Characteristics and Attitudes of Middle and Lower Classes

2. Middle classes Plan and save for the future Analyze alternatives Understand how the world works Feel they have opportunities Willing to take risks Confident about decision making Want long-run quality or value Lower classes Live for the present "Feel" what is "best" Have simplistic ideas about how things work Feel controlled by the world "Play it safe" Want help with decision making Want short-run satisfaction Characteristics and Attitudes of Middle and Lower Classes

3. Grid of Evaluative Criteria for Three Car Brands

4. Relation of Problem-Solving Process, Adoption Process, and Learning (given a problem) • Problem-solving steps • Becoming aware of or interested in the problem • Gathering information about possible solutions • Evaluating alternative solutions, perhaps trying some out • Deciding on the appropriate solution • Evaluating the decision • Adoption process steps • Awareness and interest • Interest and evaluation • Evaluation, maybe trial • Decision • Confirmation • Learning steps • Drive • Cues • Response • Reinforcement

5. Organizational Buying Focuses on Value • Vendor analysis is likely to be more formal • Focus on economic criteria, including • Quality (including ISO 9000 certification) • Total costs to purchase and use • Reliability • Value in use • Including consideration of what related costs are reduced by using the product instead of some alternative • …and the like

6. Buying Center • Business purchases often involve multiple influence • "Buying center"—all people who participate in or influence a particular purchase • Buying center varies from purchase to purchase • Does not appear on the "organizational chart" • Structure may be formal or informal

7. A Retailer’s “Statement of Policy Concerning Gifts” To: Our Manufacturers and Suppliers Re: Statement of Policy Concerning Gifts The holiday season is a happy time when custom suggests we share gifts and remembrances with friends and associates. The joy and goodwill of the holiday spirit brings us all a little closer together, and for that we are thankful. However, a (store name) associate who accepts a gift or gratuity from a supplier or vendor during any season violates (store name) policies and procedures. Please save us both embarrassment by not sending any (store) associate gifts this holiday season. Regardless of the intent, the gift cannot be accepted and will have to be returned. If you feel the spirit of the season compels you to do something, we suggest that you make a charitable donation to your favorite charity in the name of your friend. Thank you for your understanding and compliance. Best wishes for a happy holiday season and a prosperous New Year. (signed) President

8. Three Kinds of Organizational Buying Processes • New-task buying • a firm has a new need and the buyer wants a great deal of information • Modified rebuy • the in-between process where some review of the buying situation is done—though not as much as in new-task buying • Straight rebuy • a routine repurchase that may have been made many times before

9. Major Sources of Information Used by Organizational Buyers

10. Some Basic Practices in Organizational Buying • Inspection buying • Sampling buying • Description buying • Use of Internet “bots” to search for products and vendors is making specification buying more competitive • Negotiated contract buying • Negotiation may not be in person but instead involve fast exchanges of faxes or e-mail

11. North American Industry Classification System Codes • NAICS—new system of number codes that groups firms in similar lines of business • Most government data is now being organized by NAICS codes • Replacing the older Standard Industrial Classification (SIC) codes • SIC codes are still prominent in most published government reports because of lag times in publication • Much detail is available • Two digit codes are the most general • Additional digits add more details (i.e., six digit codes are the most detailed)

12. Producers of Services • Geographically spread out • Growing in number • Buying may be informal • Government data is incomplete

13. Government Market • Government units • Federal government • State governments • Local governments • Foreign countries • Bid buying and negotiated contracts • Sources of information • Commerce Business Daily • A variety of Internet web-sites • Small Business Administration • Government purchasing departments

14. Marketing Information System (MIS) • Organized for a continuous flow of information • Gathering information • Accessing information • Analyzing information • Development of intranets is speeding the adoption • Multimedia information, not just numerical data • Search engines make information easier to find • Design of the MIS requires data processing expertise and marketing expertise • Use of MIS is focused on making better marketing decisions • Strategy planning • Details of implementation • Timely control procedures

15. Decision Support System (DSS) • A computer program—an interface—between the manager and the MIS • Makes it easy to get needed information • Search engines are a powerful tool for finding what’s needed • Easy access to databases in a data warehouse • Makes it easy to analyze the information • May involve marketing models—to show the relationships among different marketing variables • Is used as the manager is making decisions

16. Examples of Uses of a Decision Support System • Selecting target markets (chapter 3) • Competitive evaluation, such as changes in market share (chapters 4, 17) • Customer analysis (chapters 5, 6, 7) • Sales analysis (chapter 19) • Cost analysis (chapters 19, 20, 21) • Analysis of responses to elements of marketing mix (chapter 21) • Forecasting (chapter 21)

