Chapter 1

Marketing: the activity, set of institutions, and processes for

1. creating value
2. communicating value
3. delivering value
4. exchanging value

● creating value: collaborating with suppliers and customers to create offerings that have value
● communicating value: describing offerings and learning from customers
● delivering value: getting offerings to customers in a way that optimizes the value for them
● exchanging value: trading value for provided offerings

The 4 P's of Marketing

1. Product / Service: goods and/or services → creating offerings for customers
2. Promotion: communicating the value of said, offerings
3. Place/ Distribution: delivering the product to the customer so they are able to purchase
● Marketing element focusing on considerations in getting a selected product in the right place at
the right time
4. Price: monetary amount charged for product (exchanging)
● exchange of ownership (ex. car → papers to sign)

Value
● Value is ascertained from consumers' perspective
● everything a customer gets for what they benefited from what they gave up in return for benefits
● based on consumer expectations of brand (brand positioning)

Personal Value Equation:

value = benefits received — [ price + non-financial costs ]

● Non-financial costs: time & effort consumer puts into shopping process

Key Aspects of Marketing

● creates value
● satisfies customer needs & wants
● exchange between parties
● marketing mix decisions (4 P's) (marketing plan)
● can be performed by companies & individuals (B2B --> suppliers) (C2C --> Facebook marketplace,
Ebay etc.)
Marketing Strategies
1. Product/ Service strategy: creating offerings that have value

2. Price strategy: exchanging offerings such as…

● Cash
● Rewards points
● Data/information in exchange for service (Facebook)

3. Promotion strategy: describing the offering and its value to potential and current customers
● Interactive dialogue w/ consumers (what they want and like)
● Monitoring social media & answering questions (website consumer groups and chat forums --> ex.
Adobe chat room)
● Mobile marketing --> sending ads and coupons based on device location (web, TV, movie product
placements, billboard, public relations PR)

4. Place (distribution) strategy: delivering offerings

● Ensuring that customer understands how to get the most out of the product
● Taking care of consumer if requires service later (ex. Apple Care)
● Relies on supply chain and logistics

Marketing concept / Market oriented

Marketers seek to satisfy consumer wants and needs

Evolution of the Marketing Concept (4 Phases)

1. Production Orientation
● After the Industrial Revolution in the late 1800's
● Tagline = "if you built it, they'll buy it"
● a good will sell itself
● reducing production costs

CONTEXT
● introduction of machinery into production process → mass production

PHILOSOPHY
● produce as much as possible & cost per unit will decrease (buy raw materials in bulk)
● sell at lowest price → attract masses
● (ex. Ford automobile)

2. Selling Orientation
● after The Great Depression (late 1920's)
● "if you push the product, they'll buy”

CONTEXT
 ● consumer choice exists
● ↑ inflation, ↑ unemployment
● consumers have less disposable income

PHILOSOPHY
● convince consumer to buy
● hard sell/ aggressive sales tactics
● product push → door-to-door salesmen

3. Product Orientation (& Market Orientation)

● Post World War 2 (1950's)

● "if you differentiate it, they'll buy it"

CONTEXT
● economy is improving
● ↑ demand, ↑ access to raw materials

PHILOSOPHY
● create different products → catch consumer attention
● product innovation
● differentiation from competition
● ex. P&G (Proctor & Gamble) → many products serve same function with a twist appeal

3. Market Orientation

● Post World War 2 (1950's)

● "if you understand them, they'll buy it”

CONTEXT
● economy is improving
● ↑ demand, ↑ access to raw materials

PHILOSOPHY
● focus on understanding what consumer wants
● strategize around 4 P's (product, price, promotion, place)

4. Value Orientation

● 1990's to the Present

● "if you interact w/ them, they will continually buy”

CONTEXT
● customers have greater access to info & voice on socials
● they tell us what they want

PHILOSOPHY
 ● create value
● build relationship (one-one marketing)
● use big data
● service-dominant logic consumers want value no matter how it's delivered

POST-COVID predictions
● slow growth
● de-marketing
● anti-consumption
● ↓ environmental impact

Criticisms of Marketing
● creates unnecessary wants
● creates consumer debt

1. Sustainability
● social responsibility --> not diminishing earth's resources
● end of life & disposal of products handling (batteries, cell phones etc.)
● reducing resources used at every step of manufacturing process
● Ex. server farms for cloud computing & internet services (power, energy, fossil fuels)

2. Ethics & Social Responsibility:

● ethics = do no harm
● social responsibility = actively seek to improve the lives of others
● Proactive

3. Service-dominant logic: consumers want value no matter how it's delivered

● aspect of Value Orientation marketing concept

4. Metrics
● big data → more metrics to create better offerings, communication plans → satisfy customers

5. Global environment
● all business influenced by global issues
● distribution systems (roads), government policies, different ethical structure (bribes), global
competition

linear economy: products created from raw material and used until they are discarded as waste

circular economy: business production model that removes waste/ pollution at every stage of the production
process
● keeps products and materials in use for as long as possible
● regenerates natural systems
 Chapter 2

Strategic Planning Process

● keep in mind decisions/ actions to be taken (focus on relevant aspects)
● conduct situational analysis
● develop mission statement, objectives, strategies
● segmentation, targeting, & positioning strategy
● marketing mix

Strategic Planning Process (Steps)

1. Planning Phase: Conduct a situational analysis of the external and internal environment, and then
develop mission objectives

● Situation Analysis
1. evaluate Internal Environment
2. evaluate External Environment
3. SWAT Analysis
4. Develop Mission & Objectives

External Environment (PESTC) Internal Environment (Company and

Corporate Partners)

Political / legal / regulatory Company

● how does company compare to
Economic: inflation, unemployment, interest, growth, competition?
vs recession ● company resources (ex. money, tech)
● company capabilities (ex. personnel,
Socio-Cultural: social trends, attitudes, processes)
demographic characteristics
Corporate Partners
Technological (ex. suppliers, logistics)

Competitive
● MACRO → industry competition, ease of
market entry, Porter 5 Forces Model)
● continuous evaluation

External Environment Considerations (MACRO Environment)

Political / Legal / Regulatory Considerations (MACRO environment)
● government policies, structures, and regulations
● political trends
● taxation issues
● current domestic legislation
● future legislation
● environmental regulations
● employment law
● consumer protection
● industry specific regulations
● competitive regulations
● shareholder/ stakeholder needs/ demands

Economic Considerations (MACRO environment)

● domestic economic trends
● global economic trends
● taxation issues
● market and trade cycles
● market distribution trends
● disposable income
● job growth/ unemployment
● Inflation
● consumer confidence index

Socio-Cultural Considerations (MACRO environment)

● media views
● laws affecting social factors
● brand, company, technology, image
● consumer buying patterns
● Demographics
● life cycle changes
● population shifts
● Education
● trends/ fads
● living standards
Technological Considerations (MACRO environment)
● technology development
● research funding
● associated/ dependent technology
● replacement technology
● manufacturing capacity
● information and communications
● consumer buying technology
● technology legislation
● technology access
● intellectual property issues
● rate of obsolescence
● software innovations
Competitive Considerations (MACRO environment)
● potential new entrants
● product substitutes
● supplier bargaining power
● buyer bargaining power
● competitive intensity

Internal Environment Considerations (MICRO Environment)

Company Corporate Partners

Company Resources ● raw material suppliers

● financial capital ● promotional suppliers
● personnel (knowledge) ● distribution partners
● brand reputation ● distribution reach
● assets or patents ● marketing partners
● corporate culture

Company Capabilities
● manufacturing
● systems
● marketing
● product development

Porter's 5 Forces Model

1. Potential New Entrants
2. Bargaining Power of Buyers
3. Bargaining Power of Suppliers
4. Threat of Substitute Products
5. Rivalry Among Competitors

SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats)

● Strengths or Weaknesses
○ must be about the company
○ must be within the control of the company
○ must be a comparison against the competition (better or worse)
 ENHANCING QUESTIONS
○ How do you capitalize/ leverage the strengths in the decision to be made?
○ How do you address / compensate for the weakness in the decision to be made?

● Opportunities or Threats
○ must be external to the company
○ is not within the control of the company
○ must exist in the absence of the company

ENHANCING QUESTIONS
○ How do you take advantage of the opportunities in the decision to be made?
○ How do you mitigate / minimize the threats in the decision to be made?

Develop Mission Objectives

Objectives: results the organization wants to accomplish within a given time frame
● realistic, measurable
● motivate workforce
● provide reference points
● SMART Objectives
○ Specific
○ Measurable
○ Attainable
○ Realistic
○ Timely

Marketing Plan: strategic plan that provides direction to company's marketing group
● functional level

Strategies: what a company is going to do to achieve objectives

Tactics: specific actions taken to execute the strategy

Ansoff's Matrix: Product & Market Entry Strategies

● Market Penetration:
○ getting existing customers to buy more
○ (ex. special promotions, low prices, coupons,
weekly flyers)
○ attracting target customers who haven't
purchased before

● Market Development
○ entering new markets with existing products
(age, geographic, international)
 ○ can also license the right to use the company's production processess, trademarks/patents to
companies and individuals in foreign

● Product Development
○ creating a new product for existing target customers
○ new, improved, enhances value (new feature), different variations (colours/sizes)

● Diversification
○ entering new markets with new products
○ doing something outside a company's businesses
○ can do so by acquiring other companies

Sustainable Competitive Advantage (4)

advantage over competition that can't be easily copied → maintained long term

● Locational Excellence
○ # of locations / internet presence company has
○ not easily copied b/c locations require money and/or franchise partners (ex. Tim Hortons)

● Operational Excellence
○ improving operations → can offer customers better pricing, ease, access
○ strong supplier relationships
○ supply chain management
○ efficient operation (customer gets what they want, when they want)
○ ↑ value for customer
○ (ex. Walmart)

● Product Excellence
○ offering products w/ a high perceived value
○ effective branding and positioning
○ unique offering not easily replicated
○ (ex. Supreme)

● Customer Excellence
○ developing value-based strategies for retaining loyal customers
○ excellent/ superior customer service
○ reluctance to show w/ other companies
○ (ex. Apple, Amazon)

Strategic Planning Company Levels

● Corporate level: top executives develop strategic plans for entire

company

● Business level:
 ■ Strategic Business Unit (SBU)
○ business/ product line within organization
○ has its own competitors and customers, and profit centre for accounting
○ own mission statement → develops own strategic plans

● Functional level: strategic plans developed by different departments

Boston Consulting Group (BCG) Matrix

● Strategic business portfolio planning
● makes connection between profitability and market share
● evaluates Strategic Business Units based on:
1) SBU's Market Growth Rate
2) SBU's Relative Market Share
● Categories include…

Stars
● high market growth
● high market share
● company should maintain STARS (invest more money to
improve, distribute and promote)

Cash Cows
● high market share
● low market growth
● large share of shrinking market (no long-term future)
● company should manage CASH COWS (continue to
generate revenue to fund stars)

Question Marks
● low market share
● low market growth
● little stake in a market that isn't growing
● company must decide whether to invest or sell

Dogs
● low market growth
● low market share
● unit doesn't make much money and has no future
● company should sell it off (divest)

Holding market: keep product share at the same level and only invest to maintain current share
harvest
Harvest: lower investment in a product
● generate short-term profits regardless of impact on long-term survival

Divest: drop/ sell a product

2. Implementation Phase (Marketing Strategy)

3. Control Phase

Chapter 3

Consumer Behaviour: why ppl acquire products/ services

● understanding consumer helps businesses forecast and plan for consumer preferences & behaviour
patterns

Consumer Purchase Decision Process (5 Steps)

● describes purchase & acquisition behaviour
● rational step-by-step process (**but consumers don't always act rationally (Ex. reconsider info, repeat
steps, external influences)

1. Need/want recognition
● problem identification
- based on how consumer looks at the problem
- thinks about the task they want to accomplish
- marketers make potential customers aware of how the offering adds value (satisfies
need/want)

MARKETER’S JOB:
● create/ promote advertising to induce customer to recognize the need or create it in their mind

2. Search
● get information on different alternatives
● reflect on past experiences (may fall back on a preferred brand)
● sources: friends, family, reviews, ratings

MARKETERS JOB:
● be available and within reach to customers
● stay on the top of their mind

3. Evaluation
 ● use choice heuristics to take mental shortcuts
● evaluative criteria: characteristics that are important to specific buyer

MARKETERS JOB:
● share info about product features to convince customers that they meet evaluative criteria
● persuade potential customers that your attributes matter most ("choose us")

4. Choice
● decide which product/ service to purchase
● How: payment methods (cash, debit, credit, afterpay)
● From Whom: specific brand, employee, location

MARKETERS:
● make purchase a smooth processes

5. Post-Purchase Use and Evaluation

● consumer decides if they are happy with the purchase
● "did I get value out of it?"
● post purchase dissonance/ buyer's remorse

Post Purchase Dissonance / Cognitive Dissonance

● product does not meet customer's expectations
● Increases with expensive products
● Increases with infrequently bought products
● buyers may also question their purchase even when it meets their expectations
● "should I have waited for the price to drop?"
● "should I have gotten more information?"
● "should I have bought something else?"

COMPANIES
● handle dissonance with guarantees
● Ex. return policies, post-purchase services/ repairs etc.

Types of Decisions (3)

1. Low Involvement Decision

● low risk to customer if they make a mistake
● inexpensive compared to customer's income
● regular purchase

routine response behaviour: customer doesn't go through all the decision stages
○ automatic purchase decision based on limited info or previously gathered info
○ response to low involvement decision
 2. High Involvement Decision
● high risk to customer if they make a mistake
● not often purchased
● relevant and important to the buyer
● increased risk and intensity of post purchase dissonance

extended problem solving:customer spends time comparing product features

○ response to high involvement decision

3. Limited Involvement Decision

● middle ground between high and low involvement

limited problem solving: customer already has some information but continues to search for
more

Consumer Decision Model (4): factors that influence buying behaviour

Personal Factors

● Gender, Age, Stage of Life

■ consider gender bias in products
○ unnecessarily gendering the product?
○ who is the product for and why?
○ are there other customer segments who may also be interested?

