand still achievetheirobjectives?oIt is unlikely that a firm will succeed by trying to be all things to all people.oMany firms have succeeded by choosing to deliversuperior customer valueusing one of three value strategies-best price, best product, orbest service.

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Chapter 01-Strategic Planning and the Marketing Management Process1-7Choosing an Appropriate Strategy•Managementshould selectthose strategies consistent with its mission andcapitalizes on the organization's distinctivecompetencies that will lead to asustainable competitive advantage.•A sustainablecompetitive advantage can be based on either the assets or skills ofthe organization.Organizational Portfolio Plan•The final phase of strategic planning process istheformulation oftheorganizational portfolio plan.•Management must decide which businesses to build, maintain, or eliminate, orwhich new businesses to add.•The first stepin this approachis to identify various divisions, product lines, etc.,that can be considered a “business.”•These are referred to asstrategic business unit(SBUs)and theyhave thefollowingcharacteristics:oThey havea distinctive mission.oTheyhavetheirown competitors.oThey area single business or collection of related businesses.oTheycan beplanned independently of the other businesses of the totalorganization•Thus, depending on the type of organization, an SBU could be a single product,product line, or division; a college of business administration; or a state mentalhealth agency.C.TheCompleteStrategic Plan•Completionof the strategic plan(Figure 1.2)facilitates the development of marketingplans for each product, product line, or division of the organization.•The marketing plan serves as a subset of the strategic plan in that it allows for detailedplanning at a target market level.IV.The Marketing Management Process•Marketing management can be defined as “the process of planning and executing theconception, pricing, promotion, and distribution of goods, services, and ideas to createexchanges with target groups that satisfy customer and organizational objectives.”

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Chapter 01-Strategic Planning and the Marketing Management Process1-8•This definition is consistent with the marketing concept.•The marketing management process isillustratedin Figure 1.5.A.SituationAnalysis•Situation analysis can be divided into six major areas of concern:oTheCooperative Environment▪It includes all firms and individuals who have a vestedinterestin thefirm’s accomplishing its objectives.▪Parties of primary interest to the marketing executive in this environmentare:❖Suppliers❖Resellers❖Other departments in the firm❖Subdepartments and employees of the marketing department▪Opportunities in this environment are primarily related to methods ofincreasingefficiency.oThe Competitive Environment▪It includes primarily other firms in the industry thatrivalthe organizationfor both resources and sales.▪Opportunities in this environment include such things as:❖Acquiring competing firms❖Offering demonstrably better value to consumers andattracting themaway from competitors❖In some cases, driving competitors out of the industryoThe Economic Environment▪It includes the state of the macroeconomy and changes in it which bringabout marketing opportunities and constraints.▪Changes in technology can provide significantthreats and opportunities.oTheSocial Environment▪It includes general cultural and social traditions, norms, andattitudes.▪While these values change slowly, such changes often bring about the needfor new products and services.oThePolitical Environment▪It includes the attitudes and reactions of the general public, social andbusiness critics, and other organizations, such as the Better BusinessBureau.▪Dissatisfaction with such business and marketing practices as unsafeproducts, products that waste resources and unethical sales procedures canhave adverse effects on corporation image and customer loyalty.

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Chapter 01-Strategic Planning and the Marketing Management Process1-9oTheLegal Environment▪It includes a host of federal, state, and local legislation directed atprotecting both business competition and consumer rights.▪In recent years, there has been less emphasis on creating new lawsforconstraining business practices.B.Marketing Planning•Once an opportunity is recognized, the marketing executive must then plan anappropriate strategy for taking advantage of the opportunity.•This process can be viewed in terms of three interrelated tasksthat include:oEstablishing marketing objectivesoSelecting the target marketoDeveloping the marketing mix•Establishing ObjectivesoMarketing objectives usually are derived from organizational objectives; in somecases where the firm is totally marketing oriented, the two are identical.oMarketing objectives are usually stated as standards of performanceor as tasksto be achievedby givendates.•Selecting the Target MarketoThe success of any marketing plan hinges on how well it can identifycustomerneedsand organize its resources to satisfy them profitably.oFourimportantquestions must be answeredin selecting the groups of potentialcustomers:▪What do customers want or need?▪What must be done to satisfy those wants or needs?▪What is the size of the market?▪What is its growth profile?oPresenttarget markets and potential target markets are then ranked according to:▪Profitability▪Present and future sales volume▪The match between what it takes to appeal successfully to the segment andthe organization’s capabilities•Developing the Marketing MixoThe marketing mix is the set of controllable variables that must be managed tosatisfy the target market and achieve organizational objectives.oThese controllable variables are usually classified according to four majordecision areas:▪Product▪Price

