Chapter 16 - Managing Mass Communications: Advertising, Sales Promotions, Events and Experiences, and Public Retations

Due to the rapid infiltration of the Internet and other factors, mass media still remains an important factor of a modern marketing communications program.  Four mass communication tools are advertising, sales promotion, events and experiences, and public relations and publicity.

Advertising is any paid form of nonpersonal presentation and promotion of a product by an identified sponsor.  Marketing managers must always start by identifying the target market and buyer motives in developing an advertising program.  They then can make the five major decisions, known as “the five Ms”.  These are the mission, money, message, media, and measurement.

The mission asks what are the advertising objectives.  The advertising objective (or advertising goal) is a specific communications talk and achievement level to be accomplished with a specific audience in a specific period of time.  They can be classified according to whether their aim is to inform, persuade, remind, or reinforce.  Informative advertising aims to create brand awareness and knowledge of new products or new features of existing products.  Persuasive advertising aims to create liking, preference, conviction, and purchase of a product or service.  Reminder advertising aims to stimulate repeat purchase of products and services.  Reinforcement advertising aims to convince current purchasers that they made the right choice.

The money asks how much can be spent and how is spending allocated across media types.  Five specific factors to consider when setting the advertising budget include:  stage in the product life cycle, market share and consumer base, competition and clutter, advertising frequency, and product substitutability.

The message asks what message should be sent.  Marketers develop the message strategy or position of an ad (what the ad attempts to convey about the brand) and its creative strategy (how the ad expresses the brand claims).  Advertisers go through three steps:  message generation and evaluation (usually focuses on one or two core selling propositions), creative development and execution (how the ad says something is more important than what is says), and social-responsibility review (ads need to comply with legal and regulatory guidelines and does not offend the general public, ethnic groups, racial minorities, or special-interest groups).

The media asks what media should be used.  The steps used in determining this are deciding on desired reach, frequency, and impact; choosing among major media types; selecting specific media vehicles; deciding on media timing; and deciding on geographical media allocation.  Media selection is finding the most cost-effective media to deliver the desired number and type of exposures to the target audience.  The effect of exposures on audience awareness depends on reach (the number of different persons or households exposed to a particular media schedule at least once during a specified time period), frequency (the number of times within the specified time period that an average person or household is exposed to the message), and impact (the qualitative value of an exposure through a given medium).  The media planner must know the capacity of the major advertising media types to deliver reach, frequency, and impact, along with their costs, advantages, and limitations.  Media types include newspapers, television, direct mail, radio, magazines, outdoor, yellow pages, newsletters, brochures, telephone, and Internet.  Alternate advertising options have increased due to reduced effectiveness of traditional mass media.  Place advertising is a broad category that includes many creative and unexpected forms to grab consumers’ attention.  Types include billboards, public spaces (movie screens and hotel elevators), product placement, and point of purchase.  The media planner must search for the most cost-effective vehicles within each chosen media type.  The advertiser has both a macroscheduling and a microscheduling decision in choosing media.  The macroscheduling decision relates to seasons and the business cycle.  The microscheduling decision calls for allocating advertising expenditures within a short period to obtain maximum impact.  When launching a new product, the advertiser must choose among continuity (exposures appear evenly throughout a given period), concentration (calls for spending all the advertising dollars in a single period), flighting (calls for advertising during a period followed by a period with no advertising), and pusling (continuous advertising at low-weight levels, reinforced periodically by waves of heavier activity).  A company must decide how to allocate its advertising budged over space as well as over time.  Advertisers also try to measure the communication effect of an ad, that is, its potential impact on awareness, knowledge, or preference.  Communication-effect research (copy testing) seeks to determine whether an ad is communicating effectively. 

Sales promotion is a key ingredient in marketing campaigns.  It consists of a collection of incentive tools, mostly short term, designed to stimulate quicker or greater purchase of particular products or services by consumers or the trade.  It offers incentive to buy.  It includes tools for consumer promotion, trade promotion, and business and sales force promotion.  Objectives of sales promotion include attracting new triers, rewarding loyal customers, increasing the repurchase rates of occasional users, and attracting brand switchers.  Advertising appears to be more effective at deepening brand loyalty.  However, small-share competitors may find it advantageous to use sales promotion because of the high cost of advertising. 

In using sales promotion, a company must establish its objectives, select the tools, develop the program, pretest the program, implement and control it, and evaluate the results.  Sales promotion objectives derive from broader promotion objectives, which derive from more basic marketing objectives for the product.  Main consumer promotion tools include samples, coupons, cash refund offers (rebates), price packs (cents-off deals), premiums (gifts), frequency programs, prizes (contests, sweepstakes, games), patronage awards, free trials, product warranties, tie-in promotions, cross-promotions, and point-of-purchase displays and demonstrations.  Manufacturer (trade) promotion tools include price-off (off-invoice or off-list), allowance, and free goods.  Business and sales force promotion tools include trade shows and conventions, sales contests, and specialty advertising.  In deciding to use a particular incentive, marketers must consider the following:  size of incentive conditions for participation duration of the promotion, distribution vehicle, timing of promotion, and total sales promotion budget.  The cost of a particular promotion consists of the administrative and incentive costs, multiplied by the expected number of units sold.  Marketing managers must prepare implementation and control plans that cover lead-time and sell-in time and they can evaluate the program using sales data, consumer surveys, and experiments. 

