Class Notes For A Preface to Marketing Management, 14th Edition
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Chapter 01 - Strategic Planning and the Marketing Management Process
1-1
Chapter 1
Strategic Planning and the Marketing
Management Process
High-Level Chapter Outline
I. Introduction
II. The Marketing Concept
III. What is Marketing?
IV. What is Strategic Planning?
A. Strategic Planning and Marketing Management
B. The Strategic Planning Process
Organizational Mission
Organizational Objectives
Organizational Strategies
Choosing an Appropriate Strategy
Organizational Portfolio Plan
C. The Complete Strategic Plan
V. The Marketing Management Process
A. Situation Analysis
B. Marketing Planning
C. Implementation and Control of the Marketing Plan
D. Marketing Information Systems and Marketing Research
VI. The Strategic Plan, the Marketing Plan, and Other Functional Area Plans
A. Marketing’s Role in Cross-Functional Strategic Planning
Detailed Chapter Outline
I. The Marketing Concept
• The marketing concept means that an organization should seek to make a profit by serving
the needs of customer groups.
• The purpose of the marketing concept is to rivet the attention of marketing managers on
serving broad classes of customer needs (customer orientation), rather than on the firm’s
current products (production orientation) or on devising methods to attract customers to
1-1
Chapter 1
Strategic Planning and the Marketing
Management Process
High-Level Chapter Outline
I. Introduction
II. The Marketing Concept
III. What is Marketing?
IV. What is Strategic Planning?
A. Strategic Planning and Marketing Management
B. The Strategic Planning Process
Organizational Mission
Organizational Objectives
Organizational Strategies
Choosing an Appropriate Strategy
Organizational Portfolio Plan
C. The Complete Strategic Plan
V. The Marketing Management Process
A. Situation Analysis
B. Marketing Planning
C. Implementation and Control of the Marketing Plan
D. Marketing Information Systems and Marketing Research
VI. The Strategic Plan, the Marketing Plan, and Other Functional Area Plans
A. Marketing’s Role in Cross-Functional Strategic Planning
Detailed Chapter Outline
I. The Marketing Concept
• The marketing concept means that an organization should seek to make a profit by serving
the needs of customer groups.
• The purpose of the marketing concept is to rivet the attention of marketing managers on
serving broad classes of customer needs (customer orientation), rather than on the firm’s
current products (production orientation) or on devising methods to attract customers to
Chapter 01 - Strategic Planning and the Marketing Management Process
1-1
Chapter 1
Strategic Planning and the Marketing
Management Process
High-Level Chapter Outline
I. Introduction
II. The Marketing Concept
III. What is Marketing?
IV. What is Strategic Planning?
A. Strategic Planning and Marketing Management
B. The Strategic Planning Process
Organizational Mission
Organizational Objectives
Organizational Strategies
Choosing an Appropriate Strategy
Organizational Portfolio Plan
C. The Complete Strategic Plan
V. The Marketing Management Process
A. Situation Analysis
B. Marketing Planning
C. Implementation and Control of the Marketing Plan
D. Marketing Information Systems and Marketing Research
VI. The Strategic Plan, the Marketing Plan, and Other Functional Area Plans
A. Marketing’s Role in Cross-Functional Strategic Planning
Detailed Chapter Outline
I. The Marketing Concept
• The marketing concept means that an organization should seek to make a profit by serving
the needs of customer groups.
• The purpose of the marketing concept is to rivet the attention of marketing managers on
serving broad classes of customer needs (customer orientation), rather than on the firm’s
current products (production orientation) or on devising methods to attract customers to
1-1
Chapter 1
Strategic Planning and the Marketing
Management Process
High-Level Chapter Outline
I. Introduction
II. The Marketing Concept
III. What is Marketing?
IV. What is Strategic Planning?
A. Strategic Planning and Marketing Management
B. The Strategic Planning Process
Organizational Mission
Organizational Objectives
Organizational Strategies
Choosing an Appropriate Strategy
Organizational Portfolio Plan
C. The Complete Strategic Plan
V. The Marketing Management Process
A. Situation Analysis
B. Marketing Planning
C. Implementation and Control of the Marketing Plan
D. Marketing Information Systems and Marketing Research
VI. The Strategic Plan, the Marketing Plan, and Other Functional Area Plans
A. Marketing’s Role in Cross-Functional Strategic Planning
Detailed Chapter Outline
I. The Marketing Concept
• The marketing concept means that an organization should seek to make a profit by serving
the needs of customer groups.
• The purpose of the marketing concept is to rivet the attention of marketing managers on
serving broad classes of customer needs (customer orientation), rather than on the firm’s
current products (production orientation) or on devising methods to attract customers to
Chapter 01 - Strategic Planning and the Marketing Management Process
1-2
current products (selling orientation).
• The principal task of the marketing function operating under the marketing concept is not
to manipulate customers to do what suits the interest of the firm, but rather to find effective
and efficient means of making the business do what suits the interest of the customer.
• Effective marketing requires that consumer needs come first in organizational decision
making.
• One qualification to this statement deals with the question of a conflict between consumer
wants and societal needs and wants.
II. What is Marketing?
• Everyone knows something about marketing because it has been a part of their lives since
they spent their first dollar.