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Chapter 01-Strategic Planning and the Marketing Management Process1-10▪Promotion▪PlaceC.Implementationand Control of the Marketing Plan•Implementing the marketing plan involves putting the plan into action and performingmarketing tasks according to the predefined schedule.•Controlling the marketing plan involves three steps:oTheresults of the implemented marketing plan are measuredoTheresultsare compared with objectivesoDecisionsare made on whethertheplan is achieving objectivesD.MarketingInformation Systems and Marketing Research•Throughout the marketing management process, current, reliable, and validinformation is needed to make effective marketing decisions.V.The Strategic Plan,theMarketing Plan, andOther Functional Area Plans•Strategic planning is a top management responsibility.•Marketing managers are increasingly involved in strategicanalysis andplanning.•Nearly all strategic planning questions have marketing implications.•Marketing executives are involved in the strategic planning process in atleast twoimportant ways:oThey influence the process by providing important inputs inthe form of informationand suggestions relating to customers, products, and middlemen.oThey must always be aware of what the process of strategic planning involves as wellas the results because everything they do—themarketing objectives and strategiestheydevelop—mustbe derived from the strategic plan.A.Marketing’s Role in Cross-Functional StrategicPlanning•More and more organizations are bringing managers and employees together toparticipateincross-functional teams.•Rather than making decisions independently,marketing managers work closely withteam members from production, finance, human resources, and other areas to deviseplans that address all concerns.•The greatest advantage of strategic planning with a cross-functional team is the abilityof team members to consider a situation from a number of viewpoints.•In well-managed organizations, a direct relationship exists between strategic planning

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Chapter 01-Strategic Planning and the Marketing Management Process1-11and the planning done by managers at all levels.•If done properly, strategic planning results in a clearly defined blueprint formanagement action in all functional areas of the organization(Figure 1.7).KEY TERMSDistinctive competencies:Distinctive competencies are things that an organization does well—so well in fact that they give it an advantage over similar organizations.No matter how appealingan opportunity may be, to gain advantage over competitors, the organization must formulatestrategy based ondistinctive competencies.Diversification:An organizational strategy that seeks growth through new products (oftenthrough acquisitions) for customers not currently being served.Market development:An organizational strategy that seeks growth through seeking newcustomers for present products.Market penetration:An organizational strategy that seeks growth through increasing the sale ofpresent products to present customers.Marketing:The activity, set of institutions, and processes for creating, communicating,delivering, and exchanging offerings that have value for customers, clients, partners, and societyat large.Marketing concept:The marketing concept means that an organization should seek to make aprofit by serving the needs of customer groups. Its purpose is to rivet the attention of marketingmanagers on serving broad classes of customer needs (customer orientation), rather than on thefirm’s products (production orientation) or on devising methods to attract customers to currentproducts (selling orientation).Marketing information systems:Throughout the marketing management process, current,reliable, and valid information is needed to make effective marketing decisions. Providing thisinformation is the task of the marketing information system and marketing research.Marketing management:Marketing management is the process of planning and executing theconception, pricing, promotion, and distribution of goods, services, and ideas to create exchangeswith target groups that satisfy customer and organizational objectives.Marketing mix:The marketing mix is the set of controllable variables that must be managed tosatisfy the target market and achieve organizational objectives.The controllable variables are

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Chapter 01-Strategic Planning and the Marketing Management Process1-12usually classified according to four major decision areas: product, price, promotion, and place (orchannels of distribution).Marketing planning:The marketing planning process produces three outputs: (1) establishingmarketing objectives, (2) selecting the target market, and (3) developing the marketing mix.Organizational mission:The mission statement, or purpose, of an organization is thedescription of its reason for existence. It is the long-run vision of what the organization strives tobe, the unique aim that differentiates the organization from similar ones and the means by whichthis differentiation will take place. An effective mission statement will be focused on marketsrather than products, achievable, motivating, and specific.Organizational objectives:Organizational objectivesare the end points of an organization’smission and are what it seeks through the ongoing, long-run operations of the organization.Theorganizational mission is distilled into a finer set of specific, measurable, action commitments bywhich the mission of the organization is to be achieved.Organizational portfolio plan:This stage of the strategic plan involves the allocation ofresourcesacross the organization’s product lines, divisions, or businesses. It involves decidingwhich ones to build, maintain, or eliminate, or which to add.Organizational strategies:Organizational strategies are the choice of the major directions theorganization will take in pursuing its objectives. There are three major approaches: (1) strategiesbased on products and markets, (2) strategies based on competitive advantage, and (3) strategiesbased on value.Organizational strategies based on competitive advantage:This approach to developingorganizational strategy would develop either a cost leadership strategy which focuses on beingthe lower cost company in the industry or a differentiation strategy which focuses on beingunique in the industry or market segment along dimensions that customers value.Organizational strategies based on products and markets:An approach to developingorganizational strategies that focuses on the four paths an organization can grow: marketpenetration strategies, market development strategies, product development strategies, anddiversification strategies.Organizational strategies based on value:This approach to developing organizational strategyseeks to succeed by choosing to deliver superior customer value using one of three valuestrategies—best price, best product, or best service.