■ consider stage of life

○ single, graduated, married, children (still young vs grown)
○ there is no "average" old person
○ older ≠ dependent
○ older customers have more disposable income

■ chronological age: a person's actual age in years

■ cognitive age: how old you perceive yourself to be

● Lifestyle, Activities, Interests, Opinions

○ what they do
○ how they spend time
○ priorities
○ values
○ opinions
○ general outlook on the world

asking directly doesn't lead to better understanding

○ location tracking
○ research studies
 ○ experiments
○ Psychographics: combines lifestyle traits, personality, attitudes, activities, values to determine
similarities in consumer groups

● Mood: moods temporarily affect spending patterns

○ affective state
○ Sadness increases desire for indulgences

● Personality & Self-Concept

● Personality: disposition, unique traits

Big 5 Personality Traits (OCEAN)

○ Openness
○ Conscientiousness
○ Extraversion
○ Agreeableness
○ Neuroticism

● self concept: how a person sees themselves

● ideal self: how a person would like to see themselves

○ people buy products to try and get closer to their ideal self

Psychological Factors

Motivation: inward drive to get what we need

● Maslow's Hierarchy of Needs

1. Physiological: basic biological necessities
of life: food, drink, rest, and shelter
2. Safety: security and protection from physical
and emotional harm
3. Social: needs for love,
companionship, and friendship-the desire for
acceptance by others
4. Esteem: need for self-esteem,
achievement, competence, and
independence; need for recognition and respect
from others
5. Self-actualization: need to live up to our fullest
and unique potential

● lower level needs = global needs (everyone needs them)

● higher level needs = culture specific needs
Perception
how you interpret the world around you (5 senses)

● selective exposure: selective info from thousands of messages on different social media (vids,
magazines, posters)
● selective attention:filtering info based on personal relevance
● selective retention: ignoring or forgetting information
● selective distortion: misinterpreting the intended message of information

Learning
marketers try to teach consumers

● experiential learning: customers learn by experiencing the product (Ex. test drives, free samples)
● operant conditioning: give the customers rewards for certain behaviours
○ toys that come in McDonald’s Happy Meals
○ free tans offered with gym memberships
○ free sandwich after a certain number are purchased.

● classical conditioning: connecting neutral stimulus with a positive one → faster learning
○ (Ex. You celebrated your birthday at a particular restaurant and now you associate positive
birthday feelings to the once-neutral thought of that restaurant)

Attitude
how we feel about /towards a certain product
● hard to change (long-lasting)

Societal Factors

Culture: shared beliefs, customs, behaviours, and attitudes that characterize a society

Subcultures: a group of people within a culture who are different from the dominant culture but have
something in common with one another
● common interests
● vocations or jobs
● Religions
● ethnic backgrounds
● geographic locations

Social class: a division of a society based on social and economic status.

Reference Groups: groups a consumer identifies with and may want to join
● influences consumer attitudes and behaviour
● social groups
 ● work groups
● Family
● close friends

Dissociative Groups: groups with whom a consumer does not want to associate.

Opinion Leaders: People with expertise in certain areas

● Consumers respect these people and often ask their opinions before they buy goods and
services.
● (Ex. picture of doctor on a pharmaceutical ad)

Family: Most marketing researchers consider a person’s family to be one of the most important infuences on
their buying behaviour.

External Factors

● Physical Factors
○ Atmospherics: store layout, store music, lighting, temperature, smell
● company can control
● (Ex. grocery story strategically places products in a way that encourages customers to
buy)
○ Weather: inclement weather affects purchase patterns
● (ex. ppl less likely to leave their house when its cold or raining)
● companies compensate with discounts or alternative shopping methods (Ex. delivery,
curbside pickup)
○ Crowding: can positively impact buying experience
● herd behaviour

● social norms: expectations for behaviour in specific situations based on the values of a social group or
society

● Time: time of day (ex. early in the morning), time of year (ex. holidays), amount of disposable
consumer time

● reason for purchase: Emergency, special occasion, last-minute

Formal Marketing Research Process (7 Steps)

1. Define the problem or opportunity:

● Defining the problem to be answered by the data from the research
● most critical part of the study.

2. Design research
● outlines what data you are going to gather, and from whom, how and when you will collect the
data, and how you will analyze it once it’s been obtained.
 ● primary data: collect it yourself
● secondary data: already collected by someone else

● qualitative research: any form of research that explores consumers’ attitudes and behaviours
through questions such as why rather than what or how much (Ex. depth interviews, focus
group interviews, ethnography)
○ Depth interview:
■ engaging in detailed, one-on-one sessions with potential buyers
■ moderators prepares a set of general topics uses questions that are open ended,
so that the participant follows their own thinking and provides lots of detail.
○ Focus Group:
■ a group of people who are brought together to discuss a marketing research
topic with one another (users, influencers, or buyers)
■ moderator is used to focus the discussion, the sessions are recorded, and the
main points of consensus are later summarized by the marketing researcher.

○ ethnography / -ic research: researchers interview, observe, and often videotape

people while doing day-to-day activities.

○ exploratory research: used to investigate a problem or gain deeper insight

● descriptive research/ quantitative research: gathering hard numbers to describe or

measure a phenomenon so as to answer the questions of who, what, where, when, and how
(often via surveys).
- “On a scale of 1–5, how satisfied were you with your service?”

● Causal Research: examines cause-and-effect relationships

- answers "what if" types of questions
- researcher designs an experiment that "controls," or holds constant, all of a product's
marketing elements except one
- one variable is changed, and the effect is measured.

● field experiment / test market: An experiment conducted in a natural setting such as a store

3. Design the data collection forms

● Questionnaire:
- standardized collection form
- pre-set answers to ensure they are comparable (responses can be multiple choice or
tabular)
- questions should be unbiased and neutral
 4. Specify the Sample:
● population of interest?
● how many? Where?
● larger sample = more accurate picture

5. Collect the Data

● specify data collection method
● In-person, telephone and mail methods are less used because they are more expensive
however, they provide more reliable data
● if people are aware that a company is collecting data, it may have an effect on their answers
or their behaviour.

6. Analyze the Data:

cleaning, exploring and organizing the data to understand what customers told you.

7. Write research report and present its findings

Report should include: title page, table of contents, executive summary, methodology and limitations,
findings, recommendations

Chapter 4

B2B vs B2C Key Differences

Market Product Buying Process Marketing Mix

● Demand for business ● Buying decisions more ● Direct selling

products is derived ● Technical complex ● Advertising more
from consumer ● Mainly raw and ● Bidding, negotiated pricing, technical,
markets semi-finished complex financial emphasis on
● Few customers goods arrangements personal selling
● Customers more ● Emphasis on ● More formalized buying ● Price often
geographically delivery time, process negotiated,
concentrated after sale ● Buying criteria & objective ● Trade or quantity
● Larger orders service, specified discounts
● Demand is more financing. ● Many participants in
inelastic, fluctuates purchase decision
more and more ● Close long-term
frequently. relationships
Types of B2B Buyers (4)

1. Producers: transform purchased goods into other products (Ex. restaurant)

2. Resellers: sell purchased good to customers without changing/ transforming them
3. Governments: end user customer, doesn’t resell, uses the goods themselves
4. Institutions: end user customer, cost is an important factor (Ex. universities, hospitals,
non-profit organizations)

B2B Buying Process

1. Need Recognition
department heads realize the need for a product

2. Product Specification
buying centre sets the parameters for the purchase

3. Supplier Search
business seeks info about vendor options

4. Proposal Analysis and Supplier Selection

evaluates the vendors' proposals and chooses a candidate

5. Order Specification
business makes the order and specifies the features and aspects it needs

6. Performance Assessment
post purchase evaluation

Key Factors Affecting the B2B Buying Process

1. Buying Centre: committee that makes decisions about purchases

● Initiator: recognizes the need
● User: uses the product
● Influencer: decision expertise contribution
● Gatekeeper: filters access to the vendor and buying centre members
● Decider: makes the decision
● Buyer: makes the purchase

2. Buying Situations
● Straight Re-buy: straight repeat purchase from the same vendor
● New buy: first time purchase
● Modified Re-buy: repeat product purchase with some modifications (ex. different quantity,
features, supplier)
3. Organizational Buying Culture
● Autocratic: many participants, one decision maker
● Consultative: team consultation, one decision maker
● Democratic: group decision, majority decides
● Consensus: group decision, unanimous

4. B2B Marketing Dynamics

● Interpersonal factors
○ "office politics" among decision makers
○ power, influence
● Personal factors
○ preference for simplicity
○ relationship bias
○ brand image

Chapter 5

● Target Market: The segment/group of people or organizations you decide to sell to

○ Get information for precise segmentation from Internet tracking, population reports, social
media, economic data, Statistics Canada

● Mass / Undifferentiated marketing: delivering the same product, price, and promotion to everyone.
Example: Henry Ford's Model T cars.

● Targeted / Differentiated marketing: customizes some aspect of the marketing mix (ex. Price,
promotion, offering) for specific customer groups. It focuses resources effectively and allows for
personalization.

● One-to-One Marketing: when a company targets their best customers and forms close personal
relationships with them → give them what they want

Benefits of Segmenting and Targeting

● Avoiding head-on competition
● Develop new offerings
● Expanding profitable product lines
● Remarket older less profitable brands
● Retaining “at risk” customers who may leave you for competitors

Targeting Current Customers

● Cheaper to retain current customers instead of going out and finding new ones
● Focus selling efforts on keeping current customers
 ● Maintain good relationship with customers using social media, (ex. Twitter, Facebook)
● Some customers are more profitable than others → want to interact more with most-profitable
customers

One-to-One Marketing Steps

1. Establish short-term metrics to evaluate the consequences of your efforts

○ Figure out how you will measure the success of your marketing actions
○ (ex. Customer satisfaction ratings, increased revenue, number of sales, transaction costs)
2. Identify your customers
- Gather all information about current customers (ex. Buying patterns, preferences, get contact
info with “opt-in” function)
3. Differentiate among your customers
○ Determine who best customers are (ex. How much they spend, how much they are likely to
spend in future)
4. Interact with your customers → target the best ones
○ Connect with them through media
5. Customize your products and promotional messages to meet customers needs

Segmentation base: Criteria used to classify buyers

● Markets are divided based on various characteristics to better address consumer needs
● Group customers with similar needs into the same segment

The Segmentation–Targeting–Positioning Process (Steps)

Step 1: Needs-Based Segmentation
○ Group customers into segments based on similar needs and problems

Step 2: Segment Identification

○ Determine demographics, lifestyles and usage behaviours of each needs-based segment

Step 3: Segment Attractiveness

○ Determine the overall attractiveness of each segment based on pre-established criteria

Step 4: Segment Profitability

○ Determine how profitable the segment will be

Step 5: Segment Positioning

○ Create a value proposition for each segment
○ Create a product-price positioning strategy based on the unique needs and characteristics of each
segment

Step 6: Marketing-Mix Strategy

○ Expand the positioning strategy to include all aspects of the marketing mix (product, price, promotion,
place, people)
Consumer Segment Identification
Describing the needs of customers within a segment based on different categories of characteristics

● Consumer Insight: using both qualitative and quantitative data to learn about consumers

Consumer Segment Identification Categories of Characteristics

Behavioural, Demographic, Geographic, Psychographic

(1) Behavioural
How customers behave towards products

● The benefits the customer seeks from the product

● Usage rate: how often the customer uses the product
● Usage situation: where and when the customer uses the product (Ex. daily use, holiday use)
● The buyer’s status and their loyalty to the product (Nonuser, Potential user, First-time user, Regular
user)

(2) Demographic
personal characteristics like age, income, ethnicity, nationality, education, occupation, religion, social class,
family size, generation

● Seniors (before 1946)

○ Live within their means
○ Spend a lot on healthcare
○ Internet usage rates are increasing rapidly

● Baby Boomers — (starts from 1946)

○ Biggest consumer of traditional media (TV, radio, magazine, newspaper)

● Generation X — (starts from 1965)

○ Embrace technology and multitasking
○ Spend many hours on Facebook per week
○ Buying habits are based on stage of life

● Generation Y — (starts from 1981)

○ Very good at multitasking and technology use (grew up with it)
○ Mostly watch Netflix
○ Have many social media accounts

● Generation Z — (starts from 1997 — 2012)

○ Get phones at very early ages
○ Hyper-connected to technology
○ Try to avoid debt (more conservative than Gen X about borrowing)

(3) Geographic
Divide market based on location, city size, climate differences, migration patterns
 ● Proximity marketing: using wireless technology to target buyers within a few hundred feet of the
business (ex. You get Spotify ads from a store as you’re passing by them or if you live near them)

(4) Psychographic
Lifestyles, values, and attitudes

● Why consumers behave a certain way

● What do consumers prioritize
● How do consumers rank the importance of buying criteria

B2B Market Segment Identification

● Customers who buy a lot → special deals, sales-people call on them in person
● Customers who buy less → have to use customer service people onthe website, salesperson only calls
over the phone
● Tradeshows, direct mail, email, search engine marketing, social media “fan pages” campaigns to reach
new target markets

Segment Attractiveness (Criteria)

● Identifiable: able to identify which consumers fall into the segment, and the segment is unique enough
that there is no overlap with other segments

● Accessible: geographic accessibility, political & legal barriers, tech barriers, social barriers, ability to
reach the customer through persuasive communication

● Responsive: will consumers respond positively to the marketing

● Sizeable: is the segment large enough to be profitable, given the business’ current operating cost

● Growing: Is the segment growing?

● Competitors: Is the segment saturated with competitors? Is the business able to stand out from the
competition?

● Resources: Does the company have the resources to compete in this segment?

● Fits in With Company Mission: Would marketing to this segment fit in with the firm’s mission and
objectives?

Target-Market Strategies
● Mass marketing: Appeals to a wide audience.

● Multi-segment marketing: Targets multiple segments with tailored products (e.g., Marriott's various
brands).
 ● Concentrated marketing: Focuses on one segment, though it can be risky (put all eggs in one
basket).