Marketers have several reasons they sponsor events:  to identify with a particular target market or lifestyle, to increase salience of company or product name, to create or reinforce perceptions of key brand image associations, to enhance corporate image, to create experiences and evoke feelings, to express commitment to the community or on social issues, to entertain key clients or reward key employees, and to permit merchandising or promotional opportunities.  Making sponsorships successful requires choosing the appropriate events, designing the optimal sponsorship program, and measuring the effects of sponsorship.  Experiential marketing not only communicates features and benefits, but also connects a product or service with unique and interesting experiences.

Companies must also relate to a large number of interested publics.  A public is any group that has an actual or potential interest in or impact on a company’s ability to achieve its objectives.  Public relations (PR) includes a variety of programs to promote or protect a company’s image or individual products.  The PR department performs the following five functions:  press relations, product publicity, corporate communications, lobbying, and counseling.  Marketing public relations (MPR) are publicity and other activities that build corporate or product image to facilitate marketing goals.  It plays an important role in launching new products, repositioning a mature product, building interest in a product category, influencing specific target groups, defending products that have encountered public problems, and building the corporate image in a way that reflects favorably on its products.  In considering when and how to use MPR, management must establish the marketing objectives, choose the PR messages and vehicles, implement the plan carefully, and evaluate the result.  The main tools of MPR include publications, events, sponsorships, news, speeches, public service activities, and identity media.

Example:  One of the most creative advertisements for a product is for Axe.  It makes shower gel, shampoo, conditioner, body spray, and deodorant for men.  They advertise on the radio, television, in the movie theater, online, and they even have ring tones.  Their tv commercials will have a man in various parts of the store and the woman will drop what they are doing and flock to them.  Their most catchy pitch is “Bom Chicka Wah Wah”.  Their ads are very catchy and rememorable.

Chapter 15 - Communicating Value

Marketing communications are the means by which firms attempt to inform, persuade, and remind consumers about the products and brands they sell.  They represent the voice of the company and its brands and help build relationships with consumers.  Technology has greatly changed the way consumers process communications.  Marketers must be creative in using technology without intruding in consumers’ lives.  The marketing communications mix consists of the following major modes of communication:  advertising, sales promotion, events and experiences, public relations and publicity, direct marketing, interactive marketing, word-of-mouth marketing, and personal selling.  Marketing communications must be integrated to deliver a consistent message and achieve the strategic positioning.  Two models are useful in helping marketers understand the fundamental elements of effective communications.  A macromodel has a sender and receiver (they represent major parties); message and media (represent major tools); encoding, decoding, response, and feedback (represent major communication functions); and noise (random and competing messages that may interfere with the intended communication).  Micromodels concentrate on consumers’ specific responses to communications.  It is represented by four response hierarchy models, which assume the buyer passes through cognitive, affective, and behavioral stages, in that order. 

Developing effective communications requires eight steps.  First, identify the target audience.  The process must start with a clear audience in mind.  It is a critical influence on the communicator’s decisions about what to say, how, when, where, and to whom. 

Second, determine the communications objectives.  Four possible objectives include category need, brand awareness, brand attitude, and brand purchase intention. 

Third, design the communications.  Formulating the communications to achieve the desired response requires solving three problems.  One is what to say, which is message strategy.  Here management searches for appeals, themes, or ideas that will tie in to the brand positioning and help establish points-of-parity or points-of-difference.  Another way is to create strategy.  This is the way marketers translate their messages into a specific communication.  They can be informational appeals (elaborates on product or service attributes or benefits, assuming consumers will process the communication very logically) or transformational appeals (elaborates on a nonproduct-related benefit or image).  Another is the message source.  Messages delivered by attractive or popular sources can achieve higher attention and recall, which is why celebrities are often used as spokespeople in advertising.  They are likely to be effective when they are credible or personify a key product attribute.  Three factors identified as sources of credibility are expertise, trustworthiness, and likability.  Principle of congruity is when the communicators can use their good image to reduce some negative feelings toward a brand but in the process might lose some esteem with the audience. 

Fourth, select the communications channels.  They may be personal and nonpersonal.  Personal communications channels let two or more persons communicate face-to-face through a phone, surface mail, or email and they derive their effectiveness from individualized presentation and feedback and include direct and interactive marketing, word-of-mouth marketing, and personal selling.  These communications include advocate channels, expert channels, and social channels.  Nonpersonal (mass) communications channels are directed to more than one person and include advertising, sales promotions, events and experiences, and public relations.  Personal communication is often more effective than mass communication, however mass media might be the major means of stimulating personal communication because if affects personal attitudes and behavior.

Fifth, establish the total marketing communications budget.  Four common methods for deciding on a budget include:  affordable method (setting the budget at what managers think the company can afford), percentage-of-sales method (setting the budget at a specified percentage of current or anticipated sales or of the sales price), competitive-parity method (setting the budget to achieve share-of-voice parity with competitors), and objective-and-task method (developing the budget by defining specific objectives, determining the tasks that must be performed to achieve these objectives, and estimating the costs of performing them).

Sixth, decide on the marketing mix.  Companies must allocate the marketing communications budget over the eight major modes of communications.  These include advertising, sales promotion, public relations and publicity, events and experiences, direct marketing, interactive marketing, word-of-mouth marketing, and the sales force.  When developing their communications mix, companies must consider several factors, such as type of product market, consumer readiness to make a purchase, and stage in the product life cycle.  Communications mix allocations vary between consumer and business markets.  Communication tools vary in cost effectiveness at different stages of buyer readiness. Communication tools vary in cost effectiveness at different product life-cycle stages.