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Chapter 01-Strategic Planning and the Marketing Management Process1-13Product development:An organizational strategy that seeks growth through developing newproducts primarily for present customers.Situation analysis:This stage of the marketing planning process involves the analysis of thepast, present, and likely future in six major areas of concern: (1) the cooperative environment;(2) the competitive environment; (3) the economic environment; (4) the social environment; (5)the politicalenvironment; and (6)the legal environment. Opportunities for and constraints onmarketing activities arise from these environments.Strategic business units (SBUs):Strategic business units (SBUs) are product lines and divisionsthat can be considered a “business” for the purpose of the organizational portfolio plan. An SBUmust have a distinct mission, have its own competitors, be a single business or collection ofrelated businesses, and be able to be planned independently of the other SBUs.Strategicplanning:Strategic planning provides a blueprint for management actions for theentire organization. It includes all the activities that lead to the development of a clearorganizational mission, organizational objectives, and appropriate strategies to achieve theobjectives for the entire organization.ADDITIONAL RESOURCESAustin, Robert D., Richard L. Nolan, and Shannon O’Donnell.Harder Than I Thought,Boston:Harvard Business Review Press, 2013.Charan, Ram.Leadership in The Era of EconomicUncertainty. NY:McGraw-Hill, 2009.Christensen, Clayton, M., Scott Cook, and Tandy Hall.“Marketing Malpractice: TheCause and The Cure.”Harvard Business Review, December 2005,pp.74-75.Dixit, Avinash, K., and Barry J. Noblebuff. The Art of Strategy.NY: W.W. Norton andCo.,2009.Friedman, George.The Next Decade.NY: Doubleday, 2011.Kaplan, Robert S. and David Norton.“How To Implement a New Strategy withoutDisrupting Your Organization.”HarvardBusiness Review, March 2006, pp. 100-109.Levitt, Ted. On Marketing. Boston: HBS Press, 2006.Markower, Jack.Strategies For a Green Economy.NY: McGraw-Hill, 2009.

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Chapter 01-Strategic Planning and the Marketing Management Process1-14O'Sullivan, Don, and Andrew W. Abdela.“Marketing Performance MeasurementAbility and Performance.”Journalof Marketing, April2007,pp. 79-93.Silverstein, Michael J., Abheek Singhi, Carol Liao, and David Michael.The $10 Trillion Prize:Captivating the Newly Affluent in China and India.Boston: Harvard Business Review Press,2012.

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Chapter 02-Marketing Research: Process and Systems for Decision Making2-1Chapter 2Marketing Research: Process and Systemsfor Decision MakingHigh-Level Chapter OutlineI.The Role of Marketing ResearchII.The Marketing Research ProcessA.Purpose of theResearchB.PlanoftheResearchPrimaryversus SecondaryDataQualitativeversus Quantitative ResearchCompanyversus Contract ResearchC.Performanceof the ResearchD.Processingof Research DataE.PreparationoftheResearch ReportF.LimitationsoftheResearch ProcessIII.Marketing InformationSystemsDetailed Chapter OutlineI.The Role of Marketing Research•Marketing research is theprocess by which information about the environment isgenerated, analyzed, and interpreted for use in marketing decision making.•Marketing research does not make decisions, but it can substantially increase the chancesthat good decisions are made.•Marketing managers should recognize that:oEventhe most carefully executed research can be fraught with errorsoMarketingresearch does not forecast with certainty what will happen in the futureoTheyshould make decisions in light of their own knowledge and experience, sinceno marketing research study includes all of the factors that could influence thesuccess of a strategy•Although marketing research does not make decisions, it can reduce the risk associatedwith managing marketing strategies.