● Niche marketing: Targets a small, specialized group with a highly tailored approach (even smaller
segment than concentrated marketing) — company is trying to be a big fish in a small pond

● Microtargeting / Narrowcasting: gathering all kinds of data available on a person (tax records, phone
records etc.) in an effort to isolate markets and then target them → ethical issues associated

Positioning
How consumers perceive a product relative to competitors.
● Developed based on the marketing mix (product, price, place, promotion) and defined by a
positioning statement.

Positioning Statement (Components)

○ Target market characteristics

○ Customer needs
○ Customer benefits
○ Clear points of differentiation

Point of differentiation (POD): A unique feature of an

offering that the competition doesn’t have

Perceptual Map: a graph tool that shows how customers perceive a product compared to competitors based
on key factors like price or quality. It helps identify market gaps and position products away from competitors.

Tagline: a catchphrase designed to sum up the essence of a

product.

Repositioning changes consumer perception of a product to

attract a new audience (ex. Old Spice shifting its image from an
older demographic to a younger one)

Chapter 6

Offering: A product or service designed to deliver value to customers (satisfy needs or wants or both). Key
components include…
 ● Product: A tangible good that a consumer can buy and own (Ex. iPhone)
○ Can be offered with an associated intangible service (ex. Warrantee, AppleCare)
○ Core Product: The central functional offering
○ Augmented Product: The services, features and accessories surrounding the core product

● Service: provides a buyer with an intangible benefit (ex. A haircut)

○ Pure Service: A service without any associated tangible features or characteristics (ex.
Skydiving experience)

● Pricing

Features: Characteristics of an offering (Ex. iPhone storage, high quality phone camera)

Benefit: When a feature satisfies a consumer’s need or want

Value = Benefit (received from purchase) — Cost (of purchase)

Total Cost of Ownership (TCO)

Includes both the purchase price and ongoing costs and the time and energy related to owning the product (ex.
maintenance and disposal)
● Ex. the time and effort to handwash a special sweater after buying it
● Ex. the money and time spent to buy a phone case after buying a phone

Service–Dominant Approach
Considers the product, price, and service dimensions of an offering

Product–Dominant Approach
Considers only the tangible goods

● An offering includes a product, price, and service, designed to fulfill customer needs or wants.
● The product-dominant approach focuses on tangible goods, while the service-dominant approach
integrates product, price, and service, emphasizing customer needs.

Product Levels & Product Lines

Technology platform: The core technology on which a product is built (ex. iPad Air, Mini and Pro are all based
on the same iPad OS technology)
● Knowledge can also be a type of technology platform in “pure” services (Ex. knowledge used to train
other healthcare professionals on how to perform a certain
procedure)

Product Line: a group of related offerings (ex. Campbell’s line of

soup, Apple’s line of Macbooks)

Line Extension: adding new but similar products to a product line

(Ex. Apple adding a new Macbook Lite to the Macbook product line)

Line Breadth: the number of different product lines a company

has

Line Depth: the number of offerings that exist in one single

product line (broad or narrow)

Product Mix: the entire assortment of products that a firm offers

Types of Consumer Offerings

Consumer products are categorized by how customers buy them…

● Convenience offerings: Frequently purchased with minimal effort into shopping for them(ex. Bread)
- Marketers should get the product into as many places as possible where a purchase could
occur → make ads to remind consumer of the product, be readily available to the customer

● Shopping offerings: Consumer makes the effort to compare between brands (e.g., electronics).
- Marketers should create strong brand recognition and show consumers why their brand is better
- Consumers care alot about brand names, could be a motivation to shop at a different location if
a specific brand is not in stock

● Specialty offerings: Highly differentiated and purchased less frequently (e.g., luxury items).
- Limited channels for consumers to purchase from —> difficult to access, scarce
- Marketers should build strong brand recognition and educate consumers about what makes
their product different
-
● Unsought offerings: Purchased only when needed, consumers don’t usually want to buy them (e.g.,
funeral services, towing services)
- Marketers should create a strong brand awareness, so that their brand is the first to come to
mind when the need arises

Types of Business-to-Business (B2B) Offerings

B2B products are classified by usage…
● Capital equipment: Long-term assets like machinery.
○ Useful for more than one year
○ Depreciates over the course of its useful life

● Raw materials: Basic materials for production (e.g., lumber, iron, nickel)
○ Minimally processed, competition is mainly based on the price since the material isnt much
different
○ Manufactured material: raw materials that have been processed into a finished good but not
yet a stand-alone product (ex. Sheets of metal rather than just raw metal)

● OEM (Original Equipment Manufacturing) offerings: Components used in final products.

○ the raw material has been processed to some extent but will still be just a components of the
new item that needs to be produced
○ (ex. Intel core chips used to make computers)

● MRO (Maintenance, Repair and Operations) offerings: Maintenance and repair items (e.g., janitorial
supplies, nuts and bolts).
○ Used products and services used to keep a company functioning
○ Often sold by distributors → buyers usually stick to one vendor

● Facilitating offerings: Products and services that support operations but are not part of the product it
sells (e.g., marketing research, banking service, transportation services, copiers, computers)
○ Company tries to build strong relationship with consumer because their services are critical to
the success of the client’s business

Elements of an Offering

● Brand: a name, picture, design, or symbol (or combination of both) used by a seller to identify its
offerings and differentiate them from the competition

● Brand Name: the spoken part of a brand’s identity

● Brand Mark: the symbol associated with a brand

● Branding: activities that create a brand and position it in consumer’s minds

- establishes a unique identity (e.g., Apple, Nike).

● Brand extensions: use an existing brand name or mark for a new product category (ex. Black &
Decker adds a line of construction site accessories under its Dewalt brand of construction machinery)

● Cannibalization: occurs when new products reduce sales of existing ones within the same company.
- Ideally, the launch of a new product is supposed to steal customer from the competition

● Packaging serves to communicate the brand, protect products, and meet legal requirements of
government-warranted information.
 ○ Primary packaging: holds individual items (one single unit of a product) (ex. The bottle that
holds one serving of Coca-Cola drink)

○ Secondary packaging: hold one wholesale unit (ex. The carstock packaging that holds one set
of 150 printing paper sheets)

○ Tertiary packaging: holds bulk shipping quantities (ex. Wooden pallets containing several units
of a product and wrapped around a forklift with plastic)

Managing the Offering

● A product mix is the total set of products offered by a company → combination of product width and
depth

Strategies for managing offerings

● Line stretching: A company extends its current range of product lines to target different market
segments. (Creating a new product line)

○ Going up-market: Introducing higher-quality, premium-priced products to appeal to wealthier or

more quality-conscious customers.
➢ (ex. Campbell’s introduces a gourmet line of soups under the brand "Campbell’s
Reserve," featuring premium ingredients like truffle oil, lobster, or organic produce,
targeting high-income or health-conscious consumers who seek elevated culinary
experiences.)

○ Going down-market: Offering lower-priced, value-oriented products to attract budget-conscious

consumers.
 ➢ (ex. Campbell’s creates a budget-friendly line called "Campbell’s Basics," offering
simpler soups with fewer ingredients at lower prices, appealing to budget-conscious
shoppers or families needing affordable meal options.)

○ Both ways: Expanding in both directions to cover a wider range of the market.

● Line filling: Adding more products to an existing product line

○ Fills any potential gaps in the market that a competitor could take advantage of

● Line pruning: Removing underperforming products.

● Line modernization: Upgrading or adding new features to a product to improve it (ex. Increase the
quality of the product, prolong the products life)

● Line featuring: a product is fearutres through a specific retailer at a discounted price (ex. Coca-Cola
has an agreement with Shoppers Drug Mart to sell the bottles for a lower price)

Types of Managers
Brand Manager:

● Responsible for all business decisions regarding offerings within one brand (ex. which offerings to
include, market positioning, and pricing)
● Runs the brand as if it were a separate business from the main one
● Common in consumer marketing companies like Microsoft, Procter & Gamble, and General Mills but
rare in B2B companies, since they often do not have multiple brands.

Product Manager:

● Found in B2B companies, responsible for business decisions related to a particular product or product
line.
● Tasks include decisions like which offerings to include and advertising selection.
● Examples of companies with product managers include Xerox, IBM, and Rockwell International.

Category Manager:

● Oversees a broad grouping of offerings. For example, at SC Johnson, a category manager might
manage all home cleaning products, which could include brands like Pledge, Windex, and Drano.
● Category managers at the retail level handle offerings from multiple manufacturers within a category
(e.g., SC Johnson and Procter & Gamble).

Market Manager:

● Responsible for business decisions within a specific market, which can be defined by:
○ Geography (e.g., southern regional managers adjusting insect repellent inventory based on
weather conditions).
○ Market segments (e.g., healthcare professionals in hospitals or doctor’s offices).
○ Distribution channels.
 ● In B2B markets, often focuses on vertical markets where buying needs and communication channels
are similar within an industry.

Vertical Market Manager:

● A type of market manager specializing in industries (vertical markets) where buying needs and
communication channels are uniform.
● B2B companies use this structure for efficiency due to industry-specific publications, websites, and
trade shows.

Reporting and Responsibilities of Market Managers:

● Market managers often report to brand managers or sales executives.

● They are less likely to influence pricing, product decisions, or communication content but are tasked
with implementing strategies set by product or brand managers.
● In some companies, there are market managers but no brand managers; marketing executives handle
brand responsibilities.

Vertical market: all the customers in a particular industry

The New Offering Development Process

Steps in developing new products:

(1) Idea Generation

Ideas can come from customers, suppliers, competitors, or

internal research.

● Lead users: customers who are very good at

generating new product ideas
● B2B markets often rely heavily on customer
input.
● Suppliers may offer new technologies that spark
new product ideas.
● Competitors are monitored for trends, and
products can be adapted or improved.
● Idea generation is typically inexpensive
compared to later stages of development.

(2) Idea Screening

Assess ideas for feasibility and potential value. The goal is to discard bad ideas early to minimize investment
loss. The product’s feasibility, including pricing and manufacturing costs, is evaluated as a core concern.

● Key questions:
- Does the product add value?
 - Can it be produced on time and within budget?
- Will it be profitable?

Concept testing may be conducted at this stage to gather early feedback from potential consumers.

● Focus groups: groups of 8–12 consumers gather and react to the product
● Depth interviews: individual consumers are presented with the product and react individually to

Process feasibility: Whether the company actually has the ability to make and service the product

Financial feasibility: Whether the company can control the costs of the product as it’s being made or serviced

(3) Feature Specification

● Define the product’s key features based on customer desires at different price points.

Quality Function Deployment (QFD): a process that designs products based on customer needs

● Linking desired benefits to product features

● Ensures the product meets customer expectations → the product delivers the benefits customers want
● Features are linked to customer benefits, and then broken down into component parts for design.

(4) Development
● The product is designed, specifications are written, and prototypes are developed.
● The manufacturing process is also considered to ensure efficiency and cost-effectiveness.
● Technology platforms (e.g., Apple’s iPhone) may be reused for cost and training efficiency.

(5) Testing
● Alpha Testing (Lab Testing): The product is tested in various environments to ensure it meets
specifications (e.g., working in different climates or altitudes).

● Beta Testing: Real customers test the product under real-world conditions, assessing its functionality,
delivery mechanisms, service processes, and marketing aspects.
○ This stage can be expensive
○ particularly important in B2B settings, where strong relationships with lead users are crucial to
avoid damaging customer trust.

Simultaneously, the company tests the marketing communication plan, often using consumer panels or user
communities (ex. seen with companies like JCPenney and Teradata, who involve customers in both product
and marketing feedback)

(6) Launch / Commercialization

● The product is made available to customers, either through a full launch or a rolling launch to different
markets over time
 ● Some companies conduct a market test in specific locations (e.g., London, Ontario) to assess the
product's reception before a full launch.

Full Launch: The offering is made available to all of its markets at once.

Rolling Launch: The offering is made available to certain markets first, and then to other markets later, often
due to the need for service technicians' training (larn as you go)

Market Test: A test of the complete launch of the product’s marketing plan, conducted in limited markets or
nationwide, to ensure it reaches buyers, gets positive feedback, and generates sales.

(7) Evaluation
● After launch, the company monitors the product's performance, similar to tracking box office sales for
movies.
● Key milestones (e.g., the first 90 days) are used to assess progress and determine if adjustments are
needed.
● Companies may adjust features, pricing, or marketing strategies based on initial feedback and sales
performance.

The Product Life Cycle

(1) Introduction Stage

High costs, low profits, and building awareness.

● Product is first launched into the market

● Generating awareness, persuading consumers
to try the product, and ensuring distribution
channels are in place to meet demand.
● Products are often priced low due to R&D
(Research & Development) and high marketing
costs.

Pricing strategies in the introduction stage include:

● Penetration pricing: Low initial prices to attract

customers and gain market share.

○ Goal is to sell a high volume of the product to generate alot of revenue (making the product
attractive to price-sensitive consumers)
○ It is often used for products like cereals, fragrances, and snack foods, which are introduced at
low prices and accompanied by advertising, coupons, or samples to increase product
awareness and encourage trial.
○
 ● Skimming pricing: High initial prices to quickly recover development and marketing costs, targeting
early adopters.

○ This approach targets the high-end market, consisting of early adopters or customers who are
less price-sensitive.
○ Skimming is typically used for electronic products like DVRs, plasma televisions, and digital
cameras, where the high price aligns with the product's innovative nature.
○ The high price is often supported by strategies like personal selling, targeted ads, and limited
distribution outlets to appeal to a specific customer group.

(2) Growth Stage

Sales rise, profits increase, competitors enter, and promotions focus on differentiation.

● Distribution costs rise as more outlets are used.

● Promotions during the growth stage often focus on highlighting the product's specific benefits and its
value compared to competitors
● Brand extensions, like those from Black & Decker, can also provide a competitive edge.
● The product price usually remains stable, though some companies may reduce prices slightly to attract
more buyers and compete with new entrants. The goal is to expand sales while managing costs and
increasing profits.