Seventh, measuring communications results.  After implementing the communications plan, the company must measure its impact by asking members of the target audience whether they recognize or recall the message, how many times they saw it, what points they recall, how they felt about the message, and what are their previous and current attitudes toward the product and company. 

Eighth (and final), managing integrated marketing communications.  Integrated marketing communications is defined as a planning process designed to assure that all brand contacts received by a customer or prospect for a product, service, or organization are relevant to that person and consistent over time.  This planning process evaluates the strategic roles of a variety of communications disciplines and skillfully combines these disciplines to provide clarity, consistence, and maximum impact through the seamless integration of messages.  Marketers should combine personal and nonpersonal communications channels through multiple-vehicle, multiple-stage campaigns to achieve maximum impact and increase message reach and impact.  Integrated marketing communications can produce stronger message consistency and help build brand equity and create greater sales impact.  It should improve the company’s ability to reach the right customers with the right messages at the right time and place.

Example:  Celebrities are often used in advertising because the product can achieve a higher attention and recall.  Jenny Craig has used celebrities over the years for the same reason.  People look up to celebrities.  If they seeing them use a product then they think it must work, or if they can do it so can the person.  The celebrities pose that the product is the best and that’s why they are using it.  Using celebrities is a way to maximize advertising effectiveness.

Chapter 14 - Managing Retailing, Wholesaling, and Logistics

Retailing is all the activities in selling goods or services directly to final customers for personal, nonbusiness use, no matter how or where sold.  A retailer (or retail store) is any business enterprise whose sales volume comes primarily from retailing.  Three types of retailers are store retailers, nonstore retailers, and retail organizations.  Types of store retailers include specialty store, department store, supermarket, convenience store, drug store, discount store, extreme value or hard-discount store, off-price retailer, superstore, catalog showroom.  They can position themselves as offering one of four levels of service:  self-service, self-selection, limited service, and full-service.  Nonstore retailing falls into four major categories:  direct selling, direct marketing, automatic vending, and buying service.  Corporate retailing organizations include corporate chain store, voluntary chain, retailer cooperative, consumer cooperative, franchise organization, and merchandising conglomerate.  These organizations have greater economies of scale, purchasing power, brand recognition, and better-trained employees compared with independent stores.

Long-term trends in the new retail marketing environment are evident.  One is that new retail firms are merging to better satisfy customers’ needs for convenience.  Another is growth in inter-type competition with different types of stores competing for the same consumers with the same type of merchandise.  Also, store-based and nonstore based retailers are competing with each other.

Retailer marketing decisions include target market, channels, product assortment, procurement, prices, services, store atmosphere, store activities and experiences, communications, and locations. 

Private label brands are brands that retailers and wholesalers develop.  These brands can be more profitable.  Generics are unbranded, plainly packaged, less expensive versions of common products, priced low because of low-cost labeling, minimal advertising, and sometimes lower-quality ingredients.  They have several success factors.  Retailers typically give more prominent display to their own brands and make sure they are well stocked.  Also, the growing power of store brands has benefited from the weakening of national brands.  Many consumers have become more price sensitive.

Wholesaling is all the activities in selling goods or services to those who buy for resale or business use. It excludes manufacturers, farmers, and retailers.  The major types of wholesalers include merchant wholesalers, full-service wholesalers, limited-service wholesalers, brokers and agents, manufactures’ and retailers’ branches and offices, and specialized wholesalers.  They differ from retailers in several ways.  First, they pay less attention to promotion, atmospheres, and location because they deal with business customers rather than final customers.  Second, wholesale transactions are usually larger than retail transactions, and they cover a larger trade area.  Third, wholesalers and retailers comply with different legal regulations and taxes.  Wholesalers are more efficient in performing one for more of the following functions:  selling and promoting, buying and assortment building, bulk breaking, warehousing, transportation, financing, risk bearing, market information, and management services and counseling.  Trends in wholesaling include adapting their services to meet their suppliers’ and target customers’ changing needs; increasing asset productivity; and improving strategic decisions about target markets, product assortment, services, pricing, communications, and distribution.  However, they remain vulnerable to the fierce resistance to price increases and the winnowing out of suppliers based on cost and quality.

Market logistics is planning the infrastructure to meet demand, then implementing and controlling the physical flows of materials and final goods from points of origin to points of use, to meet customer requirements at a profit.  It has four steps:  deciding on the company’s value proposition to its customers; selecting the best channel design and network strategy for reaching the customers; developing operational excellence in sales forecasting, warehouse management, transportation management, and materials management; and implementing the solution with the best information systems, equipment, policies, and procedures.  Integrated logistics systems include materials management, material flow systems, and physical distribution, aided by information technology to shorten the order-cycle time, reduce errors, and improve control. 

Firms should make four major decisions about its market logistics.  First they should decide how orders should be handled.  This is known as order processing.  Their goal is to shorten their order-to-payment cycle, which is the elapsed time between an order’s receipt, delivery, and payment.  Second, they should decide where stock should be located.  This is known as warehousing.  Every company must store finished goods until they are sold.  Storage warehouses store goods for moderate to long periods of time.  Distribution warehouses receive goods from various company plants and suppliers and move them out as soon as possible.  Automated warehouses employ advanced materials-handling systems under the control of a central computer.  Third, they must decide the amount of stock to be held.  This is known as inventory.  Companies need to balance order-processing costs and inventory-carrying costs.  Fourth, companies must decide how goods should be shipped.  This is known as transportation.  This affects product pricing, on-time delivery performance, and the condition of the goods when they arrive, all of which affect customer satisfaction.