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Chapter 02-Marketing Research: Process and Systems for Decision Making2-2•Itis vital for investigating the effects of various marketing strategies after they have beenimplemented.•Today, many marketing researchers work hand-in-hand with marketing managersthroughout the research process and have responsibility for making strategicrecommendations based on the research.II.The Marketing Research Process•Marketing research can be viewed as the systematic process for obtaining information toaid in decision-making.•There are many types of marketing research.•The five Ps of the research processare(Figure 2.1):oPurpose of the researchoPlan of the researchoPerformance of the researchoProcessing of research dataoPreparation of research reportA.Purpose of theResearch•The first step in the research process is to determine explicitly why the research isneeded and what it is to accomplish.•Quite often a situation or problem is recognized as needing research, yet the nature ofthe problem is not clear or well defined nor is the appropriate type of research evident.•Managers and researchers need to discuss and clarify the current situation and developa clear understanding of the problem.•Managers and researchers should agree on:oThecurrent situation involving the problem to be researchedoThenature of the problemoThespecific question or questions the research is designed to investigate•This step is crucial since it influences the type of research to be conducted and theresearch design.B.PlanoftheResearch•A research plan spells out the nature of the research to be conducted and includes anexplanation of such things as the sample design, measures, and analysis techniques tobe used.•Three critical issues influence the research planare:oWhetherprimary or secondary data are needed

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Chapter 02-Marketing Research: Process and Systems for Decision Making2-3oWhetherqualitative or quantitative research is neededoWhetherthe company will do its own research or contract with a marketingresearch specialistPrimaryversus SecondaryData•Primary dataare the data collected specifically for the research problem underinvestigation.•Secondary dataarethe datathat have previously been collected for other purposesbut can be used for the problem at hand.•Secondary information has the advantage of usually being cheaper than primarydata, although it is not always available for strategy-specific research questions.•There are many types of secondary data that could be useful for understanding amarket and for answering a particular research question.•Some ofthesedata can be found from sourcesinternalto the organization such assales invoices, quarterly sales reports, and marketing research done by theorganization.•Other secondary data must be obtained from sourcesexternalto the organizationandinclude information such assyndicated data providersandby the government,such as U.S. census data.•Figure 2.2 liststhe common types of information that is available in a secondarydata research.Qualitativeversus Quantitative Research•Qualitative research typically involves face-to-face interviews with respondentsdesigned to develop a better understanding of what they think and feel concerninga research topic.•The two most common types of qualitative research are focus group and longinterviews.oFocus groupstypically involve discussions among a small number ofconsumers led by an interviewer and are designed to generate insights andideas about products and brands.oLong interviewsare conducted by an interviewer with a singlerespondentfor several hours.•Quantitative research involves more systematic procedures designed to obtain andanalyze numerical data.•There are four common types of quantitative researchin marketingareobservation, surveys, experiments, and mathematical modeling.oObservational researchinvolves watching people and recording relevant

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Chapter 02-Marketing Research: Process and Systems for Decision Making2-4facts and behaviors.oSurvey researchinvolves the collection of data by means of a questionnaireeither by mail, phone,onlineor in person.oExperimental researchinvolves manipulating one variable and examiningits impact on other variables.oMathematical modelingresearch often involves secondary data.It is usefulbecause it provides an efficient way to study problems with extremely largesecondary data sets.Companyversus Contract Research•Most large consumer goods companies have marketingresearchdepartments thatcan perform a variety of types ofresearch.•In addition many marketing research firms, advertising agencies, and consultingcompanies do marketing research on a contract basis.C.Performanceof the Research•Performance of the research involves preparing for data collection and actuallycollecting them.•In terms of actual data collection,a cardinal ruleis to obtain and record the maximalamount of useful information, subject to the constraints of time, money, andrespondent privacy.•Failure to obtain and record data clearly can obviously lead to a poor research study,while failure to consider the rights of respondents raises both practical and ethicalproblems.•Thus, both the objectives and constraints of data collection must be closely monitored.D.Processingof Research Data•Processing research data includes the preparation of data for analysis and the actualanalysis ofthem.•The appropriate analysis techniques for collected data depend on the nature of theresearch questions and the design of the research.•Qualitative research data consist of interview records that are content analyzed forideas or themes.•Quantitative research data may be analyzed in a variety of ways depending on theobjectives of the research.•A critical part of this stage is interpreting and assessing the research results.•Marketing researchers should always double-check their analysis and avoid