(3) Maturity Stage

Sales plateau, competition is intense, and strategies aim to extend the product's life.Products are often heavily
promoted, focusing on their value and benefits. Companies modify their strategies by…

● Modifying the Target Market: Try to attract new customers

○ Targeting new market segments
○ Finding new uses for the product
○ Entering new geographic or international markets
○ (ex. McDonald's expanded globally as the U.S. market saturated)

● Modifying the Product:

○ Update product features, packaging, size, flavors, or quality to maintain customer interest.
○ (Ex. car manufacturers update vehicle designs or add safety features to stay competitive)
○
● Adapting for International Markets:
○ Adjust products to meet local cultural, legal, and environmental needs.
○ (Ex. Coca-Cola’s diet drinks are called "light" in some countries due to legal restrictions, and GE
creates smaller appliances for markets like Japan.)
(4) Decline Stage
Sales fall, and companies decide whether to rejuvenate or retire the product.

● Sales drop due to changing consumer preferences, technological advances, or better alternatives.
● Decline can be gradual or rapid, especially for products tied to fads or outdated technology.

Companies must decide how to manage declining products:

 ● Reduce Costs: Cut promotional expenses, distribution outlets, and investments to increase remaining
profits (harvesting).

● Divest: Drop or sell the product, or reduce prices drastically to clear inventory.

● Modify Earlier: Many firms aim to modify products in the maturity stage to avoid reaching the decline
stage.

The Product Adoption Curve (Diffusion of Innovation)

how different groups of consumers adopt new products over time, following a bell-shaped curve.

(1) Innovators
● The first to adopt new products.
● Risk-takers, highly knowledgeable, and willing to pay a premium.
● Influence other groups through reviews and expertise (e.g., early buyers of the first iPhone).

(2) Early Adopters

● Less risk-taking than innovators but still opinion leaders.
● Await favourable feedback from innovators before purchasing.
● Critical to a product’s success as their influence leads to adoption by larger groups.

(3) Early Majority

● Cautious, preferring to wait until issues with
the product are resolved.
● Represent a large part of the market and drive
profitability.
● Adoption occurs when price and quality
options peak.

(4) Late Majority

● Highly risk-averse and skeptical.
● Adoption marks the product reaching its
market potential, but sales start to plateau.

(4) Laggards
● Resist change and prefer older technologies
until they are obsolete and they have to upgrade
● For example, those still using non-smartphone devices.

*Non-adopters, who never adopt the product, are not included in this curve.

Chapter 7
Service: an intangible act or performance that does not result in ownership. It may or may not be tied to a
physical product.

Continuum of Evaluation
Ranges from purely physical goods to purely intangible services, with most offerings falling in between,
combining both elements.

Search qualities: easily assessed before and after purchase

Experience qualities: best to assess after purchase
Credence qualities: hard to assess even after purchase → have to just believe

● Purely physical goods: have no service component.

○ High in search qualities: have characteristics that a buyer can easily use to evaluate before
and after purchase.
○ Left side of continuum
○ (Ex. clothing, jewelry, houses, cars)

● Combination goods and services: include both physical components (e.g., food) and intangible
components (e.g., service, atmosphere).
○ high in experience qualities: meaning they are best evaluated after purchase, through
consumption.
○ (Ex. a restaurant meal — combines physical component (food) with intangible (service,
atmosphere))
○ (Ex. Vacation, haircut, child care)
○ Middle of continuum

● Purely intangible services: no physical/tangible component

○ high in credence qualities, making them difficult for consumers to evaluate even after
purchase. Consumers often rely on trust and external cues to judge quality.
○ Right side of the continuum
○ (e.g., medical diagnosis, legal service, root canal, automobile repair)

As offerings move toward the service end of the continuum, they are considered higher risk because
evaluation often happens after purchase or remains uncertain.

Consumers increasingly depend on word of mouth, price, personnel, and other physical cues to assess
quality.

For services, customer satisfaction leads to high loyalty due to switching costs and consumer inertia, making
it harder for competitors to win over customers.

consumer inertia: The difficulty of luring customers away from a service provider once they are satisfied with
a purely intangible service offering.
Distinctive Characteristics of Services
1. Intangibility:
○ Services are intangible and challenging to evaluate pre-purchase.
○ Marketers must tangibilize the service by providing evidence of quality through factors like…
■ Service environment (e.g., cleanliness, luxury finishes),
■ Professionalism of staff (e.g., well-groomed, professional uniforms)
■ High-quality communication materials (ex. Business cards with high quality design,
finish, photography, and clear messaging)
■ Appropriate pricing

2. Inseparability:
○ Services must be produced and consumed simultaneously (e.g., haircuts).
○ Limited by operational hours and customer presence.
3. Variability:
○ Human-provided services vary in quality based on employee skills and consistency.
○ Addressed using training, standardization, and customer satisfaction monitoring.
4. Perishability:
○ Services cannot be stored or inventoried and are subject to fluctuating demand
○ If customer demand exceeds capacity or if customers are unavailable, service opportunities and
revenue are lost
○ Can manage perishability by using strategies like…

■ Demand-side strategies: (Customer-facing)

 - Offer differential pricing (e.g., discounts during off-peak times),
- Introduce new services during non-peak hours
- offer complimentary services (e.g., free cocktails while waiting).

■ Supply-side strategies (Employee facing)

- Hire part-time employees
- Assign tasks based on peak demand
- Encourage customer participation in the service delivery (e.g., self-checkout or
filling out forms).

The Service Gap Model

Evaluation Criteria for Service Quality

1. Reliability: Consistent, dependable, and accurate service, delivered correctly the first time and
every time. It builds brand loyalty.

2. Responsiveness: Timely actions, such as returning calls promptly or meeting appointment

times, to meet customer needs.

3. Assurance:Service provider employees must demonstrate knowledge, courtesy, and build trust
through respectful treatment of customers.
4. Empathy: Providing personalized, caring attention by understanding and addressing customers'
individual needs.

5. Tangibles: Customers assess physical evidence of service, such as the facilities, tools, and
equipment used during service delivery.

Service Quality Gaps

1. Knowledge Gap:
● Disconnect between customer expectations and management’s understanding of the
customer’s expectations.
● Closed through customer research and employee insights.

2. Standards Gap:
● Misalignment between how the management team wants the service to be delivered and the
actual service delivery specifications that management sets for employees to follow.
● Fixed by clear policies, standards, and employee training.

3. Delivery Gap:
● Disconnect between the standard for service delivery and the actual service delivered
● Solved with feedback, training, tools, and proper resources for employees.

4. Communications Gap:
● Mismatch between what customers are told to expect and what is actually delivered.
● Avoided by honest and realistic marketing.
 5. Expectation Gap:
● Difference in what the customer expects from the service (before consuming) and what the
customer perceives of the service after it has been provided.
● Managed through market research and aligning customer expectations and perceptions.

● Importance: Closing these gaps ensures higher customer satisfaction and loyalty, critical as 58% of
customers switch providers after poor experiences.

Chapter 8

Importance of Price
● For certain products, such as luxury goods, the price reflects the quality of the offering.

● However, in many markets, the price no longer reliably indicates quality due to factors like the ease of
price comparison online and dynamic pricing.

● Consumers can now access many data points to compare prices, and prices may vary based on
demand, time, or target customer.

● Penetration pricing to attract new customers or encourage customers to switch from competitors.

● Discounts and loyalty programs to reduce financial risk for consumer and encourage customer
retention.

● Price matching to remain competitive.

The Pricing Framework (4 steps)

How a company arrives at the decision of what to price their product at

(1) Set Pricing Objective

Set an objective for the company based on the desired outcome (Ex. profit, sales, market share etc.)

Profit–Oriented Objective: Focus on profit as the key outcome

● Targeted Return on Investement (ROI):

Companies set a specific ROI percentage (e.g., 10%) to achieve a desired profit based on investment.

● Maximizing Profits:
Companies aim to increase revenue and cut costs. Some ways to reduce costs include…
● Better inventory management
● Store closures (e.g., Disney),
● Using buying power (large companies like Walmart leverage their ability to purchase in bulk to
negotiate lower prices from suppliers)
● Economies of scale (cost savings that are achieved when the rate of production increases. As
companies produce more units, the cost per unit decreases.)

Sales–Oriented Objective: Focuses on increasing sales, either for the company or relative to
competitors:

● Maximizing Sales: Pricing products to generate the highest possible revenue, even if it sacrifices
profitability.
○ short-term strategy used to raise cash quickly, such as during financial struggles or to pay debts
by
○ selling off inventory or temporarily cutting prices.

● Maximizing Market Share: Companies aim to increase their sales by capturing a larger portion of the
market.
○ increasing market share does not always result in higher profits.

Status-Quo Objective: focus on maintaining the current pricing or matching competitors' prices:

● Maintaining the Status Quo: Companies may set prices to match competitors, aiming to avoid price
wars or losing market share.
○ (ex. Airlines often adjust their prices in response to each other. If one airline raises prices or
adds fees, others typically follow suit, or if customers resist, the original airline may drop the
fees)
○ Companies with this objective closely monitor competitors' prices.

(2) Estimate Demand, Costs, & Profits

Estimating Demand

Buyer Response
● Buyers respond to price based on three key factors:
○ the perceived value of the product
○ the number of potential buyers
○ their price sensitivity.

● Companies must assess whether customers view the price as justified by the product's value or if they
will seek alternatives.

Price elasticity: how demand changes in response to price changes

● Elastic demand: Consumers buy more when prices drop and less when prices rise (e.g., durable
goods like computers and cars).

● Inelastic demand: Price changes have little effect on demand, especially for necessities (e.g., basic
food, bus fare).

● Factors like the number of substitutes and whether a product is a necessity or luxury influence elasticity
● Products like cigarettes are relatively inelastic, while monopolies, such as utility companies or Canada
Post, face inelastic demand but must still consider indirect competition (ex. like email, which has
impacted Canada Post’s Lettermail business.

Competitor Pricing

● Competitors heavily influence a company's pricing decisions.

● Companies often match competitors' prices to attract and retain loyal customers (Ex. Home Depot
offers a price-matching guarantee with an additional 10% discount if the same product is found cheaper
elsewhere)
● Online shopping further intensifies this competition, as consumers can easily compare prices across
merchants.
● Companies must also consider substitutes and potential market entrants, not just direct competitors, as
outlined in the Five Forces Model.

The Economy & Government Laws & Regulations

● During weak economies with high unemployment, companies often lower prices.
● In international markets, currency exchange rates also influence pricing.
● Government regulations, such as Canada’s Competition Act, protect consumers and ensure fair
competition by addressing practices like misleading pricing, bait-and-switch tactics, and sales above
advertised prices.
Determine Costs

Product Costs: Includes expenses for development, testing, and packaging. These directly impact the pricing
decision.

Promotion Costs: High promotional costs during a product launch (e.g., creating awareness and educating
consumers) can increase the price. These costs vary depending on the product's life cycle stage.

Regional Considerations: Pricing can differ by country due to factors like average income, network
functionality, or government restrictions. (Ex. Apple offers cheaper, less-featured iPhones in some countries to
address these challenges.)

Distribution Costs: Running brick-and-mortar stores increases costs that must be reflected in product pricing.
(Ex. Microsoft closed physical stores because their operating costs were too high relative to sales revenue)

Establish Profit Level

Breakeven Point (BEP): The BEP is where total costs equal total revenue. To be profitable, revenue must
exceed total costs. If not, the company incurs a loss.

Fixed Costs: Do not change with production or sales levels (e.g., rent, advertising, insurance).

Variable Costs: Change with production or sales levels (e.g., raw materials, labor, commissions).

(3) Determine Pricing Strategy and (4) Select Pricing Tactics

Pricing Strategy
The approach a company uses to set the price of its products or services to align with the company’s
objectives (profit, sales, or status-oriented) and factors such as the product life cycle, market development, or
relaunch needs.
● Pricing depends on product type, competing products, the value provided to consumers, and production
costs.

Types of Pricing Strategies

Penetration Pricing:
● A low price is set to attract as many customers as possible, often for new products like food, health, or
paper goods.
● Aims to generate high sales volume and revenue.
● Typically paired with advertising, coupons, samples, or incentives to increase awareness and
encourage trials.

Price Skimming:
● A high initial price is set to quickly recover development and marketing costs.
● Targets early adopters or high-end market segments less sensitive to price.
 ● Works best for innovative products (e.g., driverless cars) and is often combined with strategies like
personal selling, targeted ads, and limited distribution.

Free Pricing:
● Products or services are offered for free to encourage trials, commonly used by tech companies.
● (ex. Free basic apps, which provide limited functionality but attract new customers to sign up, Spotify
free vs premium)

Cost-Plus Pricing:
● Add a profit margin to the cost of the product to set the price.
● Ensures costs are covered and the company earns a profit.

Markup Pricing:
● A specific amount is added to the product's cost
● A form of cost-plus pricing.

Markdowns:
● Prices are reduced during sales, but companies often still make a profit.
● Markdowns should be considered when determining the initial price.

Odd-Even Pricing:
● A product is priced just below a round number (e.g., $399.99 instead of $400) to make it seem like a
better deal due to the perception that prices in the 300s are more attractive than those in the 400s.

Prestige Pricing:
● A higher price is set to create a perception of high quality
● Used by stores that want to be seen as offering premium products, even if the product itself is identical
to one sold at a lower price elsewhere.

Price Lining:
● Products are priced at specific levels (e.g., $25, $50, $75) to manage inventory efficiently, often used in
categories like belts, movies, and music.
● This strategy simplifies pricing by offering a few distinct price points with a range of products at each
level.
● Used in categories where theres not much to differentiate the products

Demand Backward Pricing:

● Companies set prices based on what consumers are willing to pay, particularly for time-limited products
like holiday items.
● (Ex. stores offer products at different price points (e.g., $5 or $10) based on what customers expect to
pay for gifts or seasonal items)
● (Ex. IKEA uses this strategy by setting a price and then designing products to fit that price.)

Loss Leader Pricing:

● Some products are priced very low to attract customers into stores, with the expectation that they will
purchase additional items.
● (Ex. grocery stores may advertise turkeys at low prices around Thanksgiving)
 ● While leader or low pricing is legal, loss leaders (items sold below cost to drive competitors out of
business) are illegal in many states.

Everyday Low Prices:

● Retailers like Walmart offer a guarantee of consistently low prices, both in-store and online, to attract
customers.