Example:  Apple is one of the leading retailers for customer service.  With their ahead of the game product innovations they know how to treat their customers.  When Apple comes out with a new product, previous Apple owners are on the list to buy it even before it becomes available.  They also offer a great return policy.  Their online customer support service is customer friendly with not having to go through a maze to be able to talk to someone.  And they can provide quick feedback.  Their customer loyalty proves their success.

Chapter 13 - Designing and Managing Integrated Marketing Channels

Marketing channels are intermediaries between producers and final users that perform a variety of functions.  They make the product or service available for use or consumption.  A marketing channel system is a set of marketing channels a firm employs and affects all other marketing decisions.  The firm must decide whether to use push or pull marketing.  A push strategy uses the manufacturer’s sales force, trade promotion money, or other means to induce intermediaries to carry, promote, and sell the product to end users.  A pull strategy is where the manufacturer uses advertising and other communications to persuade consumers to demand the product from intermediaries, which induces the intermediaries to order it.  Hybrid channels or multichannel marketing occurs when a single firm uses two or more marketing channels to reach customer segments.  A value network is a system of partnerships and alliances that a firm creates to source, augment, and deliver its offerings.  It includes a firm’s suppliers and its suppliers’ suppliers, and its immediate customers and their end customers.   Demand chain planning is when a company thinks of the target market and then designs the supply chain backward from that point.

Members of marketing channels perform several key functions.  Functions such as storage and movement, title, and communications create a forward flow of activity from the company to the customer; ordering and payment functions create a backward flow from customers to the company; information, negotiation, finance, and risk taking functions occur in both directions.  The producer and consumer are part of every channel, however there are sometimes a number of intermediary levels that designate the length of the channel.  A zero-level channel (or direct marketing channel) is where the manufacturer sells directly to the final customer.  A two-level channel consists of two intermediaries; and so on.  Most channels are forward moving, however reverse-flow channels are also important in some situations. 

To design a marketing channel system, marketers must analyze customer needs and wants, establish objectives and constraints, and identify and evaluate major channel alterations.  Customers choose channels based on price, product assortment, convenience, and their own shopping goals.  Marketers must be aware that different consumers have different needs during their purchase process.  Five service outputs produced by channels include lot size, waiting and delivery time, spatial convenience, product variety, and service backup.  Marketers should state their channel objectives in terms of service output levels and associated cost and support levels, adapting objectives to the larger environment.  Channel objectives vary with product characteristics.  Each channel has unique strengths and weaknesses, and channel alternates differ in three ways:  the types of intermediaries, the number needed, and the terms and responsibilities of each.  Types of intermediaries include merchants, agents, and facilitators.  The number of intermediaries depends on whether a firm uses exclusive distribution (limits the number of intermediaries), selective distribution (relies on only some of the intermediaries willing to carry a particular product), and intensive distribution (places offerings in as many outlets as possible).  The main elements in the “trade-relations mix” are price policies (the producer establishes a price list and schedule of discounts and allowances that intermediaries see as equitable and sufficient), conditions of sale (payment terms and producer guarantees), territorial rights (define the distributors’ territories and the terms under which the producer will add other distributors), and specific services to be performed by each party.  In addition, each channel needs to be evaluated against economic, control, and adaptive criteria.

Once a channel system is chosen, a firm must select, train, motivate, and evaluate individual intermediaries for each channel.  Producers should determine what characteristics distinguish the better intermediaries.  A company should also view its intermediaries the same way it views its end users.  Carefully implemented training, market research, and other capability-building programs can motivate and improve intermediaries’ performance.  Producers must also periodically evaluate intermediaries’ performance against others.  Producers must periodically review and modify its channel design and arrangements.

Distribution channels are constantly growing.  A conventional market channel consists of an independent producer, wholesaler(s), and retailer(s) with each being a separate business seeking to maximize its own profits.  A vertical marketing system (VMS) includes the producer, wholesaler(s), and retailer(s) acting as a unified system.  It is the dominant mode of distribution in the US consumer marketplace.  Three types of VMS are corporate (combines successive stages of production and distribution under one owner), administered (coordinates successive stages of production and distribution through one member’s size and power), and contractual (consists of independent firms at different levels of production and distribution).  Horizontal market systems are where two or more unrelated companies put together resources or programs to exploit an emerging marketing opportunity.  Integrated marketing channel systems are where the strategies and tactics of selling through one channel reflect the strategies and tactics of selling through one or more other channels.  Benefits of adding more channels are increased market coverage, lower channel costs, and more customized selling.  However, new channels typically introduce conflict and problems with control and cooperation.  These marketers need to decide how much of their product to offer in each channel.