• Since everyone is involved in marketing, it seems strange that one of the persistent
problems in the field has been its definition.
• The American Marketing Association defines marketing as, “the activity, set of
institutions, and processes for creating, communicating, delivering, and exchanging
offerings that have value for customers, clients, partners, and society at large.”
• This definition takes into account all parties involved in the marketing effort: members of
the producing organization, resellers of goods and services, and customers or clients.
• Major types of marketing includes: product, service, person, place, cause, and organization
(see Figure 1.1 for descriptions and examples).
III. What is Strategic Planning?
• Before a production manager, marketing manager, and personnel manager can develop
plans for their individual departments, some larger plan or blueprint for the organization
should exist.
• Senior managers must look toward the future and evaluate the ability to shape their
organization’s destiny in the years and decades to come.
o The output of this process is objectives and strategies designed to give the
organization a chance to compete effectively in the future.
• The objectives and strategies established at the top level provide the context for planning in
each of the divisions and departments by divisional and departmental managers.
A. Strategic Planning and Marketing Management
• Some of the most successful business organizations are here today because many years
ago they offered the right product at the right time to a rapidly growing market.
• Over three-quarters of the 100 largest U.S. corporations of 70 years ago have fallen
1-2
current products (selling orientation).
• The principal task of the marketing function operating under the marketing concept is not
to manipulate customers to do what suits the interest of the firm, but rather to find effective
and efficient means of making the business do what suits the interest of the customer.
• Effective marketing requires that consumer needs come first in organizational decision
making.
• One qualification to this statement deals with the question of a conflict between consumer
wants and societal needs and wants.
II. What is Marketing?
• Everyone knows something about marketing because it has been a part of their lives since
they spent their first dollar.
• Since everyone is involved in marketing, it seems strange that one of the persistent
problems in the field has been its definition.
• The American Marketing Association defines marketing as, “the activity, set of
institutions, and processes for creating, communicating, delivering, and exchanging
offerings that have value for customers, clients, partners, and society at large.”
• This definition takes into account all parties involved in the marketing effort: members of
the producing organization, resellers of goods and services, and customers or clients.
• Major types of marketing includes: product, service, person, place, cause, and organization
(see Figure 1.1 for descriptions and examples).
III. What is Strategic Planning?
• Before a production manager, marketing manager, and personnel manager can develop
plans for their individual departments, some larger plan or blueprint for the organization
should exist.
• Senior managers must look toward the future and evaluate the ability to shape their
organization’s destiny in the years and decades to come.
o The output of this process is objectives and strategies designed to give the
organization a chance to compete effectively in the future.
• The objectives and strategies established at the top level provide the context for planning in
each of the divisions and departments by divisional and departmental managers.
A. Strategic Planning and Marketing Management
• Some of the most successful business organizations are here today because many years
ago they offered the right product at the right time to a rapidly growing market.
• Over three-quarters of the 100 largest U.S. corporations of 70 years ago have fallen
Chapter 01 - Strategic Planning and the Marketing Management Process
1-3
from the list.
o Their managements failed to recognize that business strategies need to reflect
changing environments and emphasis must be placed on developing business
systems that allow for continuous improvement.
• Present-day business managers realize that the true mission of the organization is to
provide value for three key constituencies: customers, employees, and investors.
• Strategic planning includes all the activities that lead to the development of a clear
organizational mission, organizational objectives, and appropriate strategies to achieve
the objective for the entire organization.
• Strategic planning, if performed successfully, plays a key role in achieving equilibrium
between the short and the long term by balancing acceptable financial performance
with preparation for inevitable changes in markets, technology, and competition as
well as in economic and political arenas.
• The strategic planning process is depicted in Figure 1.2.
• In the strategic planning process the organization gathers information about the
changing elements of its environment.
• This information is useful in aiding the organization to adapt better to these changes
through the process of strategic planning.
B. The Strategic Planning Process
• The output of strategic planning is the development of a strategic plan.
• Figure 1.2 indicates four components of a strategic plan: mission, objectives,
strategies, and portfolio plan.
Organizational Mission
• The organization’s environment provides the resources that sustain the
organization, whether it is a business, a college or university, or a government
agency.
• Every organization exists to accomplish something in the larger environment and
that purpose, vision, or mission usually is clear at the organization’s inception.
• As time passes, the organization expands, and the environment and managerial
personnel change. As a result, one or more things are likely to occur:
o The organization’s original purpose may become irrelevant as the
organization expands into new products, new markets, and even new
industries.
o The original mission may remain relevant, but managers begin to lose
interest in it.
o Changes in the environment may make the original mission inappropriate.
1-3
from the list.
o Their managements failed to recognize that business strategies need to reflect
changing environments and emphasis must be placed on developing business
systems that allow for continuous improvement.
• Present-day business managers realize that the true mission of the organization is to
provide value for three key constituencies: customers, employees, and investors.
• Strategic planning includes all the activities that lead to the development of a clear
organizational mission, organizational objectives, and appropriate strategies to achieve
the objective for the entire organization.
• Strategic planning, if performed successfully, plays a key role in achieving equilibrium
between the short and the long term by balancing acceptable financial performance
with preparation for inevitable changes in markets, technology, and competition as
well as in economic and political arenas.