Price Bundling:
● Different products are sold together at a price lower than the total cost of buying them separately.
● (Ex. combo meals at restaurants (e.g., McDonald's value meals) or bundled items like shampoo and
conditioner)
● Automobile companies often bundle options like power locks and windows.
● The goal of bundling is to increase a company’s revenue by encouraging customers to purchase more.

Captive Pricing:
● Consumers must buy a product because they are at a specific event or location, or because no
substitutes are available.
● (Ex. expensive snacks at sporting events or movies, and razor blades priced higher than the razor
itself, as they can only be used with the specific razor model)

Product Mix Pricing:

● Products used together, like razors and blades or printers and ink cartridges, are priced differently to
achieve varied profit margins.
● (Ex. printers may be sold at a low price, but the ink cartridges, which are essential for the printer's
operation, are priced much higher)
○ Many consumers are willing to pay a premium for brand-name cartridges over cheaper generic
options.

Two-Part Pricing:
● Charging customers two separate charges for a product or service.
● (Ex. with mobile phone plans, one charge might cover a set amount of data or minutes, and additional
usage is charged separately)

Payment Pricing:
● Customers can pay for products in installments, making higher-priced items more affordable.
● (Ex. furniture, or programs like Easy Pay from the Shopping Channel, where customers can split
payments without interest when using a credit card)
● This strategy is often used to make expensive items more accessible to consumers.

Promotional Pricing:
● A short-term tactic to get people in store or to encourage them to buy more of a product
● (Ex. back-to-school sales, rebates, extended warranties, and going-out-of-business sales)

● Rebates offer consumers the perception of a good deal, but many forget to redeem them.
 ● Extended warranties are common for various products, though their value depends on the cost of
repairs (Ex. vacuums, a $25 warranty might not be worth it, but for automobiles, it can be more
beneficial)

Dynamic Pricing:
● Prices are adjusted automatically based on factors like browsing behavior, search patterns, or past
purchases, especially online.
● Amazon is a leader in dynamic pricing, adjusting millions of items frequently.
● This pricing model can disconnect the price from the product's value, as it is based more on maximizing
retailer revenue than reflecting product costs.
● Dynamic pricing can also apply to promotions, bundles, personalized offers, and shipping fees.

Subscription-Based Pricing:
● Customers pay a recurring fee (weekly, monthly, or annually) for regular product or service delivery,
with some companies offering flexibility in delivery timing based on customer preferences.
● Applies to various industries, including software (e.g., Microsoft Office 360, Apple iCloud), content (e.g.,
Netflix, Amazon Video Prime), and products (e.g., Dollar Shaving Club, Vegan Cuts Beauty Box, Frank
and Oak Style Plan).

Price Differentiation (Price Discrimination):

● Charging different prices to different customer groups for the same product (Ex. offering discounts to
students, children, or seniors at restaurants or events)
● Discounts must be applied consistently to specific groups, not just select individuals.
● This strategy is used to increase product usage or boost sales during slow periods by attracting more
customers.

Sealed Bid Pricing:

● Companies submit bids by a set deadline, and the best bid is chosen. This can happen on either the
supplier or buyer side.
● Examples: Oil companies bidding for drilling rights, consumers bidding on land, contractors bidding for
jobs, and government purchases.

● Online Auctions:
○ Forward Auction: Sellers bid to until the buyer selects an acceptable price
○ Reverse Auction: The buyer lists what they want and their price, and the auction ends when a
seller agrees to the price.
Going-Rate Pricing:
● Buyers pay the same price regardless of where they buy from or who they buy it from.
● Common in commodity markets (e.g., wheat, gold, silver) or government-regulated industries, where
products are seen as largely the same and there is a standard price.

Price Adjustments

Quantity Discounts: Discounts for larger purchases.

Cash Discounts: Discounts for paying in cash on large purchases.

Seasonal Discounts: Discounts to clear out inventory or holiday items.

Trade Allowances: Manufacturers provide retailers with incentives to improve profitability.

● Advertising Allowances: Manufacturers pay stores to advertise their products in apps or printed
flyers.

● Shelf Placement Payments: Manufacturers pay for prime shelf space, such as middle or end-of-aisle
placements, which are more valuable.

● Restocking Discounts: Manufacturers may offer stores a discount to restock their products instead of
using company representatives for restocking.

Reciprocal Agreements: Merchants agree to promote each other’s products or services. (Ex. The Royal
Ontario Museum offers discounts to its members at other museums.)

Bounce Back Promotions: Customers receive discount cards or coupons after a purchase to encourage
them to return and make future purchases. (Ex. Mark's offers coupons for future purchases, such as $20 off a
$100 purchase.)
● Some stores set conditions like minimum spending or specific product categories for the next visit.

Shipping Charges
Should considered when a company is creating their price adjustment policies (Ex. offering discounts on orders
over a certain $$ amount)

● Free Shipping: Offered for certain products, minimum order amounts, or within a set time frame by
online merchants.

● FOB Origin: The title changes when the product is purchased, and the buyer pays for shipping.

● FOB Destination: The title changes when the product reaches the destination, and the seller pays for
shipping.

● Uniform-Delivered Pricing (Postage-Stamp Pricing): A flat shipping charge regardless of the buyer’s
location.

Chapter 9

Marketing Channel:
● The set of companies involved in the process of bringing a product from raw materials to the final
consumer, either directly by the company or through retail intermediaries.
● Focuses on companies involved in selling and promoting products to the final consumer.

Channel Partners:
 ● Companies that collaborate with other companies to promote or sell a product. The success of the
product in the marketplace depends on all parties in the marketing channel.

Intermediaries: a company or individual that acts as a middleman in the distribution process, helping to move
products or services from the producer to the final consumer

● Companies partner with intermediaries to sell products more efficiently, leveraging their capabilities
such as customer contact, marketing expertise, shipping, and credit lending.
● Intermediaries reduce the number of transactions a company must handle, saving time and money.

Supply Chains:
● Takes a broader view than marketing channels, including all companies involved in producing,
promoting, and delivering a product.
● The supply chain includes raw material producers, distributors, transportation companies, and even
outsourced companies (e.g., a software maker hiring a coding company in India). These companies are
part of the supply chain but aren't considered channel partners since they don't sell the product directly.

Supply Chain Management:

● The process of monitoring and improving the efficiency of the supply chain.
● Challenges arise when operating across borders or during global events.

Types of Channel Partners

Wholesalers
★ Buy large quantities of products from producers, store them, and break them down into smaller units for
retailers, a process called "breaking bulk."
★ Resell goods to other companies without altering the products themselves.
★ Wholesalers assume risks, such as theft, damage, or product obsolescence, as they bear the financial
loss if anything happens to the goods before they are sold.

● Merchant Wholesalers: take title to the goods they sell, meaning they assume more financial risk (also
called distributors, dealers, or jobbers)

● Full-Service Wholesalers: Offer a wide range of services, including stocking inventories, operating
warehouses, providing credit, offering sales assistance, and delivering goods.

● Limited-Service Wholesalers: Offer fewer services than full-service wholesalers. (Ex. cash and carry
wholesalers)

● Drop Shippers: A type of limited-service wholesaler that takes title to goods but doesn't physically
possess them, avoiding the financial risks associated with holding inventory.
○ They earn a commission by connecting sellers with producers, who then ship directly to the
seller.

● Mail-Order Wholesalers: Sell products through catalogs and ship them directly to buyers, without
using a sales force.
 ● Truck Jobbers/ Wholesalers: Store products, often perishable (e.g., fresh fish), on trucks and make
deliveries directly to customers, allowing them to inspect and select products from the truck.

● Rack Jobbers: Sell specialty products like books, hosiery, and magazines, displaying them on their
own racks in stores.
○ They retain title to the goods while they're in the store and periodically check sales to bill the
store for sold items.

● Brokers / Agents: Do not purchase or take title to products but instead negotiate sales contracts for
producers, and earn a commission for their sales
○ Often assigned to specific geographic territories.
○ Common in industries like clothing, furniture, food, and commodities

Manufacturers' Sales Offices (or branches): sales units that operate directly for manufacturers, typically in
B2B settings.

Retailers
Retailers buy products from wholesalers, agents, or distributors and sell them to consumers.

● Grocery Stores: Self-service retailers that offer a full range of food and some household products.
○ High-end: offer a wide variety at higher prices. (Ex. Whole Foods and Fortino’s)
○ Mid-range: Stores like Metro, Sobeys, Loblaw, and Real Canadian Superstore.
○ Low-end: Offer lower prices and a limited selection. (Ex. No Frills, Budget Foods, and Shop ’n
Save)
○ Drugstores: Specialize in medications, health products, and some groceries. (Ex. Shoppers
Drugmart and Rexall)

● Convenience Stores: Smaller supermarkets that are often open 24/7 and may sell gasoline
○ Located for quick access, with higher markups for convenience.
○ Some may feature fast-food franchises (e.g., Tim Hortons) or offer fresh meat and produce in
Europe.

● Specialty Stores: Sell a specific type of product but carry a deep range of that product. (Ex. jewelry
store, kitchen product store [Kitchen Stuff Plus])
○ Employees are typically knowledgeable and provide high service.

○ Category Killers: Large specialty stores that dominate a product category, such as PetSmart
(pet products), Best Buy, and Amazon (electronics).

● Department Stores: Offer a wide range of products like clothing, jewelry, and household items. Prices
and service levels vary.

● Superstores: Larger versions of regular or discount department stores that carry a wide range of
general merchandise and groceries.
- Often include banks, salons, and restaurants like Starbucks for added convenience. (Ex.
Walmart and Real Canadian Superstore)
 - Also known as hypermarkets or supercenters

● Warehouse Clubs: Supercenters that offer discounted products but require customers to pay an
annual membership fee. (Ex. Costco)

● Off-Price Retailers: Sell discounted merchandise, including seconds, overruns, and past-season stock
from other stores. (ex. Winners, Marshalls, Home Sense, and dollar stores.)

● Outlet Stores: Discount retailers that sell products under a single manufacturer’s brand
○ Products sold are often surplus or have manufacturing flaws.
○ Typically located in rural areas or along highways, these stores have lower overhead costs due
to cheaper rent and salaries.

● Online Retailers: Can fall into any of the previous store categories, and many brick-and-mortar stores
also have an online presence.
○ Pure-play online stores: operate exclusively online (Ex. Wayfair)

● Used or Thrift Retailers: Sell used products (Ex. Value Village)

○ Traditional used stores face competition from online peer-to-peer platforms like Kijiji and
Craigslist.

● Pop-Up Stores: Temporary stores that can be kiosks or occupy unused retail spaces.
○ Used to generate excitement, test new concepts, or attract new customers to regular stores.
○ Common during holidays or for seasonal products (Ex. costume stores before Halloween)

Non-Store Retailing (Direct Marketing)

Companies engaging in direct marketing aim to communicate directly with consumers, encouraging them to
contact the company directly to make purchases.

Non-store retailers use various methods to reach customers, such as…

● Broadcasting infomercials and direct-response advertising

● Publishing traditional and electronic catalogs
● Door-to-door solicitation and in-home demonstrations
● Temporary stands or stalls
● Vending machines
● Exclusive online selling

Typical Marketing Channels

Direct Channel:Involves only two parties: the producer and the consumer.

Indirect Channel:Involves one or more intermediaries, with the product passing through them before reaching
the consumer.
Industrial Distributor: supply products used by businesses, government departments, and agencies, but do
not resell them.

Disintermediation: cutting out intermediaries from the supply chain to potentially lower prices and simplify the
process.
● Advantages: Eliminating intermediaries can lower costs, especially for large retailers with enough
buying power.

● Disadvantages: Smaller businesses, like local convenience stores, benefit from wholesalers' buying
power and distribution capabilities. Cutting out intermediaries means the producer has to handle more
functions (e.g., storage, retailer relations), which can be time-consuming and costly.

Multiple/ Alternate Channels

Using different methods to reach customers, such as selling through retailers, outlet stores, or online. These
channels may also include intermediaries like wholesalers or brokers.

● Target Different Markets: Companies choose channels based on customer needs (Ex. Levi's sells
through multiple channels like retailers, outlet stores, and online)

● Increase Loyalty: Some studies show that using multiple channels can increase customer loyalty,
though this can vary by industry.

● Consistency Across Channels: Maintaining the same look and messaging across channels ensures a
consistent customer experience.

● Strategic Alliances: Companies form strategic partnerships to enhance sales. (Ex. Harley-Davidson
partnering with Best Western, and Indigo Books having Starbucks in its stores to encourage more
customer engagement)

International Marketing Channels

The network of intermediaries and strategies a company uses to distribute its products or services across
international markets

● Joint Ventures: Companies partner with local firms located in the area in which they want to expand to
share profits, losses, and control

● Exporting: Products can be sold directly to international buyers or through intermediaries like brokers
and agents.

● Franchising: Companies grant rights to local operators to use their business model (e.g., McDonald's
expanding in Japan through franchises).

● Licensing: Companies allow others to use their patents, trademarks, and manufacturing processes for
a fee.

● Direct Foreign Investment: Directly purchasing or creating businesses in foreign markets. This is
costly but can lead to higher profits (e.g., Tim Hortons merging with Restaurant Brands
International).
Channel Functions & Activities

Disseminate Marketing Communications & Promote Brands

Strategies to raise awareness of an offering and encourage purchasing. Two common strategies are:

● Push Strategy: increase product availability by convincing intermediaries (wholesalers, distributors,

retailers) to stock more inventory.
○ Manufacturers focus on convincing wholesalers, distributors, or retailers to buy more of their
products, ensuring availability for consumers.
○ Mainly targets intermediaries rather than consumers.

● Pull Strategy: create consumer demand, encouraging consumers to seek out the product, which in
turn motivates businesses to sell it.
○ Targets consumers
○ The pharmaceutical industry uses both push (to pharmacies and doctors) and pull (advertising
to consumers) strategies.

Sorting and Managing Inventory

● Holding products in stock to meet customer demand and avoid lost sales
● Requires investment in storage facilities, employees, and resources for shipping and handling.

Distributing Products
● Transporting physical goods between channel members, sometimes requiring return shipments.
● Large wholesalers, distributors, and retailers may own trucks, while others hire third-party
transportation providers (e.g., trucking companies, railroads).
● Tracking merchandise is crucial to monitor product location and condition.
● Loss, damage, or spoilage of inventory can reduce profits.
● Delays or failures in timely delivery, especially when competitors can fulfill orders, can also impact
profits.