Conflict always arises no matter how well channels are designed and managed.  Channel conflict is generated when one channel member’s action prevent another channel member from achieving its goal.  Channel coordination occurs when channel members are brought together to advance the channel’s goals.  Types of conflict and competition include horizontal channel conflict (occurs between channel members at the same level), vertical channel conflict (occurs between different levels of the channel), and multichannel conflict (exists when the manufacturer has two or more channels that sell to the same market).  Causes of channel conflict include goal incompatibility, unclear roles and rights, territory boundaries, credit for sales, and differences in perception intermediaries’ dependence on the manufacturer.  Some channel conflicts can be constructive and lead to better adaptation to a changing environment.  The challenge is to manage conflict well.  This can be done through mechanisms such as strategic justification; dual compensation; superordinate goals; employee exchange; joint memberships; co-optation; diplomacy, mediation, or arbitration; and legal resource.  Marketers must be careful not to dilute their brands through inappropriate channels.  Legal and ethical issues arise in channel relations.  This includes exclusive distribution, exclusive territories, tying agreements, and dealers’ rights.

E-commerce uses a Web site to transact or facilitate the sale of goods and services online.  Pure-click companies are those that have launched a Web site without any previous existence as a firm.  These include Internet service providers, commerce sites, transaction sites, content sites, and enabler sites.  Customer service is critical for these companies.  Brick-and-click companies are existing companies that have added an online site for information or e-commerce.  M-commerce marketing will see a big future because of the widespread saturation of cell phones and smart phones.

Example:  Push strategies create customer demand for a product.  Mobile phone manufacturers use this strategy.  Manufacturers such as Nokia place their phones in retail stores, such as Wal-Mart, Best Buy, and Sam’s.  Once customers purchase the mobile phone they will have to purchase their required service.  Pull strategies spend on advertising to build up customer demand for a product.  Television advertisements for children’s toys use this strategy.  Manufacturers such as Playskool will advertise toys on channels where children are watching television and especially close to Christmas to build up their desire to want the toys. 

Chapter 11 - Designing and Managing Services

A service is defined as any act or performance one party can offer to another that is essentially intangible and does not result in the ownership of anything.  Service industries include the government sector, the private nonprofit sector, the business sector, the manufacturing sector, and the retail sector.  These sectors are providing added services or excellent customer service to differentiate themselves.  Many service firms are using the Internet to reach their customers, some of which are only online.

The service component can be a major or minor part of the total offering.  Categories of a service mix include pure tangible goods, tangible goods with accompanying services, hybrids, major services with accompanying minor goods and services, and pure service.  Services have more risk in their purchase because they are generally high in experience and credence qualities.  Service consumers generally rely on word of mouth rather than advertising as well as price, provider, and physical cues to judge quality.  Distinctive characteristics of services include intangibility, inseparability, variability, and perishability.  Services are intangible as they cannot be seen, tasted, felt, heard, or smelled before they are bought.  Service firms try to demonstrate their service quality through physical evidence and presentation.  Services are typically produced and consumed simultaneously, which makes them inseparable.  They are highly variable because the quality depends on who provides them, when and where, and to whom.  Three steps to increase the quality control of services are to invest in good hiring and training procedures, to standardize the service-performance process, and to monitor customer satisfaction.  Since services cannot be stored, their perishability can be a problem when demand fluctuates. 

Service firms are among the most skilled marketers.  Services marketers must recognize three new services realities:  customer empowerment, customer coproduction, and satisfying employees as well as customers.  In the service sector, marketing requires excellence in three broad areas:  external, internal, and interactive marketing.  External marketing is the normal work of preparing, pricing, distributing, and promoting the service to customers.  Internal marketing is training and motivating employees to serve customers well.  Interactive marketing is the employees’ skill in serving the client.  Clients judge services by its technical quality and its functional quality.  Teamwork is often key.  In achieving marketing excellence, well-managed service companies share a strategic concept, a history of top-management commitment to quality, high standards, profit tiers, and systems for monitoring service performance and customer complaints.  Marketers are able to differentiate their service offerings in many ways.  The primary service package is what the customer expects.  The provider can then add secondary service features to the package. 

Service quality is tested at each service encounter.  Managing customer expectations and incorporating self-service technologies are two important considerations in delivering service quality.  Customers compare the perceived service with the expected service.  When the perceived service falls below the expected service, customers are disappointed.  Five gaps that can cause unsuccessful service delivery include the gap between consumer expectation and management perception, the gap between management perception and service-quality specification, the gap between service-quality specifications and service delivery, the gap between service delivery and external communications, and the gap between perceived service and expected service.  Based on this, five determinants of service quality (in order of importance) are reliability, responsiveness, assurance, empathy, and tangibles.  Consumers value convenience in services.  As a result, self-service technologies are replacing person-to-person service interactions.

Some service providers must provide product-support services.  Companies that make a good product but provide poor local service support are seriously disadvantaged.  Customers have three worries about product service:  reliability and failure frequency, downtime, and out-of-pocket costs.  A buyer considers all these factors and tries to estimate the life-cycle cost.  This is the product’s purchase cost plus the discounted cost of maintenance and repair less the discounted salvage value.  To provide the best support, a manufacturer must identify the services customers value most and their relative importance.  They can offer product-support services in different ways.  For example, they offer service contracts agreeing to provide free maintenance and repair services for a specified period at a specified contract price. 

Some firms provide postsale services.  They usually start by running their own parts-and-services departments so they can stay close to the equipment and know its problems.  Customer-service choices are increasing rapidly and manufacturers must determine how to make money on their equipment, independent of service contracts.  One such way is for firm’s to have their own service people on-site.