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Chapter 02-Marketing Research: Process and Systems for Decision Making2-5overstating the strength of their findings.E.PreparationoftheResearch Report•The research report is a complete statement of everything in a research project andincludes a write-up of each of the previous stages as well as the strategicrecommendationsfrom the research.•Figure 2.4 lists the types of questions marketing researchers and managers shoulddiscuss prior to submitting the final research report.•Research reports should be clear and unambiguous with respect to what was done andwhat recommendations are made.•Researchers should work closely with managers to ensure that the study and itslimitations are fully understood.F.Limitationsof the Research Process•Many problems and difficulties must be overcome if a research study is to providevaluable information for decision making.•The major goal of most test marketing is to measure new product sales on a limitedbasis where competitive retaliation and other factors are allowed to operate freely.•Problems that could invalidate test marketing study results arelisted below.oTest market areas are not representatives of the market in general in terms ofpopulation, characteristics, competition, and distribution outlets.oSample size and design are incorrectly formulated because of budget constraints.oPretest measurements ofcompetitive brand sales are not made or are inaccurate,limiting the meaningfulness of market share estimates.oTest scores do not give complete support to the study, such that certain packagesizes may not be carried or prices may not be held constant during the testperiod.oTest-market products are advertised or promoted beyond a profitable level forthe market in general.oThe effects of factors influence sales, such as the sales force, season, weatherconditions, competitive retaliation, shelf space, and so forth, are ignored in theresearch.oThe test-market period is too short to determine whether the product will berepurchased by customers.•Careful research planning, coordination, implementation, and control can help reducesuch problems and increase the value of research for decision making.III.Marketing Information Systems

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Chapter 02-Marketing Research: Process and Systems for Decision Making2-6•Most marketers use computer-based systems to help them gather, sort, store, and distributeinformation for marketing decisions.•A popular form of marketing information system is the marketing decision support system,which is a coordinated collection of data, tools, and techniques involving both computerhardware and software by which marketers gather and interpret relevant information fordecision making.•These systems require three types of software:oDatabase management software for sorting and retrieving data from external andinternal sources.oModel base management software for manipulating data in ways that are useful formarketing decisionmaking.oA dialog system that permits marketers to explore data base and use modelstoproduce information to address their decision-making needs.•Marketing decision support systems are designed to handle information from both internaland external sources.•External information is gathered from outside the organization and concerns changes in theenvironment that could influence marketing strategies.KEY TERMSExperimentalresearch:Experimental researchinvolves manipulating one variable andexamining its impact on other variables.Focus groups:A type of qualitative research that typically involves discussions among a smallnumber of consumers led by an interviewer and designed to generate insights and ideas aboutproducts and brands.Long interviews:A type of qualitative research conducted by an interviewer with a singlerespondent for several hours and designed to find out such things as the meanings variousproducts and brands have for the person or how a product influences the person's life.Marketingresearch:Marketing research is the process by which information about theenvironment is generated, analyzed, and interpreted for use in marketing decision making. Mostoften consumers or organizational buyers are the subject of the research.Mathematicalmodeling:Mathematical modeling involves developing equations to modelrelationships among variables to investigate the impact of various strategies and tactics on salesand brand choices.

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Chapter 02-Marketing Research: Process and Systems for Decision Making2-7Observationalresearch:Observational researchinvolves watching people and recordingrelevant facts and behaviors.Primarydata:Primary dataare data collected specifically for the research problem underinvestigation.Qualitativeresearch:Qualitative research typically involves face-to-face interviews withrespondents designed to develop a better understanding of what they think and feel concerning aresearch topic, such as a brand name, a product, a package, or an advertisement.Quantitativeresearch:Quantitative research involves more systematic procedures designed toobtain and analyze numerical data.Secondarydata:Secondary dataare those that have previously been collected for otherpurposes but can be used for the problem at hand.Surveyresearch:Survey researchinvolves the collection of data by means of a questionnaireeither by mail, phone, or in person.Testmarketing:The major goal of most test marketing is to measure new product sales on alimited basis where competitive retaliation and other factors are allowed to operate freely. In thisway, future sales potential can often be estimated reasonably well.ADDITIONAL RESOURCESBurns, Alvin C. and Ronald Bush.Marketing Research,7th ed. Upper Saddle River, NJ:Prentice-Hall,2014.Churchill, Gilbert A., Jr.; Tom J. Brown; and Tracy A. Suter.Basic Marketing Research.8th ed.Mason,OH: Thomson South-Western, 2014.Hair, Joseph F., Jr., Robert P. Bush, and David J. Ortinau.Marketing Research.4thed. BurrRidge, IL: McGraw Hill/Irwin, 2009.Iacobucci Dawn, and Gilbert A. Churchill, Jr.Marketing Research: MethodologicalFoundations.10th ed. Mason, OH: Thomson South-Western, 2010.Molhatra, Naresh K.Marketing Research.6th ed. Upper Saddle River, NJ: Pearson Education,2010.