• The strategic planning process is depicted in Figure 1.2.
• In the strategic planning process the organization gathers information about the
changing elements of its environment.
• This information is useful in aiding the organization to adapt better to these changes
through the process of strategic planning.
B. The Strategic Planning Process
• The output of strategic planning is the development of a strategic plan.
• Figure 1.2 indicates four components of a strategic plan: mission, objectives,
strategies, and portfolio plan.
Organizational Mission
• The organization’s environment provides the resources that sustain the
organization, whether it is a business, a college or university, or a government
agency.
• Every organization exists to accomplish something in the larger environment and
that purpose, vision, or mission usually is clear at the organization’s inception.
• As time passes, the organization expands, and the environment and managerial
personnel change. As a result, one or more things are likely to occur:
o The organization’s original purpose may become irrelevant as the
organization expands into new products, new markets, and even new
industries.
o The original mission may remain relevant, but managers begin to lose
interest in it.
o Changes in the environment may make the original mission inappropriate.
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Chapter 01 - Strategic Planning and the Marketing Management Process
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• The result of any or all three of these conditions is a “drifting” organization,
without a clear mission, vision, or purpose to guide critical decisions.
o When this occurs, management must search for a purpose or emphatically
restate and reinforce the original purpose.
• The mission statement, or purpose, of an organization is the description of its
reason for existence.
o In essence, the mission statement defines the direction in which the
organization is heading and how it will succeed in reaching its desired goal.
• The basic questions that must be answered when an organization decides to
examine and restate its mission are:
o What is the business?
o Who is are the customers?
o What do customers value?
o What will the business be?
• In developing a statement of mission, management must take into account three
key elements: the organization’s history, its distinctive competencies, and its
environment.
o The organization’s history—in formulating a mission, the critical
characteristics and events of the past must be considered.
o The organization’s distinctive competencies—these are things that an
organization does well.
o The organization’s environment—it dictates the opportunities, constraints,
and threats that must be identified before a mission statement is developed.
• When completed, an effective mission statement will be focused on markets
rather than products, achievable, motivating, and specific.
• Focused on Markets Rather than Products
o In recent years, a key feature of mission statements has been an external
rather than internal focus.
o In other words, the mission statement should focus on the broad class of
needs that the organization is seeking to satisfy (external focus), not on the
physical product or service that the organization is offering at present
(internal focus).
• Achievable
o The mission statement should open a vision of new opportunities but should
not lead the organization into unrealistic ventures far beyond its
competencies.
o It should open a vision of new opportunities but should not lead the
organization into unrealistic ventures far beyond its competencies.
• Motivational
o One of the side (but very important) benefits of a well-defined mission is the
1-4
• The result of any or all three of these conditions is a “drifting” organization,
without a clear mission, vision, or purpose to guide critical decisions.
o When this occurs, management must search for a purpose or emphatically
restate and reinforce the original purpose.
• The mission statement, or purpose, of an organization is the description of its
reason for existence.
o In essence, the mission statement defines the direction in which the
organization is heading and how it will succeed in reaching its desired goal.
• The basic questions that must be answered when an organization decides to
examine and restate its mission are:
o What is the business?
o Who is are the customers?
o What do customers value?
o What will the business be?
• In developing a statement of mission, management must take into account three
key elements: the organization’s history, its distinctive competencies, and its
environment.
o The organization’s history—in formulating a mission, the critical
characteristics and events of the past must be considered.
o The organization’s distinctive competencies—these are things that an
organization does well.
o The organization’s environment—it dictates the opportunities, constraints,
and threats that must be identified before a mission statement is developed.
• When completed, an effective mission statement will be focused on markets
rather than products, achievable, motivating, and specific.
• Focused on Markets Rather than Products
o In recent years, a key feature of mission statements has been an external
rather than internal focus.
o In other words, the mission statement should focus on the broad class of
needs that the organization is seeking to satisfy (external focus), not on the
physical product or service that the organization is offering at present
(internal focus).
• Achievable
o The mission statement should open a vision of new opportunities but should
not lead the organization into unrealistic ventures far beyond its
competencies.
o It should open a vision of new opportunities but should not lead the
organization into unrealistic ventures far beyond its competencies.
• Motivational
o One of the side (but very important) benefits of a well-defined mission is the
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Chapter 01 - Strategic Planning and the Marketing Management Process
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guidance it provides employees and managers working in geographically
dispersed units and on independent tasks.
o It provides a shared sense of purpose outside the various activities taking
place within the organization.
• Specific
o The mission statement must be specific to provide direction and guidelines
to management when they are choosing between alternative courses of
action.
o However, it does not provide direction for management.
Organizational Objectives
• Organizational objectives are the end point of an organization’s mission and are
what it seeks through the on-going, long-run operations of the organization.
• The organizational mission is distilled into a finer set of specific and achievable
organizational objectives that must be specific, measurable, action commitments
by which the mission of the organization is to be achieved.
• If formulated properly, they can accomplish the following:
o They can be converted into specific action.
o They will provide direction.
o They can establish long-run priorities for the organization.
o They can facilitate management control.
• Organizational objectives are necessary in all areas that may influence the
performance and long-run survival of the organization.