Example:  Carnival Cruise Lines provides excellent service.  I have been on four cruises in the past two years and have never been disappointed.  They go above and beyond to provide the best quality of everything from food to entertainment to personal treatments and services from then time you get ready to purchase your ticket to the time you depart the ship.  They make sure their customers are fully satisfied in every way.  They make their customers feel as if they are being treated like royalty.  They cater to everyone to give them an experience they will never forget and want to return again and again.  

Chapter 10 - Setting Product Strategy and Marketing Through the Life Cycle

A product is defined as anything that can be offered to a market to satisfy a want or need, including physical goods, services, experiences, events, persons, places, properties, organizations, information, and ideas.  Five product levels need to be addressed by marketers in planning their market offering.  Level one is the fundamental level and is known as the core benefit.  This is the service or benefit the customer is really buying.  This is turned into the basic product, which is the second level.  The third level is where the marketer prepares an expected product, which is a set of attributes and conditions buyers normally expect when they purchase the product.  At the fourth level, the marketer prepares an augmented product, which exceeds customer expectations.  The fifth level is the potential product, which are all the possible augmentations and transformations the offering might undergo in the future.  This is where companies search for new ways to satisfy customers and distinguish their offering. 

In addition to the product levels, marketers classify products on the basis of durability, tangibility, and consumer or industrial use.  Durable goods are tangible goods that survive many uses, require personal selling and service, command a higher margin and require more seller guarantees.  Nondurable goods are tangible goods normally consumed in one or a few uses.  Services are intangible, inseparable, variable, and perishable products that normally require more quality control, supplier credibility, and adaptability.  Consumer goods are classified according to shopping habits.  They include convenience goods (purchased frequently, immediately, and with minimal effort), shopping goods (consumers compare on the basis of suitability, quality, price, and style), specialty goods (unique characteristics or brand identification), and unsought goods (consumers do not know about or normally think about buying).  Industrial goods consist of materials and parts, capital items, and supplies and business services.

Products must be differentiated in order to be branded.  Some products allow little variation while others are capable of high differentiation.  Marketers face an abundance of differentiation possibilities.  Form is the product’s size shape, or physical structure.  Features are characteristics that supplement a product’s basic function.  Mass customization meets each customer’s requirements, on a mass basis, by individually designing products, services, programs, and communications.  Performance quality is the level at which the product’s primary characteristics operate.  Conformance quality is the degree to which all produced units are identical and meet promised specifications.  Durability is a measure of the product’s expected operating life under natural or stressful conditions.  Reliability is a measure of the probability that a product will not malfunction or fail within a specified period.  Reparability measures the ease of fixing a product when it malfunctions or fails.  Style describes the product’s look and feel to the buyer.

Adding valued services and improving its quality may be the key to competitive success when the physical product cannot easily be differentiated.  Service differentiators include ordering ease, delivery, installation, customer training, customer consulting, and maintenance and repair. 

Design offers an effective way to differentiate and position a company’s products and services as competition intensifies.  It is the totality of features that affect how a product looks, feels, and functions to a consumer.  It offers functional and visual benefits and appeals to the rational and emotional sides of consumers.

Products can be related to ensure that a firm is offering and marketing the optimal set of products.  A product system is a group of diverse but related items that function in a compatible manner.  A product mix (or product assortment) is the set of all products and items a particular seller offers for sale.  This consists of various product lines, which is a group of products within a product class that is closely related because they perform similar functions, are sold to the same customer groups, and are marketed through the same channels, or fall within given price ranges.  A product mix has width (how many different product lines the company carries), length (the total number of items in the mix), depth (how many variants are offered of each product in the line), and consistency (how closely related the various product lines are in end use, production requirements, distribution, or some other way).  Marketers need to conduct product-line analysis to provide information for decisions about length and modernization.

A company can lengthen its product line by line stretching and line filling.  Line stretching is when a company lengthens its product line beyond its current range.  Line filling is when a firm adds more items within the product line’s present range.  In addition, product lines need to be modernized to encourage customer migration to higher-valued, higher-priced items.  Marketers must also modify their price-setting logic when the product is part of a product mix.  Product-mix pricing is when the firm searches for a set of prices that maximizes profits on the total mix.  Marketers will also combine their products with products from other companies.  One way is co-branding.  This is when two or more well-known brands are combined into a joint product or marketed together in some fashion.  Advantages of this include convincingly being positioned by virtue of multiple brands, reducing the cost of product introduction, and learning about how other companies approach consumers.  Disadvantages include risks and lack of control in becoming aligned with another brand.

Other important elements of product strategy include packaging, labeling, warranties, and guarantees.  Packaging includes all the activities of designing and producing the container for a product.  It is the buyer’s first encounter with the product, so it must draw the consumer in and encourage product choice.  It must achieve objectives, such as identifying the brand, convey descriptive and persuasive information, facilitate product transportation and protection, assist at-home storage, and aid product consumption.  The label provides an abundant amount of information about a product.  It identifies the product or brand, grades the product, describes the product, and promotes the product.  Warranties are formal statements of expected product performance by the manufacturer, and legally enforceable.  Guarantees reduce the buyer’s perceived risk and suggest that the product is of high quality and the company and its service performance are dependable.

Companies can add new products through acquisition or through development from within.  Most new product-activity is devoted to improving existing products.  Reasons for new products failure include ignored or misinterpreted market research; overestimates of market size; high development costs; poor design or ineffectual performance; incorrect positioning, advertising or price; insufficient distribution support competitors who fight back hard; and inadequate ROI or payback.  Established companies often focus on incremental innovation, which is entering new markets by tweaking products for new customers, introducing variations on a core product, and creating interim solutions for industry-wide problems.  Newer companies create disruptive technologies because they are cheaper and more likely to alter the competitive space.