17. Marketing Research • Procedures to gather and analyze information for marketing decision making • Focus is on new information not already available in the MIS or other secondary data sources • May be handled inside the firm or by outside specialists • Cooperation is needed between technical specialists and manager/decision makers

18. Primary and Secondary Data • PRIMARY DATA: Information specifically collected to solve a current problem. Examples: • surveys • experiments • observational studies • SECONDARY DATA: Information that has previously been collected or published. Some examples: • information from the Internet or a firm’s intranet • data from Bureau of the Census • computer databases • internal reports • industry trade associations

19. Focus Group Interviews • A popular type of qualitative research • Involves a small group (usually 6 to 10 people) in a discussion—usually for about 1 hour • A group leader ("interviewer") unobtrusively guides the discussion • Designed to get in-depth, open-ended responses, not intended to be "representative" of larger market • Group interaction stimulates thinking and reactions • Analysis of results is subjective • May involve videotaping and or “on-line sessions” and other technologies

20. Cross-Tabulation Breakdown of Responses to a Phone Company Consumer Survey

21. Product Line Decisions • Individual Product • a particular product within a product line • a "stock keeping unit" (sku) • Product Line • set of individual products that are closely related • "depth" and "breadth" • breadth implies number of product lines • depth concerns choice within product lines • Product Assortment • the set of all product lines and individual products that a firm sells

22. Product Classes • Two broad classes • consumer products • business products • Classes help in planning marketing mix needed • Based on how the customer views the product • how consumers think about and shop for products • how business/organizational buyers think about products and how they'll be used

23. Consumer Product Classes and Marketing Mix Planning

24. Special Considerations with Business Products • Derived demand • Demand for goods and services is derived from the demand for what firms produce and sell • Demand elasticity faced by whole industry • Tax treatment • Capital item • Expense item

25. Business Product Classes and Marketing Mix Planning

26. Conditions Favorable to Branding • Product easy to identify by brand • Consistent quality can be maintained • Widespread availability is possible • Strong demand enables price to be high enough to support branding • Economies of scale are possible • Favorable shelf locations can be obtained

27. Levels of Brand Familiarity • Brand Rejection • Brand Nonrecognition • Brand Recognition • Brand Preference • Brand Insistence

28. Characteristics of a Good Brand Name • Short and simple • Easy to spell and read • Easy to recognize and remember • Easy to pronounce • Can be pronounced in only one way • Can be pronounced in all languages (for international markets) • Suggestive of product benefits • Adaptable to packaging/labeling needs • No undesirable imagery • Always timely (does not get out-of-date) • Adaptable to any advertising medium • Legally available for use (not in use by another firm)

29. Branding Decisions • What kind of brand to use? • Individual Brand • Family Brand • Licensed Brand • No brand at all (generic products) • Who does the branding? • Manufacturer Brand • Dealer Brand

30. Packaging • Opportunity to promote the product • at the point of purchase • links product to earlier promotion • at the point of consumption • Opportunity to protect the product • reduces costs of shipping and storing • reduces theft, spoiling, etc. • Improve the basic product • easier to use, more convenient • appeals to new target markets

31. Per Capita Consumption of Paper and Board (Packaging) Consumers in the U.S. like the convenience of disposable packaging and small serving sizes, but some critics argue that it is wasteful and bad for the environment. 700 670 491 Pounds per person 347 88 98 22 U.S. Japan China World W. Europe E. Europe

32. Warranties • Warranty: what the seller promises about its product • Regulated by the Magnuson-Moss Act (1975) • producers must provide clearly written warranty if a warranty is offered • warranty does not have to be "strong" • Federal Trade Commission provides guidelines • must be clear and definite • may not be "unfair" or "deceptive" • must be available for inspection before the purchase

33. How Quickly a New Product Moves through the Product Life Cycle • Comparative advantage—is the new product really better? • The new product is easy for consumers to use • Product advantages are easy to communicate • Product is easy to try on a limited basis • Product is compatible with customers' values and experiences

34. Fashion Cycles Follow Three Stages • Distinctiveness stage • Some consumers seek—and are willing to pay for—products different from those that satisfy the majority • Emulation stage • When many consumers want to buy what is satisfying the original users or fashion leaders • Economic Emulation stage • Many consumers want the currently popular fashion, but at a lower price

35. Fashion cycles may last for some time as they spread beyond the innovators Fad cycles may be very short Sales level Styles may come back over time as fashions and fads Sales level Patterns of Fashion, Fad, and Style Cycles for Fashion Products