• Obviously, during the strategic planning process conflicts are likely to occur
between various functional departments in the organization.
• The important point is that management must translate the organizational mission
into specific objectives that support the realization of the mission.
Organizational Strategies
• Strategy involves the choice of major directions the organization will take in
pursuing its objectives.
• As many as 70 percent of strategic plans fail because the strategies are not well
defined and, thus, could not to be implemented effectively.
• Organizational Strategies Based on Products and Markets
o One means to developing organizational strategies is to focus on the
directions the organization can take in order to grow.
o The four paths an organization can take in order to grow are market
penetration, market development, product development, and diversification
1-5
guidance it provides employees and managers working in geographically
dispersed units and on independent tasks.
o It provides a shared sense of purpose outside the various activities taking
place within the organization.
• Specific
o The mission statement must be specific to provide direction and guidelines
to management when they are choosing between alternative courses of
action.
o However, it does not provide direction for management.
Organizational Objectives
• Organizational objectives are the end point of an organization’s mission and are
what it seeks through the on-going, long-run operations of the organization.
• The organizational mission is distilled into a finer set of specific and achievable
organizational objectives that must be specific, measurable, action commitments
by which the mission of the organization is to be achieved.
• If formulated properly, they can accomplish the following:
o They can be converted into specific action.
o They will provide direction.
o They can establish long-run priorities for the organization.
o They can facilitate management control.
• Organizational objectives are necessary in all areas that may influence the
performance and long-run survival of the organization.
• Obviously, during the strategic planning process conflicts are likely to occur
between various functional departments in the organization.
• The important point is that management must translate the organizational mission
into specific objectives that support the realization of the mission.
Organizational Strategies
• Strategy involves the choice of major directions the organization will take in
pursuing its objectives.
• As many as 70 percent of strategic plans fail because the strategies are not well
defined and, thus, could not to be implemented effectively.
• Organizational Strategies Based on Products and Markets
o One means to developing organizational strategies is to focus on the
directions the organization can take in order to grow.
o The four paths an organization can take in order to grow are market
penetration, market development, product development, and diversification
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Chapter 01 - Strategic Planning and the Marketing Management Process
1-6
(Figure 1.4).
• Market Penetration Strategies
o These strategies focus primarily on increasing sales of present products to
present customers.
o Tactics used to implement a market penetration strategy might include price
reductions, advertising that stresses the many benefits of the product,
packaging the product in different-sized packages, or making it available at
more locations.
• Market Development Strategies
o An organization would seek to find new customers for its present products
through market development.
o Market development strategies involve much, much more than simply
getting the product to a new market.
• Product Development Strategies
o The new products developed would be directed primarily to present
customers.
• Diversification
o This strategy can lead the organization into entirely new and even unrelated
businesses.
o It involves seeking new products (often through acquisitions) for customers
not currently being served.
• Organizational Strategies Based on Competitive Advantage
o Michael Porter developed this model for formulating organizational strategy
that is applicable across a wide variety of industries.
o Porter suggests that firms should first analyze their industry and then
develop either a cost leadership or a strategy based on differentiation.
o Using a cost leadership strategy, a firm would focus on being the low-cost
company in its industry.
o Using a strategy based on differentiation, a firm seeks to be unique in its
industry or market segment along particular dimensions that the customers
value.
• Organizational Strategies Based on Value
o As competition increases, the concept of “customer value” has become
critical for marketers.
o It focuses not only on customer needs, but also on the question, How can an
organization create value for their customers and still achieve their
objectives?
o It is unlikely that a firm will succeed by trying to be all things to all people.
o Many firms have succeeded by choosing to deliver superior customer value
using one of three value strategies-best price, best product, or best service.
1-6
(Figure 1.4).
• Market Penetration Strategies
o These strategies focus primarily on increasing sales of present products to
present customers.
o Tactics used to implement a market penetration strategy might include price
reductions, advertising that stresses the many benefits of the product,
packaging the product in different-sized packages, or making it available at
more locations.
• Market Development Strategies
o An organization would seek to find new customers for its present products
through market development.
o Market development strategies involve much, much more than simply
getting the product to a new market.
• Product Development Strategies
o The new products developed would be directed primarily to present
customers.
• Diversification
o This strategy can lead the organization into entirely new and even unrelated
businesses.
o It involves seeking new products (often through acquisitions) for customers
not currently being served.
• Organizational Strategies Based on Competitive Advantage
o Michael Porter developed this model for formulating organizational strategy
that is applicable across a wide variety of industries.
o Porter suggests that firms should first analyze their industry and then
develop either a cost leadership or a strategy based on differentiation.
o Using a cost leadership strategy, a firm would focus on being the low-cost
company in its industry.
o Using a strategy based on differentiation, a firm seeks to be unique in its
industry or market segment along particular dimensions that the customers
value.
• Organizational Strategies Based on Value
o As competition increases, the concept of “customer value” has become
critical for marketers.
o It focuses not only on customer needs, but also on the question, How can an
organization create value for their customers and still achieve their
objectives?
o It is unlikely that a firm will succeed by trying to be all things to all people.
o Many firms have succeeded by choosing to deliver superior customer value
using one of three value strategies-best price, best product, or best service.