New product development stages include idea generation, idea screening, concept development, concept testing, marketing strategy development, business analysis, product development, market testing, and commercialization.  Idea generation is the search for ideas.  Idea screening is screening out poor ideas early because product-development costs rise substantially with each successive development stage.  Concept development is an elaborated version of a product idea expressed in consumer terms.  It is turned into a brand concept.  Concept testing is presenting the product concept to target consumers, physically or symbolically, and getting their reactions.  Once this is successful, the firm drafts a preliminary three-part strategy for introducing the new product.  This forms the basis for the business analysis.  The business analysis is where the firm evaluates the proposed product’s business attractiveness by preparing sales, cost, and profit projections to determine whether they satisfy company objectives.  If they do, the concept can move to the development stage.  The product development stage is where the company determines whether the product idea can translate into a technically and commercially feasible product.  Once management is satisfied with functional and psychological performance, the product is ready to be branded with a name, logo, and packaging and go into a market test.  These tests seek to estimate four variables:  trial, first repeat, adoption, and purchase frequency.  Commercialization is the final stage.  It is where the firm contracts for manufacture or builds or rents a manufacturing facility and it also prepares its communications campaign.  This is the costliest stage in the process.  Timing of entering the market is crucial.  If a firm learns that a competitor is readying a new product, it can choose first entry, parallel entry, or late entry.  However, most companies will develop a planned market rollout over time. 

Adoption is defined as an individual’s decision to become a regular user of a product and is followed by the consumer-loyalty process.  New product marketers use the theory of innovation diffusion and consumer adoption to identify early adopters.  Innovation is any good, service, or idea that someone perceives as new, no matter how long its history.  Innovation diffusion process is the spread of a new idea from its source of invention or creation to its ultimate users or adopter.  The consumer-adoption process covers the mental stages through which an individual passes from first hearing about an innovation to final adoption.  These stages are awareness, interest, evaluation, trial, and adoption. 

An innovation’s rate of adoption is influenced by five characteristics.  One is relative advantage.  This is the degree to which the innovation appears superior to existing products.  Next is compatibility, which is the degree to which the innovation matches the values and experiences of the individuals.  Third is complexity.  This is the degree to which the innovation is difficult to understand or use.  Fourth is divisibility, which is the degree to which the innovation can be tried on a limited basis.  And fifth is communicability, which is the degree to which the benefits of use are observable or describable to others.  Cost, risk and uncertainty, scientific credibility, and social approval can also influence the rate of adoption.  Adoption is also associated with variables in the organization’s environment, the organization itself, and the administrators.

A product’s life-cycle is divided into four stages:  introduction, growth, maturity, and decline.  The product life-cycle helps marketers interpret product and market dynamics, conduct planning and control, and do forecasting. 

The introduction stage is where sales grow slowly as the product is introduced and profits are nonexistent because of heavy introduction expenses.  Sales growth tends to be slow during the introduction stage because it takes time to roll out a new product, work out the technical problems, fill dealer pipelines, and gain consumer acceptance.  Profits are negative or low and promotional expenditures are high.  Being the first to enter the market with a new product can be rewarding, but risky and expensive. 

Growth is a period of rapid market acceptance and substantial profit improvement.  The growth stage is shown by a rapid climb in sales because early adopters like the product and additional consumers start buying it.  During this stage sales rise faster than costs and promotional expenditures are maintained or increased to meet competition. 

In the maturity stage sales growth slows because the product has achieved acceptance by most potential buyers, and profits stabilize or decline because of higher competition.  Products reach the maturity stage when the rate of sales growth slows.  Most products are in this stage the longest.  A brand’s course in maturity can be changed by expanding the market, improving quality, features, and style of the product, and by modifying nonproduct marketing elements. 

During the declining stage, sales drift downward and profits erode.  Sales decline for a number of reasons, such as technological advances, shifts in consumer tastes, and increased competition.  During this stage companies have several options.  They can restage or rejuvenate a mature product by adding value to it; they can harvest the product, which is gradually reducing its costs while trying to maintain sales; or they can divest, which is selling the product to another firm.

Example:  Apple is a company who sets themselves apart from all other computer companies through differentiation, advertising, and customer loyalty.  They constantly remain a step ahead of their competitors by developing new products before their customers get used to the most current ones they have released.  Their advertising is another strong point that sets them apart from their competitors.  By developing high quality products their customers have remained loyal.  They are constantly upgrading to the newest product.  Apple is able to keep their prices up because their customers are willing to pay more for better quality.

Chapter 9 - Crafting the Brand Positioning and Competing Effectively

Marketing strategies are built on segmentation, targeting, and positioning.  Positioning is the act of designing a company’s offering and image to occupy a distinctive place in the minds of the target market.  The goal of positioning is to locate the brand in the minds of consumers to maximize the potential benefit to the firm.  The result is the successful creation of a customer-focused value proposition.  Deciding on the positioning of the brand requires determining a frame of reference, identifying the optimal points-of-parity and points-of-difference brand associations, and creating a brand mantra to summarize the positioning.