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Chapter 02-Marketing Research: Process and Systems for Decision Making2-8Zikmund William G., and Barry J. Babin.Essentials of Marketing Research.5thed. Mason, OH:Thomson South-Western, 2013.

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Chapter 03-Consumer Behavior3-1Chapter 3Consumer BehaviorHigh-Level Chapter OutlineI.Social Influences on Consumer Decision MakingA.Culture and SubcultureB.Social ClassC.Reference Groups andFamiliesII.Marketing Influences on Consumer Decision MakingA.Product InfluencesB.Price InfluencesC.Promotion InfluencesD.PlaceInfluencesIII.Situational Influences on Consumer Decision MakingIV.Psychological Influences on Consumer Decision MakingA.ProductKnowledgeB.ProductInvolvementV.Consumer Decision MakingA.NeedRecognitionB.AlternativeSearchC.AlternativeEvaluationD.PurchaseDecisionE.PostpurchaseEvaluationDetailed Chapter OutlineI.Social Influences on Consumer Decision Making•Behavioral scientists have become increasingly aware of the powerful effects of the socialenvironment and personal interactions on human behavior.•In terms of consumer behavior, culture, social class, and reference group influences havebeen related to purchase and consumption decisions.•These influences can have both direct and indirect effects on the buying process.A.Culture and Subculture

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Chapter 03-Consumer Behavior3-2•Culture is one of the most basic influences on an individual’s needs, wants, andbehavior.•Cultural antecedents affect everyday behavior, and there is empiricalsupport for thenotion that culture is a determinant of certain aspects of consumer behavior.•Cultural values are transmitted through three basic organizations: the family, religiousorganizations, and educational institutions.•Marketing managers should adapt the marketing mix to cultural values and constantlymonitor value changes and differences in both domestic and global markets.•In large nations such as the United States, the population is bound to lose a significantamount of its homogeneity, and thus subcultures arise.•Subcultures are based on such things as geographicareas, religion, nationalities, ethnicgroups, and age.•Many subcultural barriers are decreasing because of mass communication, masstransit, and a decline in the influence of religious values.•However, age groups, such as the teen market, baby boomers, and the mature market,have become increasingly important for marketing strategy.•Marketing Insight 3–1 provides a summary of American cultural values.B.Social Class•Social classes develop on the basis of such things as wealth, skill, and power.•The single best indicator of social class is occupation.•For marketing purposes, fourdifferentsocialclasses have been identified:oUpper Americanscomprise14percentof the population and are differentiatedmainly by having high incomes.▪This class remains the group in which quality merchandise is most prizedand prestige brands are commonly sought.oThemiddle classcomprises34percentof the population,and these consumerswant to do the right and buy what is popular.▪They are concerned with fashion and buying what experts in the mediarecommend.oTheworking classcomprises38percentof the population,people whoare“family folk” who depend heavily on relatives for economic and emotionalsupport.▪The emphasis on family ties is only one sign of how much more limitedand different working-class horizons are socially, psychologically, andgeographically compared to those of the middle class.oLower Americanscomprise16percentof the population and are as diverse invalues and consumption goals as are other sociallevels.

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Chapter 03-Consumer Behavior3-3▪Some members of this group are homeless and penniless although mostwork part-time or full-time jobs at low wages.▪The primary demands of this group are food, clothing and other staples.C.Reference Groups andFamilies•Groups that an individual looks to (uses as a reference) when forming attitudes andopinions are described asreference groups.•Primary reference groups include family and close friends, while secondary referencegroups include fraternal organizations and professional associations.•Secondary reference groups include fraternal organizations and professionalassociations.•A person normally has several reference groups or reference individuals for varioussubjects or different decisions.•The family is generally recognized to be an important reference group, and it has beensuggested that the household, rather than the individual, is the relevant unit forstudying consumer behavior.•It is important for marketing managers to determine not only who makes the actualpurchase but also who makes the decision to purchase.•It has been recognized that the needs, income, assets, debts, and expenditure patternschange over the course of what is called thefamily life cycle.•The family life cycle can be divided into a number of stages ranging fromsingle, tomarried, to married with children of different age groups, to older couples, to solitarysurvivors.•Thelifecycle is a useful way of classifying and segmenting individuals and familiesbecause it combines trends in earning power with demands placed on income.II.Marketing Influences on Consumer Decision Making•Marketing strategies are often designed to influence consumer decisionmaking and lead toprofitable exchanges.•Each element of the marketing mix (product, price, promotion,and place) can affectconsumers in various ways.A.Product Influences•Many attributes of a company’s product, including brand name, quality,newness, andcomplexity, canaffect consumer behavior.•One of the key tasks of marketers is to differentiate their products from those ofcompetitors and create consumer perceptionsthat the product is worth purchasing.