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Chapter 01 - Strategic Planning and the Marketing Management Process
1-7
Choosing an Appropriate Strategy
• Management should select those strategies consistent with its mission and
capitalizes on the organization's distinctive competencies that will lead to a
sustainable competitive advantage.
• A sustainable competitive advantage can be based on either the assets or skills of
the organization.
Organizational Portfolio Plan
• The final phase of strategic planning process is the formulation of the
organizational portfolio plan.
• Management must decide which businesses to build, maintain, or eliminate, or
which new businesses to add.
• The first step in this approach is to identify various divisions, product lines, etc.,
that can be considered a “business.”
• These are referred to as strategic business unit (SBUs) and they have the
following characteristics:
o They have a distinctive mission.
o They have their own competitors.
o They are a single business or collection of related businesses.
o They can be planned independently of the other businesses of the total
organization
• Thus, depending on the type of organization, an SBU could be a single product,
product line, or division; a college of business administration; or a state mental
health agency.
C. The Complete Strategic Plan
• Completion of the strategic plan (Figure 1.2) facilitates the development of marketing
plans for each product, product line, or division of the organization.
• The marketing plan serves as a subset of the strategic plan in that it allows for detailed
planning at a target market level.
IV. The Marketing Management Process
• Marketing management can be defined as “the process of planning and executing the
conception, pricing, promotion, and distribution of goods, services, and ideas to create
exchanges with target groups that satisfy customer and organizational objectives.”
1-7
Choosing an Appropriate Strategy
• Management should select those strategies consistent with its mission and
capitalizes on the organization's distinctive competencies that will lead to a
sustainable competitive advantage.
• A sustainable competitive advantage can be based on either the assets or skills of
the organization.
Organizational Portfolio Plan
• The final phase of strategic planning process is the formulation of the
organizational portfolio plan.
• Management must decide which businesses to build, maintain, or eliminate, or
which new businesses to add.
• The first step in this approach is to identify various divisions, product lines, etc.,
that can be considered a “business.”
• These are referred to as strategic business unit (SBUs) and they have the
following characteristics:
o They have a distinctive mission.
o They have their own competitors.
o They are a single business or collection of related businesses.
o They can be planned independently of the other businesses of the total
organization
• Thus, depending on the type of organization, an SBU could be a single product,
product line, or division; a college of business administration; or a state mental
health agency.
C. The Complete Strategic Plan
• Completion of the strategic plan (Figure 1.2) facilitates the development of marketing
plans for each product, product line, or division of the organization.
• The marketing plan serves as a subset of the strategic plan in that it allows for detailed
planning at a target market level.
IV. The Marketing Management Process
• Marketing management can be defined as “the process of planning and executing the
conception, pricing, promotion, and distribution of goods, services, and ideas to create
exchanges with target groups that satisfy customer and organizational objectives.”
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Chapter 01 - Strategic Planning and the Marketing Management Process
1-8
• This definition is consistent with the marketing concept.
• The marketing management process is illustrated in Figure 1.5.
A. Situation Analysis
• Situation analysis can be divided into six major areas of concern:
o The Cooperative Environment
▪ It includes all firms and individuals who have a vested interest in the
firm’s accomplishing its objectives.
▪ Parties of primary interest to the marketing executive in this environment
are:
❖ Suppliers
❖ Resellers
❖ Other departments in the firm
❖ Subdepartments and employees of the marketing department
▪ Opportunities in this environment are primarily related to methods of
increasing efficiency.
o The Competitive Environment
▪ It includes primarily other firms in the industry that rival the organization
for both resources and sales.
▪ Opportunities in this environment include such things as:
❖ Acquiring competing firms
❖ Offering demonstrably better value to consumers and attracting them
away from competitors
❖ In some cases, driving competitors out of the industry
o The Economic Environment
▪ It includes the state of the macroeconomy and changes in it which bring
about marketing opportunities and constraints.
▪ Changes in technology can provide significant threats and opportunities.
o The Social Environment
▪ It includes general cultural and social traditions, norms, and attitudes.
▪ While these values change slowly, such changes often bring about the need
for new products and services.
o The Political Environment
▪ It includes the attitudes and reactions of the general public, social and
business critics, and other organizations, such as the Better Business
Bureau.
▪ Dissatisfaction with such business and marketing practices as unsafe
products, products that waste resources and unethical sales procedures can
have adverse effects on corporation image and customer loyalty.
1-8
• This definition is consistent with the marketing concept.
• The marketing management process is illustrated in Figure 1.5.
A. Situation Analysis
• Situation analysis can be divided into six major areas of concern:
o The Cooperative Environment
▪ It includes all firms and individuals who have a vested interest in the
firm’s accomplishing its objectives.
▪ Parties of primary interest to the marketing executive in this environment
are:
❖ Suppliers
❖ Resellers
❖ Other departments in the firm
❖ Subdepartments and employees of the marketing department
▪ Opportunities in this environment are primarily related to methods of
increasing efficiency.
o The Competitive Environment
▪ It includes primarily other firms in the industry that rival the organization
for both resources and sales.