A competitive frame of reference defines which other brands a brand competes with and which brands should be the focus of competitive analysis.  A good starting point is to determine the category membership, which are the products or sets of products with which a brand competes and which function as close substitutes.  Competition can be examined from an industry and a market point of view.  The industry is a group of firms offering a product or class of products that are close substitutes for one another.  The market approach defines competitors as companies that satisfy the same customer need.  Once marketers analyze the competitors they must formally define the competitive frame of reference to guide positioning.

Points-of-difference (PODs) and points-of-parity (POPs) can be defined once the competitive frame of reference has been fixed.  PODs are attributes or benefits that consumers strongly associate with a brand, positively evaluate, and believe they could not find to the same extent with a competitive brand.  Strong brands may have several PODs.  Three criteria to determine whether a brand association can function as a POD include is it desirable to the consumer, is it deliverable by the company, and is it differentiating from competitors.  POPs are attributes or benefit associations that are not necessarily unique to the brand but may be shared with other brands.  They come in two forms:  category POPs are associations that consumers view as essential to a credible offering within a certain category and they may change over time; competitive POPs are associations designed to overcome perceived weaknesses of the brand.  A brand may identify more than one frame of reference if competition widens or the firm expands into new categories.  In choosing PODs or POPs marketers typically focus on brand benefits.  They may use perceptual maps, visual representations of consumer perceptions and preferences for choosing specific benefits as PODs and POPs. 

Brand mantras are an articulation of the brand essence and promise, economically communicating what the brand is and what it is not in short, three- to five- word phrases.  A good brand mantra should communicate the category and clarify the brand’s uniqueness, be vivid and memorable, and stake out ground that is meaningful and relevant.

Establishing brand positioning requires the consumers understand what the brand offers and what makes it a superior competitive choice.  The consumer should be informed of a brand’s category membership before stating its PODs.  Marketers can use three ways to convey a brand’s category membership.  One way is to announce the category benefits.  Marketers frequently use benefits to announce category membership to reassure consumers that a brand will deliver on the fundamental reason for using a category.  Another way is to compare to exemplars.  Brands that are well-known and noteworthy in a category can help a brand specify its category membership.  Also, relying on the product descriptor is another way to convey a brand’s category membership.  The product descriptor that follows the brand name is a concise means of conveying category origin.

Marketers realize that anything can be differentiated.  Competitive advantage is a company’s ability to perform in one or more ways that competitors cannot or will not match.  Customers must see competitive advantage as a consumer advantage and firms must focus on this to deliver high customer value and satisfaction which leads to repeat purchasing and ultimately to high profitability.  Firms may need to consider other dimensions of differentiation rather that those that relate to aspects of the product and service.  For example, employee differentiation (having better trained employees who provide superior customer service), channel differentiation (channels’ coverage, expertise, and performance designed to make buying easier, more enjoyable, and more rewarding for customers), image differentiation (powerful, compelling images created that appeal to consumers’ social and psychological needs), and services differentiation (service firms delivering more effective and efficient solutions to consumers) can all be considered in competitive markets. 

Marketing experts believe a brand positioning should have both rational and emotional components, with PODs and POPs that appeal to the head and the heart.  Firms should analyze potential competitive threats by monitoring the share of market, the share of mind, and the share of heart.  If firms make steady gains in mind share then heart share will inevitably make gains in market share and profitability.

A market leader must find ways to expand total market demand, protect its current share through good defensive and offensive actions, and increase market share, even if market size remains constant in order to stay on top.  The market leader should look for new customers or more usage from existing customers.  A company can search for new users among those who might use it but do not (market-penetration strategy), those who have never used it (new-market segment strategy), or those who live elsewhere (graphical-expansion strategy).  They can also try to increase the amount, level, or frequency of product consumption.  A market leader should also actively defend its current business.  New products and customer services, distribution effectiveness, and cost cutting should be developed.  Defense strategies that can be used include position defense, flank defense, preemptive defense, counteroffensive defense, mobile defense, and contraction defense.  In addition, a market leader should consider four factors before increasing their market share.  These include the possibility of provoking antitrust action, economic cost, pursuing the wrong marketing activities, and the effect of increased market share on actual and perceived quality.

Firms that are not market leaders are considered market challengers, market followers, and market nichers.  The market challenger must first define its strategic objective, which is usually to increase market share, and whom to attack.  Once opponents and objectives have been established, five attack strategies for challengers include frontal attacks (the attacker matches its opponent’s product, advertising, price, and distribution), flank attacks (identifying shifts that are causing gaps to develop, then filling the gaps), encirclement attacks (attempts to capture a wide slice of territory by launching a grand offensive on several fronts), bypass attacks (offers three lines of approach: diversifying into unrelated products; diversifying into new geographical markets; and leapfrogging into new technologies), and guerrilla attacks (small, intermittent attacks).  Market followers earn less than the leader and are often not a rewarding path.  Strategies for followers include counterfeiters, cloning, imitators, and adapters.  Market nichers are leaders in a small market.

Example:   Coca-Cola is product that has differentiated itself from all other soft drinks.  It has positioned itself in a way that everyone world-wide recognizes its logo.  It has also had catchy jingles over the years that people remember.  It has its share of competitors, but remains the top selling soft drink.  It has even tried to develop a new product (New Coke) that was unsuccessful, but that did not affect it.  The Cola-Cola bottling company in Atlanta is one of the most visited tourist spots in the US attracting people from all over.   Coca-Cola also has soft drinks to represent countries around the world.  No matter what it tries, its marketing strategy has created it a top-notch reputation that has put it over the top.