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Chapter 03-Consumer Behavior3-4B.Price Influences•The price of products and services often influences whether consumers will purchasethem at all, and, if so, which competitive offering is selected.•For some offerings, higher prices may not deter purchase because consumersbelievethat the products or services are higher quality or are more prestigious.•Many of today’s value-conscious consumers may buy products more on the basis ofprice than other attributes.C.PromotionInfluences•Advertising, sales, promotions, salespeople, and publicity can influence whatconsumers think about products, what emotions they experience in purchasing andusing them, and what behaviors they perform, including shopping in particularstoresand purchasingspecific brands.•Since consumers receive so much information from marketers and screen out a gooddeal of it, it is important for marketers to devise communications that:oOffer consistent messages about their productsoAre placed in media that consumers in the target market are likely to useD.PlaceInfluences•The marketer’sstrategy for distributing products can influence consumers in severalways:oProducts that are convenient to buy in a variety of stores increase the chances ofconsumers finding and buying them.When consumers are seeking low-involvement products, they are unlikely to engage in extensive search, so readyavailability is important.oProducts sold in exclusive outlets may be perceived by consumersashavinghigher quality.oOffering products by nonstore methods, such as on theInternet or in catalogs,can create consumer perceptions that the products are innovative, exclusive, ortailored for specific target markets.III.Situational Influences on Consumer Decision Making•Situational influences can be defined as all those factors particular to a time and place thathavea demonstrable and systematic effect on current behavior.•These influences may be perceived either consciously or subconsciously and may have

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Chapter 03-Consumer Behavior3-5considerable effect on product and brand choice.oPhysical featuresare the mostreadilyapparent featuresofasituation.These featuresinclude geographical and institutional location, decor, sounds, aromas, lighting,weather, and visible configurations of merchandise or other materials.oSocial featuresprovide additional depth to a description of a situation.These includeother persons present, their characteristics, their apparent roles and interpersonalinteractions.oTimeis a dimension of situationsthat may be specified in units ranging from time ofday to season of the year.Time also may be measured relative to some past or futureevent forthe situational participant.oTask featuresof a situation include an intent or requirement to select, shop for, orobtain information about a general or specific purchase.Task may reflect differentbuyer and user roles anticipated by the individual.oCurrent conditionsmake up final features that characterize a situation.These aremomentary moods (such as acute anxiety, pleasantness, hostility, and excitation) ormomentary conditions (such as cash on hand, fatigue, and illness) rather than chronicindividual traits.IV.Psychological Influences on Consumer Decision Making•Information from group, marketing, and situational influences affect what consumers thinkand feel about particular products and brands.•However, a number of psychological factors influence how this information is interpretedand used and how itaffectsthe consumer decision-making process.•Two of the most important psychological factors are product knowledge and productinvolvement.A.Product Knowledge•Product knowledgerefers to the amount of information a consumer has stored in her orhis memory about particular product classes, product forms, models, and ways topurchase them.•Group marketing and situational influences determine the initial level of productknowledge as well as changes in it.•Theinitial level of product knowledge may influence how much information is soughtwhen deciding to make a purchase.•Product knowledge influences how quickly a consumer goes through the decision-making process.B.Product Involvement