▪ Opportunities in this environment include such things as:
❖ Acquiring competing firms
❖ Offering demonstrably better value to consumers and attracting them
away from competitors
❖ In some cases, driving competitors out of the industry
o The Economic Environment
▪ It includes the state of the macroeconomy and changes in it which bring
about marketing opportunities and constraints.
▪ Changes in technology can provide significant threats and opportunities.
o The Social Environment
▪ It includes general cultural and social traditions, norms, and attitudes.
▪ While these values change slowly, such changes often bring about the need
for new products and services.
o The Political Environment
▪ It includes the attitudes and reactions of the general public, social and
business critics, and other organizations, such as the Better Business
Bureau.
▪ Dissatisfaction with such business and marketing practices as unsafe
products, products that waste resources and unethical sales procedures can
have adverse effects on corporation image and customer loyalty.
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Chapter 01 - Strategic Planning and the Marketing Management Process
1-9
o The Legal Environment
▪ It includes a host of federal, state, and local legislation directed at
protecting both business competition and consumer rights.
▪ In recent years, there has been less emphasis on creating new laws for
constraining business practices.
B. Marketing Planning
• Once an opportunity is recognized, the marketing executive must then plan an
appropriate strategy for taking advantage of the opportunity.
• This process can be viewed in terms of three interrelated tasks that include:
o Establishing marketing objectives
o Selecting the target market
o Developing the marketing mix
• Establishing Objectives
o Marketing objectives usually are derived from organizational objectives; in some
cases where the firm is totally marketing oriented, the two are identical.
o Marketing objectives are usually stated as standards of performance or as tasks
to be achieved by given dates.
• Selecting the Target Market
o The success of any marketing plan hinges on how well it can identify customer
needs and organize its resources to satisfy them profitably.
o Four important questions must be answered in selecting the groups of potential
customers:
▪ What do customers want or need?
▪ What must be done to satisfy those wants or needs?
▪ What is the size of the market?
▪ What is its growth profile?
o Present target markets and potential target markets are then ranked according to:
▪ Profitability
▪ Present and future sales volume
▪ The match between what it takes to appeal successfully to the segment and
the organization’s capabilities
• Developing the Marketing Mix
o The marketing mix is the set of controllable variables that must be managed to
satisfy the target market and achieve organizational objectives.
o These controllable variables are usually classified according to four major
decision areas:
▪ Product
▪ Price
1-9
o The Legal Environment
▪ It includes a host of federal, state, and local legislation directed at
protecting both business competition and consumer rights.
▪ In recent years, there has been less emphasis on creating new laws for
constraining business practices.
B. Marketing Planning
• Once an opportunity is recognized, the marketing executive must then plan an
appropriate strategy for taking advantage of the opportunity.
• This process can be viewed in terms of three interrelated tasks that include:
o Establishing marketing objectives
o Selecting the target market
o Developing the marketing mix
• Establishing Objectives
o Marketing objectives usually are derived from organizational objectives; in some
cases where the firm is totally marketing oriented, the two are identical.
o Marketing objectives are usually stated as standards of performance or as tasks
to be achieved by given dates.
• Selecting the Target Market
o The success of any marketing plan hinges on how well it can identify customer
needs and organize its resources to satisfy them profitably.
o Four important questions must be answered in selecting the groups of potential
customers:
▪ What do customers want or need?
▪ What must be done to satisfy those wants or needs?
▪ What is the size of the market?
▪ What is its growth profile?
o Present target markets and potential target markets are then ranked according to:
▪ Profitability
▪ Present and future sales volume
▪ The match between what it takes to appeal successfully to the segment and
the organization’s capabilities
• Developing the Marketing Mix
o The marketing mix is the set of controllable variables that must be managed to
satisfy the target market and achieve organizational objectives.
o These controllable variables are usually classified according to four major
decision areas:
▪ Product
▪ Price
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Chapter 01 - Strategic Planning and the Marketing Management Process
1-10
▪ Promotion
▪ Place
C. Implementation and Control of the Marketing Plan
• Implementing the marketing plan involves putting the plan into action and performing
marketing tasks according to the predefined schedule.
• Controlling the marketing plan involves three steps:
o The results of the implemented marketing plan are measured
o The results are compared with objectives
o Decisions are made on whether the plan is achieving objectives
D. Marketing Information Systems and Marketing Research
• Throughout the marketing management process, current, reliable, and valid
information is needed to make effective marketing decisions.
V. The Strategic Plan, the Marketing Plan, and Other Functional Area Plans
• Strategic planning is a top management responsibility.
• Marketing managers are increasingly involved in strategic analysis and planning.
• Nearly all strategic planning questions have marketing implications.
• Marketing executives are involved in the strategic planning process in at least two
important ways:
o They influence the process by providing important inputs in the form of information
and suggestions relating to customers, products, and middlemen.
o They must always be aware of what the process of strategic planning involves as well
as the results because everything they do—the marketing objectives and strategies
they develop—must be derived from the strategic plan.
A. Marketing’s Role in Cross-Functional Strategic Planning
• More and more organizations are bringing managers and employees together to
participate in cross-functional teams.
• Rather than making decisions independently, marketing managers work closely with
team members from production, finance, human resources, and other areas to devise
plans that address all concerns.