36. New Products • New products are critical to survival • markets change • competition changes • product life cycles march on • What is a new product? • Firm's perspective • a product that is new in any way • FTC's perspective • a product must be entirely new, or changed in a functionally significant way • can only be called new for six months

37. New-Product Development • New-product thinking should be an on-going effort • Top-level support is vital • Someone should be “in charge” of the effort • Firm should constantly generate new ideas, then narrow down to the best opportunities with clearly specified screening criteria • Need a well organized new-product development process • Involvement of cross-functional teams helps in the screening process and avoids problems and surprises later

38. Types of New Product Opportunities

39. Place Decisions in the Marketing Mix • Making products available in the right quantities and locations—when customers want them • Channels of distribution (Chapters 11-13) • Focus on institutions involved in getting product to the customer • Physical Distribution (Chapter 12) • Focus on the physical flow of the product • Facilities needed for storing and transporting • Customer service levels to satisfy customers

40. Factors Related to the Use of Direct Distribution • Direct (producer to customer) distribution is more common when: • the customer is a business or organization (rather than a final consumer) • an aggressive personal selling effort is required and/or when customers need special technical service • the product is primarily a service rather than a physical good • when working with middlemen would make it difficult to maintain control of the marketing mix • the producer can perform marketing functions more efficiently (economically) by itself • Internet web sites are making direct distribution easier and more common

41. Channel Specialists Adjust Discrepancies • DISCREPANCIES OF QUANTITY • Difference between the quantity of products it is economical to produce and the quantity customers want • DISCREPANCIES OF ASSORTMENT • Difference between the lines a producer makes and the assortment customers want • REGROUPING ACTIVITIES REDUCE DISCREPANCIES • Accumulating • Bulk-breaking • Sorting • Assorting

42. Channel Captain • A manager who helps direct the activities of the whole channel • Tries to develop cooperation and avoid or resolve conflicts • May be either a producer or middleman • Big retail chains increasingly taking this role • Guides the whole channel to compete better with other channels • Effective allocation of functions • A common product-market commitment

43. Vertical Marketing Systems • Whole channel focuses on the same target market at the end of the channel • Corporate channel systems • corporate ownership all along the channel • often involves vertical integration • Administered channel systems • informal agreements among channel members • Contractual channel systems • legal contracts among channel members

44. Level of Market Exposure • Intensive • selling through all responsible and suitable wholesalers and retailers who will stock and/or sell the product • Selective • selling through only those middlemen who will give the product special attention • Exclusive • selling through only one middleman in a particular geographic region

45. Selective Distribution • Sell only through middlemen who give the product special attention • Avoids dealing with middlemen who: • have poor credit standing • make too many returns • require too much service • place only small orders • can't or won't do a satisfactory job • Becoming more popular • less expensive than intensive distribution • better cooperation among channel members

46. Reverse Channels of Distribution • Reverse channels are channels used to retrieve products that customers no longer want • Examples of situations: • recall of unsafe products • return of products from incorrectly filled order • return of products under warranty • return of products customer orders in error • return of products to be recycled (bottles, etc.)

47. Logistics and Physical Distribution Customer Service • The transporting, storing, and handling of goods to match target customers' needs with a firm's marketing mix • Both within individual firms and along a channel of distribution (or supply chain) • Customers think of physical distribution in terms of the customer service level • how rapidly and dependably a firm can deliver what customers want • There are trade-offs among physical distribution costs, customer service levels, and sales

48. Physical Distribution Concept • All transporting, storing, and product-handling activities of a business and a whole channel system should be coordinated as one system to: • minimize the costs of distribution • for a given customer service level • Simply focusing on individual costs may increase total costs—since a total system is involved • Requires that the manager decide what aspects of service are most important to customers • Examples: order delivery time • availability of products • order status information

49. Examples of Factors that Affect PD Service Level • Advance information on product availability • Time to enter and process orders • Backorder procedures • Where inventory is stored • Accuracy in filling orders • Damage in shipping, storing, and handling • Order status information • Advance information on delays • Time needed to deliver an order • Reliability in meeting delivery date • Complying with customer's instructions • Defect-free deliveries • Procedures for handling returns and needed adjustments

50. Using Technology to Coordinate PD Activities Among Firms • Just-in-time delivery (reliably getting products there just before the customer needs them) requires close coordination and information flows • reduces handling costs • reduces storing costs • shifts greater responsibility to the supplier • a small problem can cause big ripple effects! • Electronic data interchange (EDI) puts information in a standardized format easily shared between different computer systems • Coordination may expand beyond buyers and sellers to involve a whole network of firms • a chain of supply is a complete set of firms and facilities and logistics activities that are involved in procuring materials, transforming them into intermediate and finished products, and distributing them to customers