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Chapter 03-Consumer Behavior3-6•Product involvementrefers to a consumer’s perception of the importance or personalrelevance of an item.•Product involvement influences consumer decisionmakingin two ways:oIf the purchase is for a high-involvement product, consumers are likely todevelop a high degree of product knowledge so that they can be confident thatthe item they purchase is just right for them.oA high degree of product involvement encourages extensive decision making byconsumers, which likely increases the time it takes to go through the decision-making process.V.Consumer Decision Making•Consumersrecognize a need for a product, search for information about alternatives tomeet the need, evaluate the information, make purchases,and evaluate the decision afterthe purchase.The process by which consumers make decisions to purchase variousproducts and brands is shown in Figure 3.2.•There are three types of decision making, which vary in terms of how complex orexpensive a product is and how involved a consumer is in purchasing it.oExtensive decision makingrequires the most time and effort since the purchaseinvolves a highly complex or expensive product that is important to the consumer.oLimited decision makingis more moderate but still involves some time and effortsearching for and comparing alternatives.oRoutine decision makingis the most common type and the way consumers purchasemost packaged goods.A.Need Recognition•The starting point in the buying process is the consumer’s recognition of an unsatisfiedneed.•Any number of either internal or external stimuli may activate needs or wants andrecognition of them.•Internal stimuli are such things as feeling hungry and wanting some food, feeling aheadache coming on and wanting some Excedrin, or feeling bored and looking for amovie to go to.•External stimuli are such things as seeing a McDonald’s sign and then feeling hungryor seeing a sale sign for winter parkas and remembering that last year’s coat is wornout.•A well-known classification of needs was developed many years ago by AbrahamMaslow and includes five types.

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Chapter 03-Consumer Behavior3-7•Maslow’s view is that lower-level needs, starting with physiological and safety needs,must be attended to before higher-level needs can be satisfied.•Maslow’s hierarchy is described below:oPhysiological needs—this category consists ofprimaryneeds of thehumanbody.Physiological needs will dominate when all needs are unsatisfied.oSafety needs—these needs consist of such things as protection from physicalharm, ill health, and economic disaster and avoidance of the unexpected.oBelongingness and love needs—these needs are related to the social andgregarious nature of humans and the need for companionship.oEsteem needs—these needs consist of both the need for awareness of importanceto others (self-esteem) and actual esteem from others. Satisfaction of these needsleads to feelings of self-confidence and prestige.oSelf-actualization needs—these can be defined as the desire to becomeeverything one is capable of becoming. This means that the individual will fullyrealize her or his talents and capabilities.B.Alternative Search•Once a need is recognized, the individual then searches for alternatives for satisfyingtheneed.•The individual can collect information from five basic sources for a particularpurchase decision:oInternal sources:For many purchases,consumershavehad previous experiencedealing with particular needs and wants.Thus,consumers canusually “search”throughtheir memories forstored information and experiencedealing with needsatisfying alternatives.This is quite common for routine or habitual purchases.oGroup sources: A common source of information for purchase decision comesfrom communication with other people.Group sources areoftenthe mostpowerful influence on purchase decisions.oMarketingsources: Marketing sources include factorssuchas advertising,salespeople, dealers, packaging,and displays. Itprovides a major means bywhich consumers learn about purchase options.oPublicsources:Public sources of information include such things as productratingsinConsumer Reports; buyer reviews on websites like Amazon.com; andarticles writtenabout the product in newspapers, in magazines, on independentblogs, and on other websites.oExperimental sources: Experimental sources refer to handling, examining, andperhaps tryingon or using a product.•Information processing is viewed as a four-step process in which the individual is:oExposedto information

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Chapter 03-Consumer Behavior3-8oBecomesattentive to the informationoUnderstandsthe informationoRetainsthe informationC.Alternative Evaluation•During the process of collecting information or, in some cases, after information isacquired, the consumer evaluates alternatives on the basis of what he or she haslearned.One approach to describing the evaluation process is as follows:oThe consumer has information about the number of brands in a product class.oThe consumer perceives that at least some of the brands in a product class areviable alternatives for satisfying a recognized need.oEach of these brands has a set of attributes(color, quality, size, and so forth).oA set of these attributes is relevant to the consumer, and the consumer perceivesthat different brands vary in how much of each attribute they possess.oThe brand that is perceived as offering thegreatest number ofdesired attributesin the desired amounts and the desired order will be the brand the consumer willlike best.oThe brand the consumer likes best is the brand the consumer will intend topurchase.D.Purchase Decision•If no other factors intervene after the consumer has decided on the brand that isintended for purchase, the actual purchase is a common result of search andevaluation.•Actually, a purchase involves many decisions, which include product type, brand,model, dealer selection, and method of payment, among other factors.•Traditional risk theoristsbelieve that consumerstend to make risk-minimizingdecisions based on theirperceiveddefinition of the particular purchase.•The perception of risk is based on the possible consequences and uncertaintiesinvolved.•Perceived risk may be either functional (related to financial and performanceconsiderations) or psychosocial (related to whether the product will further one’s self-or reference-group image).•The perceived risk literature emphasizes that consumers generally try to reduce risk intheir decisionmaking.•In general, the more information the consumer collects prior to purchase, the lesslikely postpurchase dissonance is to occur.

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