Assume Ownership Risk and Extend Credit

● Ownership risk is shared among channel members, depending on their contracts and free on board
(FOB) provisions.
● FOB provisions specify who is responsible for shipping costs, product ownership, and when ownership
transfers.
● Factors like product type, demand, marketing conditions, and company influence affect the contract
terms.
● During economic downturns (e.g., 2008 recession), companies may delay taking ownership of products
to minimize unsold inventory risk.

Share Marketing and Other Information

● Channel members gather valuable information about demand, trends, inventory, and competition.
● Sharing this information can help companies perform better and overcome competitive challenges.
● Confidentiality is a major concern, as sharing sensitive data between partners could be unethical.
 ● Nondisclosure agreements are used to protect proprietary information and regulate how it can be
shared or used.

Marketing Channel Strategies

Key factors to consider that influence channel decisions include…

Type of customer (e.g., individuals vs. businesses).

● Consider how the customer would want to buy the product
● Online stores may not work for products like fresh produce, where customers prefer to inspect items
themselves.
● Consumer and business buyers have different needs; businesses often require personalized service,
delivery, and special billing terms.
● Business purchases, like machinery, typically involve direct sales interactions, while consumers buy
everyday items from stores.

Type of product (perishable goods need shorter channels).

● Perishable products require shorter marketing channels due to their fragility and quick shelf life (e.g.,
fresh tuna).
● Non-perishable products can go through longer channels, with more intermediaries (e.g., canned tuna).
● Valuable or fragile products, like cars or corporate jets, typically use shorter channels, often sold directly
to buyers or dealers.

Channel partner capabilities (e.g., intermediaries for retail expansion).

● The ability of a company to manage its marketing channels depends on its own capabilities.
● If a company can handle direct sales, it may choose to sell directly to customers (e.g., a service
provider or digital product creator).

The Business Environment & Technology

● Economic Factors: Changes in the economy, such as a decline in currency value, can influence
marketing channel choices.
○ If a country's currency weakens, imported products become more expensive, prompting
companies to consider local production and partners.

● Technological Changes: Advancements in technology, particularly the Internet and social media, have
transformed how products are sold.
○ Online sales channels give companies more control over product pricing and sales while
allowing them to gather valuable customer data for targeted marketing and personalized offers.

Competing products' strategies (e.g., Dell diversifying from direct sales to retail).
 ● Competitor Influence: The marketing channels used by competitors can impact a company's choice of
channels.
○ (Ex. Dell expanded from direct-to-consumer sales to also selling through retailers like Best Buy
to increase product visibility.

● Innovative Channel Strategies: Companies can also differentiate by creating unique marketing
channels
○ (Ex.Netflix disrupted the video rental market by shifting from direct mail to online streaming, a
model later adopted by many TV networks offering on-demand content)

● Different Channels within an Industry: Companies within the same industry may operate through
different channels
○ (Ex. L'Oréal sells primarily through retail stores, while Mary Kay and Avon use direct sales
through consultants and also offer online sales)

Distribution intensity: the number of intermediaries used by a manufacturer within its trade areas.
● Too few intermediaries can limit exposure, while too many may harm the brand image.

Intensive Distribution: Widely available (e.g., soda).

● Products with many competitors and weak brand loyalty are distributed widely across various outlets
(e.g., soft drinks, chocolate bars).

Selective Distribution: Available at specific outlets

● Products are sold at select outlets in specific locations to target different market segments.
(Ex. Sony sells different models of TVs at stores like Walmart for lower-priced models and specialty
stores for premium models)

Exclusive Distribution: Sold at very few outlets to enhance brand image (e.g., high-end furniture).
● Products are sold through one or very few outlets, often to create demand through scarcity.
● Enhances brand value and prevent the brand from being sold cheaply in unauthorized markets
(Ex. exclusive pieces of a furniture line may only be sold at high-end retailers)

Channel Dynamics
Channel Power
The influence held by certain partners in a marketing channel (channel leaders or channel captains)
● Traditionally held by large manufacturers
● power is increasingly shifting to big retailers like Walmart and Costco, who have vast customer bases
● Consumers now also have more power, using the internet to find products at the best prices and
bypass traditional retailers.

Channel Conflict
Disputes between different members of a marketing channel, each with their own goals.
 ● Vertical conflict: Occurs between different types of members in a marketing channel (e.g.,
manufacturer, wholesaler, retailer).
○ (Ex. when manufacturers, agents, wholesalers, or retailers disagree on pricing, product display,
or promotion strategies)

● Horizontal conflict: occurs between companies of the same type (Ex. two wholesalers that sell the
products of the same manufacturer)
○ (Ex. two wholesalers competing with each other by selling the same product from a
manufacturer at different prices.)
○ Can be healthy due to competition but may also cause issues, especially if companies undercut
each other’s prices
○ Dumping: products are sold at below-market prices in foreign markets, often to eliminate
competition. (a significant cause of horizontal conflict)

Common sources of conflict include…

● Inventory Management: Disagreements over who should bear the cost of holding and managing
inventory.
● Promotions and Sales: Retailers and wholesalers may criticize manufacturers for not doing enough to
promote products, while manufacturers may be frustrated with poor sales and display practices by
retailers.
● Direct Sales by Manufacturers: When manufacturers sell directly online, retailers and wholesalers
may feel they are competing for the same customers.
● Store Brands: Retailers selling their own private-label products (e.g., Walmart’s Dr. Thunder) can
create competition for manufacturers who feel slighted when their products aren’t prioritized.

Achieving Channel Cooperation Ethically

● Building Relationships: For companies without significant power, emphasizing the benefits of
partnership is key.
- (Ex. brands like Rolex highlight how being an "authorized seller" can boost a retailer's traffic and
sales.)

● Support and Assurance: Companies provide materials and case studies to show channel partners
how working together can improve sales. Partners also want assurance of product authenticity and a
steady supply.

● Convincing Partners: If a product is in high demand, sometimes retailers must convince

manufacturers to work with them, especially when they are new or lack power (e.g., Amazon convincing
suppliers in its early days).

● Marketing Materials: Offering promotional tools like brochures, in-store displays, and ads that channel
partners can customize helps foster cooperation.

● Training Sales Teams: Educating the sales force is essential, especially when launching a new
product. Companies like Sephora provide training through platforms like Sephora University.
 ● Sales Incentives: Companies often run sales contests or offer monetary incentives to encourage
channel partners to sell their products.

● Resale Price Maintenance: Some producers require retailers to maintain a certain resale price to
protect the brand's image and prevent price wars. However, these agreements must comply with legal
standards, as price maintenance agreements in Canada are regulated under the Competition Act.

Channel Integration
Vertical Marketing System:
Channel members cooperating closely but still working independently (no official affiliation with each other)

○ Vertical Integration: when one channel member takes over another's functions

○ Forward / Downstream Integration: when a company moves downstream in the supply chain,
taking control of distribution or retail activities that were previously handled by intermediaries.
■ (Ex. P&G acquiring The Art of Shaving and running its own retail stores).

○ Backward / Upstream Integration: a company moves upstream in the supply chain, gaining
control over its suppliers or production processes.
■ (Ex. a retailer acquiring or taking control of a company that produces the goods it sells)

○ Franchises: A vertical system where franchisees market a company's products/services in

specific territories under set guidelines (e.g., McDonald's).
- Used to penetrate markets

○ Subscription Services: A vertical system in which companies control product selection,

distribution, and timing of purchases, with types including:
■ Predefined services: Consumers choose delivery period based on their usage rate
(e.g., Dollar Shave Club).
■ Curated services: Specialty products are selected for consumers (e.g., Meal Kits).
■ Surprise services: Consumers choose categories, but not specific products (e.g., wine
clubs, surprise boxes, Ardene mystery box).

Horizontal Marketing System

Two companies at the same channel level (ex. 2 wholesalers, or 2 retailers) cooperating to maximize
marketing opportunities (e.g., Skype and Nokia teaming up to put Skype’s service on Nokia phones).
 Chapter 10

Integrated Marketing Communications (IMC)

A strategy where companies deliver consistent messages about their products and services across multiple
communication channels (TV, radio, magazines, social media, etc.) to both business-to-business and
business-to-consumer markets.

● goal is to establish a unified brand message in consumers' minds across various target markets,
enhancing brand recognition and fostering strong customer relationships.
● With the rise of social media, consumers can share feedback or contradict company messages,
requiring companies to monitor and respond effectively to maintain consistent messaging.

Integrated Marketing Communications (IMC): IMC is a strategic business process that coordinates
stakeholders, content, channels, and results to deliver consistent brand messaging.
● Purpose: It focuses on building customer relationships, managing brand equity, and communicating
social responsibility initiatives.
● (Ex. Ritz Crackers uses consistent messaging across various platforms, such as "a taste of welcome,"
to represent core values and promote inclusivity in campaigns.)

Digital vs Traditional Shift

● Companies are increasingly focusing on digital channels

● Consumers generally trust traditional media more than digital, with a significant gap in trust levels
between digital and traditional advertising.

● Combining digital and traditional media often proves more effective, with different media mixes suited
for specific brand objectives.

The Promotion Mix

Specific promotion vehicles that inform and remind customers about the product or service, and motivate a
purchase. The different types of marketing communications a company uses compose its promotion mix. The
different types include…

Advertising:
Paid promotion to reach a large audience via:
● Media Channels: Video (satellite, cable, streaming), print/digital magazines, newspapers, radio, social
media (LinkedIn, Facebook, Instagram, TikTok, blogs, Twitter)
Sales Promotions:
Short-term incentives aimed to drive consumers to take quick action into making large purchases
● Incentives: Coupons, contests, games, rebates, mail-in offers
● Purpose: Encourage quick action, larger purchases, and repeat buys. Supports a market penetration
strategy.

Trade Promotions:
Sales promotions targeted at businesses (channel members) like grocery stores, pharmacies, and discount
department stores.
● incentives: trade shows, in-store displays, prizes, additional funding to promote products.

Public Relations and Publicity:

Communications designed to improve a company’s image and products by crafting messages that seem
independent of the company.
● press releases, news conferences, and publicity efforts, often managed by internal or external PR
teams.

Sponsorships:
A company provides financial support to events, venues, or experiences to target specific audiences.
● helps enhance the company’s image and generate positive publicity

Direct Promotion:
Personalized, interactive promotional materials delivered to individual consumers
● Postal mail, flyers, catalogues, phone, TV, computers, tablets

Digital/ Online Marketing:

Company websites, email, search ads, display ads, blogs, social media, and online forums to connect with
customers and influence attitudes.
● Techniques: Search Engine Optimization (SEO) and Search Engine Marketing (SEM) to improve
content visibility on search engines
● Social Media Marketing: Company-controlled social media accounts (e.g., YouTube, Instagram) to
manage brand presentation on platforms once controlled by consumers.
● Mobile Marketing: A subset of online marketing that delivers messages to customers' smart devices
based on IP address
● Geotargeting: A method where advertisers tailor ad content based on the geographic location of a
customer's device. Ads can vary by location, offering promotions to consumers as they pass by stores
or adjusting prices based on their province.

Professional Selling:
Iinteractive process where a seller engages directly with a buyer—either in person, by phone, or through
technology—to build a relationship
● Most common in B2B
● (Ex. Job interviews are similar to professional selling, where the job seeker (seller) aims to persuade
the employer (buyer)
Factors Influencing the Promotion Mix
Budget Available
The amount of money a company has available for promotion. Budget impacts aspects of promotion like…
● Reach: the number of people exposed to the message
● Frequency: how often people are exposed to the message

Stage in Profuct Life Cycle

● Products in the introductory stage require more promotional investment to raise awareness and
encourage trial.
● Even after the initial promotion, continued communication is essential to maintain customer loyalty,
inform about changes, and introduce new product variations or line extensions.

Type of Product & Type of Purchase Decision

Different types of products require different types of promotion

● High Involvement Products: Technical or expensive products often require professional selling to
explain features and benefits.

● Low Involvement Products: Routine, low-cost items rely more on advertising since customers are
familiar with them and make quicker purchase decisions.

Target Market Characteristics & Consumer’s Readiness to Purchase

Companies must understand their target market's media usage, purchase frequency, purchase locations,
and readiness to buy, along with factors like age, gender, and lifestyle.

● Early adopters: Want to try products as soon as they're available.

●
● Late adopters: Wait until products are proven or improved.

● Affordability: Some consumers may need a product but can't afford it at the moment (e.g., young
adults buying property).

Consumer’s Preferences for Various Media

● Consumers prefer cinema, events, and print advertising.
● Marketers prefer TV and digital formats.

The difference in media preferences highlights the need to align promotional strategies with consumer and
marketer media preferences.
Regulations, Competitors & Environmental Factors

Regulations:
Canada has strict advertising regulations through the Canadian Code of Advertising Standards and the
Broadcast Code for Advertising to Children, ensuring ads are truthful, fair, and accurate.

Competitors:
Marketers must consider competitors' strategies and decide whether to follow them or differentiate through
alternative media.

Environmental Factors:
The COVID-19 pandemic shifted consumer behavior, with increased savings and more spending on
home-related products and housing investments, influencing the promotion mix.

Availability of Media
Companies need to plan promotions considering the availability of different media types.

● Television & Super Bowl Ads: High demand, limited spots, and high cost for top-rated shows and
events like the Super Bowl.
● Magazines: Longer lead-time for ad placement, requiring advance planning.
● Radio: More flexible, with ads often placed on the same day they are to air.

Social Media: Immediate but concerns over data privacy (e.g., Facebook-Cambridge Analytica scandal) can
impact usage.

Uncontrollable Events: External factors like weather (e.g., snowstorms) or crises (e.g., COVID-19) can
disrupt promotions and require businesses to adjust their messaging.

The Communication Process

The communication process describes how a person selects, and interprets information.

Consumers choose specific information (e.g., books, blogs, or classes), but just exposure doesn’t guarantee
attention, retention, or accurate interpretation.

● Sender (Marketer): Encodes (translates) the message for the appropriate channel.
● Receiver (Consumer): Decodes (interprets) the message.