• The greatest advantage of strategic planning with a cross-functional team is the ability
of team members to consider a situation from a number of viewpoints.
• In well-managed organizations, a direct relationship exists between strategic planning
1-10
▪ Promotion
▪ Place
C. Implementation and Control of the Marketing Plan
• Implementing the marketing plan involves putting the plan into action and performing
marketing tasks according to the predefined schedule.
• Controlling the marketing plan involves three steps:
o The results of the implemented marketing plan are measured
o The results are compared with objectives
o Decisions are made on whether the plan is achieving objectives
D. Marketing Information Systems and Marketing Research
• Throughout the marketing management process, current, reliable, and valid
information is needed to make effective marketing decisions.
V. The Strategic Plan, the Marketing Plan, and Other Functional Area Plans
• Strategic planning is a top management responsibility.
• Marketing managers are increasingly involved in strategic analysis and planning.
• Nearly all strategic planning questions have marketing implications.
• Marketing executives are involved in the strategic planning process in at least two
important ways:
o They influence the process by providing important inputs in the form of information
and suggestions relating to customers, products, and middlemen.
o They must always be aware of what the process of strategic planning involves as well
as the results because everything they do—the marketing objectives and strategies
they develop—must be derived from the strategic plan.
A. Marketing’s Role in Cross-Functional Strategic Planning
• More and more organizations are bringing managers and employees together to
participate in cross-functional teams.
• Rather than making decisions independently, marketing managers work closely with
team members from production, finance, human resources, and other areas to devise
plans that address all concerns.
• The greatest advantage of strategic planning with a cross-functional team is the ability
of team members to consider a situation from a number of viewpoints.
• In well-managed organizations, a direct relationship exists between strategic planning
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Chapter 01 - Strategic Planning and the Marketing Management Process
1-11
and the planning done by managers at all levels.
• If done properly, strategic planning results in a clearly defined blueprint for
management action in all functional areas of the organization (Figure 1.7).
KEY TERMS
Distinctive competencies: Distinctive competencies are things that an organization does well—
so well in fact that they give it an advantage over similar organizations. No matter how appealing
an opportunity may be, to gain advantage over competitors, the organization must formulate
strategy based on distinctive competencies.
Diversification: An organizational strategy that seeks growth through new products (often
through acquisitions) for customers not currently being served.
Market development: An organizational strategy that seeks growth through seeking new
customers for present products.
Market penetration: An organizational strategy that seeks growth through increasing the sale of
present products to present customers.
Marketing: The activity, set of institutions, and processes for creating, communicating,
delivering, and exchanging offerings that have value for customers, clients, partners, and society
at large.
Marketing concept: The marketing concept means that an organization should seek to make a
profit by serving the needs of customer groups. Its purpose is to rivet the attention of marketing
managers on serving broad classes of customer needs (customer orientation), rather than on the
firm’s products (production orientation) or on devising methods to attract customers to current
products (selling orientation).
Marketing information systems: Throughout the marketing management process, current,
reliable, and valid information is needed to make effective marketing decisions. Providing this
information is the task of the marketing information system and marketing research.
Marketing management: Marketing management is the process of planning and executing the
conception, pricing, promotion, and distribution of goods, services, and ideas to create exchanges
with target groups that satisfy customer and organizational objectives.
Marketing mix: The marketing mix is the set of controllable variables that must be managed to
satisfy the target market and achieve organizational objectives. The controllable variables are
1-11
and the planning done by managers at all levels.
• If done properly, strategic planning results in a clearly defined blueprint for
management action in all functional areas of the organization (Figure 1.7).
KEY TERMS
Distinctive competencies: Distinctive competencies are things that an organization does well—
so well in fact that they give it an advantage over similar organizations. No matter how appealing
an opportunity may be, to gain advantage over competitors, the organization must formulate
strategy based on distinctive competencies.
Diversification: An organizational strategy that seeks growth through new products (often
through acquisitions) for customers not currently being served.
Market development: An organizational strategy that seeks growth through seeking new
customers for present products.
Market penetration: An organizational strategy that seeks growth through increasing the sale of
present products to present customers.
Marketing: The activity, set of institutions, and processes for creating, communicating,
delivering, and exchanging offerings that have value for customers, clients, partners, and society
at large.
Marketing concept: The marketing concept means that an organization should seek to make a
profit by serving the needs of customer groups. Its purpose is to rivet the attention of marketing
managers on serving broad classes of customer needs (customer orientation), rather than on the
firm’s products (production orientation) or on devising methods to attract customers to current
products (selling orientation).
Marketing information systems: Throughout the marketing management process, current,
reliable, and valid information is needed to make effective marketing decisions. Providing this
information is the task of the marketing information system and marketing research.
Marketing management: Marketing management is the process of planning and executing the
conception, pricing, promotion, and distribution of goods, services, and ideas to create exchanges
with target groups that satisfy customer and organizational objectives.
Marketing mix: The marketing mix is the set of controllable variables that must be managed to
satisfy the target market and achieve organizational objectives. The controllable variables are
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Chapter 01 - Strategic Planning and the Marketing Management Process
1-12
usually classified according to four major decision areas: product, price, promotion, and place (or
channels of distribution).