For communication to be effective, the receiver must interpret the message as the sender intended.
 ● Distractions: Interference occurs when external factors (e.g., texting while streaming) disrupt the
transmission of a message.
- (Ex. if an advertisement interrupts a video, the viewer may not pay attention to it or remember
the brand being advertised)

● Retention Challenges: Advertisers struggle to capture attention and ensure message retention.
Repeating messages in various places helps increase retention.

● Social Media Advantage: Social media platforms like Facebook allow advertisers to deliver
personalized, targeted messages based on user interests and behaviors. This ensures that the
messages are meaningful and relevant to the consumer.

Advertising & Direct Promotion

Media
The channels through which advertising or direct promotions reach the target audience.
● Companies must choose media that effectively deliver the message to the right target market at an
efficient cost.

Media Types
● Magazines/Newspapers: Engage readers longer and direct attention through layout.

● Radio: Typically used while consumers engage in other activities (e.g., driving) and relies on audio.

● Television: Combines audio with visual demonstrations for a dynamic impact.

● Outdoor Advertising: Reaches consumers when they are outside their homes.

● Print media: Print magazines are kept longer but harder to edit. Many now offer both print and digital
versions.
○ Search engines have reduced print media's influence, causing a drop in readership and ad
revenue.
○ Print media now uses QR codes to link to digital shopping options.

● Social media: Social media targets consumers with ads based on their interests and location.

Advertising:
Paid promotions by various organizations to reach a broad audience.
Vehicle:
The specific means within a media type used to reach a target market.

Direct Promotion:
Targets specific customers, allows ROI measurement, and tests strategies before full implementation. It can be
personalized (ex. Phone call) but may be seen as intrusive.

Telemarketing
● Direct phone marketing
● Effective for charitable organizations, political parties, and service companies, but becoming less
effective due to call screening.

Direct Response Advertising

● An offer and a call to action
● (Ex. TV ads where consumers are urged to call and purchase or learn more. Like the Shopping
Channel (TSC) uses on-air hosts to promote products and encourage immediate purchases with "Show
Stoppers.")

Message Strategies

Unique Selling Proposition (USP): A key benefit or feature that makes a product stand out.

● (Ex. Domino’s “Pizza delivered in 30 minutes or it’s free,” and Nike’s “Just Do It.” shows their products
help athletes realize their potential)

● Successful brands like Nike and Coca-Cola adjust their promotions for different international audiences,
considering cultural differences in language, actions, and visuals.

● Companies must consider the target audience, promotion objectives, media, budget, USP, and product
when crafting messages. The more they understand their audience, the more effective the promotion.

Promotion Objectives:
Companies define what they aim to achieve with their promotions (ex. building awareness, driving immediate
action, or encouraging long-term brand recall)

● Primary Demand: aims to increase demand for a product category (e.g., cold drinks)

● Selective Demand: targets demand for a specific brand (e.g., Tropicana).

AIDA Model
A model that the common promotion objectives follow

(1) Attention: The first objective is to capture the consumer's attention. Without attention, the rest of
the process is irrelevant.
 (2) Interest: Once attention is captured, the goal is to generate interest by providing information that
connects with the consumer's needs or desires.
(3) Desire: The next stage is to create desire, where the consumer sees the product or service as
something they need or want.
(4) Action: Finally, the objective is to move the consumer to take action, which is typically making a
purchase or engaging with the brand.

Message Characteristics
Appeals
Companies choose an appeal to attract attention and influence emotions. Emotional appeals can be humorous
or frightening, while rational appeals use logic and detailed information.

● Humor: While humor in ads can be memorable, it must be used carefully to avoid offending diverse
audiences.

Message Structure:
● Open-ended: Allows consumers to draw their own conclusions (e.g., perfume ads).

● Closed-ended: Draws a direct conclusion, often used for clear messaging.

● One-sided: Focuses on positive aspects, common in ads (e.g., resumes).

● Two-sided: Includes both pros and cons, which can build trust (e.g., pharmaceutical ads).

Presentation Order:
The start and end of an ad are most memorable. Placing the brand name at the beginning and end ensures
better recall.

Use of Characters and Jingles:

Mascots, jingles, and slogans help make ads more memorable (e.g., Green Giant, Energizer Bunny). However,
they need to align with current societal norms to avoid criticism (e.g., Quaker Oats changing "Aunt Jemima"
due to racial stereotype concerns).

Promotion Budget Methods

● Percentage of Sales: A simple method where a fixed percentage of last year’s or projected sales is
allocated for promotion.
○ straightforward but doesn’t account for market changes or unexpected circumstances.

● Affordable Method: Based on what the company believes it can afford.

○ Often used by small businesses but can lead to underfunded promotions if costs exceed
expectations.
 ● Competitive Parity: Companies match their promotional spending to competitors to maintain brand
awareness and stay competitive, especially during market downturns.

● Objective and Task Method: A more strategic approach where companies first set communication
objectives, then determine the activities needed to meet those objectives, and calculate the costs
associated with those activities.

● Return on Marketing Investment (ROMI): A measurement to assess the effectiveness of marketing

spending. ROMI is calculated by dividing the incremental financial return from marketing by the
marketing costs, helping companies optimize spending.

Sales Promotions
Activities that support advertising, public relations, and professional selling efforts, creating incentives for
customers to make quicker and larger purchases.

● Typically temporary, but used more frequently during weak economic periods to generate revenue
quickly.
● Encourage immediate purchases and increase the size of transactions.

Consumer Sales Promotions

Designed to temporarily increase sales, encourage trial, and build product awareness.

● Samples: Allow consumers to try products risk-free, commonly used for food and apps.

● Coupons: Offer immediate price reductions

○ provided by manufacturers and reimbursed to retailers.
○ Both paper and digital coupons

● Premium: A product or discount offered for free with a purchase or by submitting proof of purchase
(e.g., receipt or package).
○ Encourages repeated purchases and motivates consumers to buy a product multiple times.

● Contest /Sweepstake: Promotion where participants enter for a chance to win prizes, often tied to
product purchases
○ Encourages product purchases and repeat buying.
○ (Ex. Tim Hortons' "Roll-Up-The-Rim" campaign rewards customer loyalty with prizes ranging
from free drinks to cars, boosting sales and creating awareness at the point of sale.)

● Loyalty Programs: Sales promotions designed to encourage repeat business.

○ (Ex. Frequent flier programs, shopping cards, and point systems)
○ Points can be redeemed for incentives like free nights, flights, or meals.
○ Often involve partnerships (e.g., Aeroplan or Airmiles) for broader point accumulation and
redemption.
 ● Rebates: a sales promotion tool where consumers can receive a partial refund or cashback after
purchasing a product.
○ Popular with manufacturers as many customers forget or delay submission.
○ Creates the perception of a lower price while benefiting companies financially.

Trade Promotions
Targeted at channel members (e.g., wholesalers, retailers) to promote products to consumers.

● Trade Shows: Events where companies in a specific industry showcase offerings to potential buyers,
gather feedback, and observe competitors.

● Conventions: Meetings with groups of professionals gatherings that provide the opportunity to display
industry-specific products, like medical devices.

● Webinars/Online Trade Shows: Virtual alternatives for businesses unable to attend in-person events.

● Shelf Talkers: Tags or displays highlighting special deals or coupons at retail locations.
● Sales Contests: Incentives for retail salespeople to sell specific products, with rewards like vacations,
cash, or recognition.

● Trade Allowance: give channel partners, for example, a manufacturer’s wholesalers, distributors,
retailers, and so forth, different incentives to push a product.

○ Advertising Allowances: Financial incentives for local advertising of a manufacturer's product,

benefiting both parties.

● Product Demonstrations: In-store events to showcase and explain product features to customers.

● Training: Helps salespeople understand and sell manufacturers' products effectively.

Chapter 11

Public Relations Activities and Tools

Public Relations (PR):
Public relations involve activities aimed at creating a positive image for a company, product, or individual, and
addressing criticism. Key elements include:

A crucial part of a company’s integrated marketing communications strategy, supporting both brand building
and crisis management efforts.

● Tools:
○ Press releases (for generating publicity, though media use is not guaranteed).
 ○ Digital platforms (websites, social media, blogs, and YouTube).
○ Publications (annual reports, brochures, employee/public magazines).
○ Sponsorships
○ Product placements
○ Speeches, podcasts).

● Goals:
○ Build rapport with customers and stakeholders.
○ Promote offerings and supplement sales efforts.
○ Manage crisis communication and address negative information.
○ Ensure product concepts are well understood in foreign markets.

● Advantages:

○ Perceived as more neutral and objective than direct promotions.

○ Can generate publicity through edited media (e.g., newspapers, TV) and influencers.

● Implementation:
○ Managed by in-house PR teams or external agencies.
○ Requires relationship-building with media and stakeholders.
○ Commonly used by companies, universities, government entities, and nonprofits.

Press Releases
A press release is a company-written news story aimed at promoting a product, company, or person with a
positive perspective.

● It seeks to generate publicity by positioning the content as objective and credible.

● PR teams create press releases in the hope that edited media (e.g., TV, newspapers) will disseminate
them. (placement in these outlets is not guaranteed)
● Companies use their own platforms (websites, YouTube, Facebook, LinkedIn) to bypass traditional
media. → These platforms allow direct communication with the public.

Public Relations in Damage Control

● Crisis Communication: PR is essential for managing negative publicity → address consumer
concerns, restore trust, and protect the brand’s image.

○ Example: In 2013, Lululemon faced backlash over defective yoga pants and mishandled
communication, leading to boycotts and stock price drops. A lack of a crisis management plan
delayed recovery until 2016.

Public Relations in Awareness Creation

● Foreign Market Expansion:
 Companies entering foreign markets often use PR to build a positive reputation and awareness,
especially where reputation significantly impacts hiring and sales, as seen in India’s tech industry.

● Internal Decision Announcements:

PR can promote internal developments such as new executive hires, community service, or new
product development to generate interest or influence competitors.

● Government Use:
Governments use PR for public awareness and to signal future intentions, often leveraging press
conferences to build support for policies and programs.

Sponsorships
Sponsorship involves paying a fee to associate a company’s brand or corporate name with various events,
causes, or venues to enhance brand awareness and improve its image among target markets.

Sponsorship opportunities include…

● Places/Venues
● Sports Apparel
● Events
● Causes/Non-Profit
● Conferences/Tradeshows

Product Placement
Product placement involves embedding products within videos, films, or other media to increase exposure,
brand awareness, and consumer interest. Companies pay a fee for their product to be featured in content that
is produced independently.

Benefits of Product Placement:

● Less expensive than traditional commercials for the same amount of exposure.
● Consumers tend to find product placements in independent content more trustworthy and less intrusive
than direct advertisements.

Examples of Product Placement:

● Audi’s long-term product placement in Marvel movies, starting with Iron Man in 2008 and continuing
with other films like The Avengers and Spider-Man: Homecoming.
● Product placements are now being extended to streamed videos, video games, and even books.

Direct Promotion (Print, Online, and Mobile)

Direct promotion involves delivering personalized promotional materials directly to consumers via methods like
postal mail, phone, TV, and digital devices. It relies on direct communication with consumers and includes both
traditional (print, phone) and newer methods (banner ads, social media).

● Traditional methods have been used for decades, while internet-based methods are more recent.
● Research into digital promotion has grown significantly.
 ● Each method has pros and cons, and effectiveness depends on the target audience and goal.

Display Advertising
Display ads on websites or social media attract clicks to the advertiser’s site. They can be static or animated
and must be placed on relevant sites to target the right audience.

Catalogues
Catalogues provide a multi-sensory experience, engaging consumers and enhancing brand value. Response
rates have increased, especially among Millennials, with a combination of print and online catalogs yielding the
best results.

Direct Mail
Direct mail uses a customer database with demographic, psychographic, and behavioral information to target
individuals with print materials. In 2019, Canada Post delivered 886 million pieces of direct mail.

Direct Response TV
Direct Response TV ads encourage immediate consumer action via a toll-free number or website. While
effective, it is less popular today due to the rise of online video tools.

Email
Email is an effective way to send promotional offers, but its success depends on consumer consent and
content relevance. Overuse or irrelevant emails can annoy customers and reduce effectiveness.

Flyers
Printed flyers are used by retailers to drive traffic and sales, especially in competitive sectors like grocery and
home improvement. They are more effective than digital flyers, as they don’t require consumer information and
are seen as less intrusive. In 2019, Canada Post delivered 3.5 billion flyers.

Interstitials
Interstitials are full-screen ads that appear during transitions in mobile apps, such as before a video starts or
between game levels. While they grab attention, they can also interrupt the user's activity, leading to potential
annoyance.

Search Ads
Search ads appear when users search for keywords related to a company’s products. Higher ad positions on
search engines like Google or Bing increase visibility and click-through rates. Companies use Search Engine
Optimization (SEO) and Search Engine Marketing (SEM) to improve ad ranking.

Social Media Advertising

● Ad-based Social Media: Ads on platforms like Facebook, Instagram, and TikTok target specific users
based on detailed information, a practice known as micro-targeting. This method increases
effectiveness but raises privacy concerns.

● Branded Social Media: Companies create their own social media profiles to build brand communities,
connect with customers, and foster relationships through engaging content and customer interaction.
Voice Calls and Text Messages
Voice calls and texts are often seen as intrusive and can negatively impact consumer perceptions. Companies
should use an opt-in approach and ensure content is relevant, with voice calls being most effective for existing
customers.

Apps
Apps help companies strengthen customer relationships by providing direct access to buying patterns.
Retailers use apps for location-based promotions and convenience features, making customers more likely to
make impulse purchases.

Websites
Websites are a foundational internet communication tool for companies, providing essential content and
information for consumers and stakeholders. Effective websites are user-friendly, fast-loading,
mobile-responsive, and include clear contact details and brand-supporting imagery.

Interactions Between Traditional & Newer Media

● Advertising Effectiveness:
○ Varies by medium (video vs. text/image-based ads).
○ Companies must integrate customer data from multiple media types.

● Customer Data:
○ Integration of behavioral, transactional, and preference data.
○ Requires compliance with laws, regulations, and industry best practices.

● Media Interactions:
○ Social media: Best for maintaining existing customer relationships.
○ Mass media: Effective for attracting new customers and brand penetration.

● Privacy and Consumer Attitudes:

○ Companies rely on customer insights for better service but must balance privacy concerns.

Privacy, Consumer Attitudes & Direct Promotion

● Company Concerns:
○ Companies focus on acquiring new customers, keeping existing ones informed, achieving
revenue, and staying competitive.
○ More customer data is believed to help improve service.

● Privacy Concerns:
○ Consumer awareness of privacy issues has increased significantly.
○ Data shows a decrease in Canadians' willingness to share personal information (from 72% in
2019 to below 40% in 2020).
○ Consumers are more conscious of their data after the COVID-19 pandemic.

○ Key factors in sharing personal data:

■ Secure data collection and storage (63%)
 ■ Control over what data is shared (57%)
■ Trust in the company (51%).

● Legislation:
○ Canada’s Bill C-11 (Digital Charter Implementation Act) aims to give citizens more control and
transparency over personal information.
○ The bill is still under debate as of August 2021.

Chapter 12

The Role Professional Salespeople Play

● Creating Value: Salespeople tailor their products and services to meet customer needs. For example,
a cardiac surgeon consults a salesperson for the right pacemaker, while a food wholesaler improves
invoicing accuracy with the salesperson's suggestion to implement an electronic system.

● Managing Relationships: Salespeople prioritize high-potential accounts and develop strategies to

close deals. Their goal is not only to make sales but to build long-term relationships and secure repeat
business.

● Gathering Information: As "boundary spanners," salespeople gather insights about competitors and
customer needs, feeding this information back to the company to improve products and strategies.
CRM systems like Salesforce help track customer data for future decision-making.

Types of Sales Positions

● Missionary Salespeople: These salespeople do not make the actual sale but influence
decision-makers who can make the purchasing decision. For example, pharmaceutical reps who
provide doctors with information so they can prescribe medications, though patients make the actual
purchase.

● Trade Salespeople: These salespeople call on retailers and assist them in promoting products to
consumers. For example, a trade salesperson might help a supermarket chain advertise and display
barbecue sauces.

● Prospectors: Their primary role is to find new customers or "prospects" by cold calling or reaching out
to potential leads. Once a prospect is found, the prospector may pass the lead to another salesperson
or handle the entire sales process themselves.

● Account Managers: These individuals manage ongoing relationships with customers, focusing on
identifying new opportunities and ensuring the customer is satisfied. They work to build long-term
relationships, often with "lead users" who are more likely to embrace new products and innovations.
 ● Order Takers: These salespeople handle sales that come to them, often in retail environments or
through customer calls, but do not actively seek out new business. They typically work on achieving
sales quotas

● Sales Support: These individuals assist the sales team with administrative tasks, such as preparing
proposals, pricing, and managing post-sale customer service. They do not close deals but support the
sales process.

Customer Relationships
Large Customers: Marketers aim to build strong relationships with large customers, as serving one big
customer can be more profitable than handling multiple smaller ones. Large customers like Home Depot and
Best Buy generate bigger sales orders, making them attractive targets for marketers.

Innovative and Influential Customers: Marketers also seek strong ties with innovative customers, such as
lead users, and those with industry status, like recognized experts or market influencers. For example, Holt
Caterpillar is an influential customer among other dealers.

Maintaining Relationships with Market Influencers: Salespeople also focus on maintaining relationships
with influential figures who may not be direct customers, such as professors, consultants, and market analysts,
who can impact future decisions or influence current ones.

Types of Sales Relationships

(1) Transactional Relationships: These are one-time exchanges with little to no ongoing interest in
maintaining a relationship. Each sale is separate, and the focus is on the transaction itself.

(2) Functional Relationships: These are ongoing but limited relationships, where buyers continue
purchasing out of habit, as long as their needs are met. Price, quality, and service differences are
minimal, and the relationship is mainly based on convenience (e.g., MRO products like bolts).

(3) Affiliative Selling Relationships: These occur when the buyer needs significant expertise and trust
from the seller. The relationship becomes more involved and the buyer relies on the seller’s knowledge.

(4) Strategic Partnerships: In these, both the buyer and seller invest time and money to mutually expand
the market. These long-term relationships, like that of Boeing and Pratt & Whitney, focus on
co-innovation, with both parties benefiting from shared advancements.
Value Calculation:
In transactional relationships, value is calculated after each transaction. As relationships deepen, these
calculations become less frequent, and actions unrelated to the sale (such as shared expertise) help
strengthen the relationship.

Relationship Progression:
Relationships don't necessarily evolve from one type to another. Not every relationship aims to become a
strategic partnership, and some may remain at a functional or transactional level depending on the business
context.

Selling Strategies
● Script-Based Selling:

○ Salespeople follow a memorized script to deliver sales pitches verbatim.

○ Effective when customer needs are predictable and don't vary much.
○ Ensures a polished, consistent presentation of the product.

● Needs-Satisfaction Selling:
○ Salespeople ask questions to identify the buyer’s problems and needs.
○ Tailors the sales pitch to satisfy those specific needs.
○ Best used when customers have varying needs but the products are fairly standard.
○ SPIN selling (Situation, Problem, Implication, Needs-Payoff) is a popular approach, where the
salesperson asks targeted questions to understand the customer's needs before offering a
solution.

● Consultative Selling:
○ Focuses on solving complex problems with customized solutions.
○ Salespeople use their expertise and collaborate with customers and technical experts over an
extended period.
○ Example: Schneider-TAC helps clients create energy-efficient solutions for buildings, working
closely with engineers and customers.

● Strategic-Partner Selling:
○ Involves a deep partnership where both buyer and seller invest resources and share expertise.
○ The goal is to create solutions that mutually benefit and grow both businesses, emphasizing
long-term collaboration and joint success.

Sales Strategy and Relationship Types

● Sales strategies should align with the relationship type and the stage of the sales process.
● Different strategies, such as script-based, needs-satisfaction, consultative, and strategic-partner selling,
can be used at various points, even across different relationship types.

The Sales Process

 1. Pre-Approach:
○ Planning stage where salespeople gather information (e.g., using LinkedIn, Google, financial
databases) about the potential buyer.
○ This may also be an impromptu visit, but ideally involves research.
2. Approach:
○ Salesperson introduces themselves and establishes a reason for the buyer to engage in the
conversation.
○ Initial engagement aims to capture interest and set the stage for further exploration.
3. Needs Identification:
○ Involves asking questions (e.g., SPIN technique) to uncover the buyer's specific needs, which
may span multiple interactions.
○ In simple cases, needs may be addressed with a prepared presentation.
4. Presentation:
○ The salesperson showcases how the product meets the identified needs using the FEBA
method: Feature, Evidence, Benefit (Objection), and Agreement.
5. Handling Objections:
○ Buyers may raise concerns, and the salesperson must probe to resolve misunderstandings or
identify hidden needs.
6. Closing the Sale:
○ After objections are resolved, the salesperson asks for the sale. Types of closes include:
■ Direct Request: “Would you like to order now?”
■ Minor Point: “Would you prefer red or blue?”
■ Summary Close: Summarizing key benefits and asking if there’s anything else to
consider.
○ Closing should feel natural, a continuation of the conversation.

The Sales Funnel

The sales funnel represents the stages a potential customer goes through, from initial contact to final
purchase. The funnel narrows as it moves through the stages, with more leads at the top and fewer customers
at the bottom.

(1) Lead: The initial contact, often just basic information of someone
who might be interested.

(2) Approach: The salesperson reaches out to the lead to introduce

themselves and their company.
 (3) Suspect: A person or company showing interest but not yet ready to purchase.

(4) Needs Identification: The salesperson qualifies the account by asking questions to determine the
likelihood of a purchase.

(5) Prospect: A person who has the Budget, Authority, Need, and Time (BANT) to make a purchase.

(6) Customer: Once the purchase is made, the cycle is complete, and the buyer becomes a customer.

(7) Ongoing Relationship: If the relationship continues, the buyer is considered an ongoing account for
the salesperson.

Salespeople Metrics

Revenue-Based Metrics:
● Salespeople are evaluated on the revenue they generate.
● Other metrics include average revenue per customer and average
revenue per sales call, to assess the effectiveness of targeting
lucrative customers.

Sales Pipeline Metrics:

● Suspect: Early stage, unqualified interest.
○ A suspect is someone who has shown some initial interest in a product or service but has not
yet been fully qualified.

● Prospect: Qualified lead, more likely to make a purchase.

○ someone who is more likely to buy and is in the active consideration stage of the sales process,
meaning they have the budget, authority to make a decision, a need for the product, and a
timeline to purchase.

● Conversion Ratio: Measures how well a salesperson moves customers through the sales stages (e.g.,
10: 1 means 10 leads converted to 1 suspect).
○ The conversion ratio helps determine the number of sales calls needed to generate sales.

Activity Goals
Targets for the number of sales calls to make in a given time period.
● More calls lead to more conversions and ultimately more sales.

Win-Loss Analysis:
After a sale, the salesperson analyzes whether the deal succeeded or failed, helping the team improve and
providing feedback for product development and marketing.

Compensation Metrics:
● Incentive Pay: Salespeople often earn bonuses or commissions based on sales performance.
 ● Bonus: Paid at the end of a period based on sales achievements.

● Commission: A percentage of each sale, typically used in shorter sales cycles.

○ Some salespeople receive salary plus commission or salary plus bonus, especially for long
sales cycles (e.g., in financial services).

Commission vs. Salary: Commission is more common for transactional sales, while salaries are used for
longer, relationship-based sales.

Sales Manager Metrics

● Sales Cycle Metrics: Assessing each stage in the sales process to identify areas for improvement,
such as training needs or ineffective leads.

● Market Share: Comparing sales with competitors to understand market position.

● Sales by Product or Customer Type: Analyzing trends in product sales or sales by customer
demographics to make decisions about product investment or divestment.

● Seasonal and Period Comparisons: Understanding if sales declines are due to seasonal factors or
deeper issues.

● Sales Forecast vs. Actual: Ensuring sales align with forecasts to avoid overproduction or stockouts.

● Cost Management: Balancing spending on sales activities like trade shows to avoid unnecessary costs
or insufficient investment.

● Customer Satisfaction: Monitoring customer feedback and satisfaction to prevent negative

word-of-mouth and lost sales, including analyzing reviews and referrals.

Ethics in Sales and Sales Management

● Competitor Information: Salespeople may be asked to share confidential information about a

competitor who is also a customer, which they should not do without permission.

● Gift-Giving: Determining the appropriateness of holiday gifts, ensuring they don’t cross into bribery,
with some companies banning gifts entirely.

● Customer Requests: Handling requests that violate company policies, such as offering something
"special" that the salesperson is not authorized to provide.

Company Safeguards:
● Sales policies should align with the company’s mission and values, outlining acceptable behaviors.
 ● Companies must offer clear policies, training, and enforce them, with mechanisms to report unethical
activities, like ethics offices or internal audits, to protect both the company and employees legally.

Challenges for Sales Managers:

● Ensuring fair hiring practices, non-discriminatory compensation, and treating employees with dignity
and respect while also managing ethical compliance.

Integrating Sales and Marketing

Sales and Marketing Collaboration:
● Sales and marketing departments often have different perspectives but should collaborate to achieve
the best results for the company.

Marketing’s Role in Shortening the Sales Cycle:

● Marketing is responsible for developing products and services, pricing them appropriately, ensuring
availability, and creating advertising and promotional campaigns.
● Marketing also participates in trade shows and prepares collateral to support sales efforts.

Collateral:
● Collateral includes printed or digital materials (brochures, case studies, clinical studies) that
salespeople use to support their sales efforts. For example, a pharmaceutical company may provide a
brochure with a clinical study to support the effectiveness of its drug.

Brand Awareness and Lead Management:

● Strong brand awareness makes it easier for salespeople to engage potential customers.
● Marketing also helps sales by providing lead management, identifying and qualifying leads to grow new
business.
● Closed-loop lead management systems track leads from initial identification to final sale, helping
marketers assess the effectiveness of their activities.

Marketing’s Role in Improving Conversion Ratios:

● Marketing helps salespeople by improving conversion ratios through lead scoring, where leads are
rated as hot, warm, or cold based on their readiness to buy.

Lead Scoring:
● Hot leads are ready to buy now, warm leads will buy soon, and cold leads are interested but not ready
to purchase immediately.
● Lead scoring takes into account both direct interactions (e.g., trade shows, budget discussions) and
buyer behavior (e.g., visiting a website, downloading case studies, signing up for demos).

When to Pass Leads to Sales:

 ● Leads from trade shows are passed to sales immediately.
● Other leads may require additional marketing efforts before being passed to sales.
● Closed-loop lead management systems help marketing managers track and decide when to pass
leads to sales based on their engagement and interest level.

What Sales Does for Marketing:

● Market Feedback: Salespeople provide valuable market feedback directly from customers. This helps
marketers understand customer needs and preferences beyond what can be tracked through CRM
systems.

● Customer Insights: Sales teams communicate customer concerns and ideas, which can lead to new
offerings, product adjustments, or additional marketing materials. For example, customer requests for
features, faster delivery, or eco-friendly packaging might prompt a company to adjust its offerings.

● Improving Marketing Efforts: Salespeople also help marketers improve promotional messages,
particularly for events like trade shows, by sharing which messages resonate most with customers.

● Product Development: Sales feedback can drive product improvements, such as Coca Cola's initiative
to test paper bottles to reduce plastic waste, based on customer demand for sustainable packaging.

Salespeople Monitor the Competition for Large Customers:

● Tracking Competitors: Salespeople track competitors' actions and customer purchases, entering this
information into CRM systems. This helps marketing managers analyze competitors' strengths and
weaknesses.

● Competitive Insights: Marketing managers use this information to identify competitors' weak spots to
capitalize on and their strengths to minimize.

● Competitive Analysis: Knowing which competitors are strongest and frequently encountered helps
companies refine their own marketing strategies, sales tactics, and product offerings.

● Countertactics: Salespeople can develop countertactics to eliminate competitors from consideration,

such as highlighting unique product features or emphasizing the company's experience and reliability.