Marketing planning: The marketing planning process produces three outputs: (1) establishing
marketing objectives, (2) selecting the target market, and (3) developing the marketing mix.
Organizational mission: The mission statement, or purpose, of an organization is the
description of its reason for existence. It is the long-run vision of what the organization strives to
be, the unique aim that differentiates the organization from similar ones and the means by which
this differentiation will take place. An effective mission statement will be focused on markets
rather than products, achievable, motivating, and specific.
Organizational objectives: Organizational objectives are the end points of an organization’s
mission and are what it seeks through the ongoing, long-run operations of the organization. The
organizational mission is distilled into a finer set of specific, measurable, action commitments by
which the mission of the organization is to be achieved.
Organizational portfolio plan: This stage of the strategic plan involves the allocation of
resources across the organization’s product lines, divisions, or businesses. It involves deciding
which ones to build, maintain, or eliminate, or which to add.
Organizational strategies: Organizational strategies are the choice of the major directions the
organization will take in pursuing its objectives. There are three major approaches: (1) strategies
based on products and markets, (2) strategies based on competitive advantage, and (3) strategies
based on value.
Organizational strategies based on competitive advantage: This approach to developing
organizational strategy would develop either a cost leadership strategy which focuses on being
the lower cost company in the industry or a differentiation strategy which focuses on being
unique in the industry or market segment along dimensions that customers value.
Organizational strategies based on products and markets: An approach to developing
organizational strategies that focuses on the four paths an organization can grow: market
penetration strategies, market development strategies, product development strategies, and
diversification strategies.
Organizational strategies based on value: This approach to developing organizational strategy
seeks to succeed by choosing to deliver superior customer value using one of three value
strategies—best price, best product, or best service.
1-12
usually classified according to four major decision areas: product, price, promotion, and place (or
channels of distribution).
Marketing planning: The marketing planning process produces three outputs: (1) establishing
marketing objectives, (2) selecting the target market, and (3) developing the marketing mix.
Organizational mission: The mission statement, or purpose, of an organization is the
description of its reason for existence. It is the long-run vision of what the organization strives to
be, the unique aim that differentiates the organization from similar ones and the means by which
this differentiation will take place. An effective mission statement will be focused on markets
rather than products, achievable, motivating, and specific.
Organizational objectives: Organizational objectives are the end points of an organization’s
mission and are what it seeks through the ongoing, long-run operations of the organization. The
organizational mission is distilled into a finer set of specific, measurable, action commitments by
which the mission of the organization is to be achieved.
Organizational portfolio plan: This stage of the strategic plan involves the allocation of
resources across the organization’s product lines, divisions, or businesses. It involves deciding
which ones to build, maintain, or eliminate, or which to add.
Organizational strategies: Organizational strategies are the choice of the major directions the
organization will take in pursuing its objectives. There are three major approaches: (1) strategies
based on products and markets, (2) strategies based on competitive advantage, and (3) strategies
based on value.
Organizational strategies based on competitive advantage: This approach to developing
organizational strategy would develop either a cost leadership strategy which focuses on being
the lower cost company in the industry or a differentiation strategy which focuses on being
unique in the industry or market segment along dimensions that customers value.
Organizational strategies based on products and markets: An approach to developing
organizational strategies that focuses on the four paths an organization can grow: market
penetration strategies, market development strategies, product development strategies, and
diversification strategies.
Organizational strategies based on value: This approach to developing organizational strategy
seeks to succeed by choosing to deliver superior customer value using one of three value
strategies—best price, best product, or best service.
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Chapter 01 - Strategic Planning and the Marketing Management Process
1-13
Product development: An organizational strategy that seeks growth through developing new
products primarily for present customers.
Situation analysis: This stage of the marketing planning process involves the analysis of the
past, present, and likely future in six major areas of concern: (1) the cooperative environment;
(2) the competitive environment; (3) the economic environment; (4) the social environment; (5)
the political environment; and (6) the legal environment. Opportunities for and constraints on
marketing activities arise from these environments.
Strategic business units (SBUs): Strategic business units (SBUs) are product lines and divisions
that can be considered a “business” for the purpose of the organizational portfolio plan. An SBU
must have a distinct mission, have its own competitors, be a single business or collection of
related businesses, and be able to be planned independently of the other SBUs.
Strategic planning: Strategic planning provides a blueprint for management actions for the
entire organization. It includes all the activities that lead to the development of a clear
organizational mission, organizational objectives, and appropriate strategies to achieve the
objectives for the entire organization.
ADDITIONAL RESOURCES
Austin, Robert D., Richard L. Nolan, and Shannon O’Donnell. Harder Than I Thought, Boston:
Harvard Business Review Press, 2013.
Charan, Ram. Leadership in The Era of Economic Uncertainty. NY: McGraw-Hill, 2009.
Christensen, Clayton, M., Scott Cook, and Tandy Hall. “Marketing Malpractice: The
Cause and The Cure.” Harvard Business Review, December 2005, pp.74-75.
Dixit, Avinash, K., and Barry J. Noblebuff. The Art of Strategy. NY: W.W. Norton and
Co., 2009.
Friedman, George. The Next Decade. NY: Doubleday, 2011.
Kaplan, Robert S. and David Norton. “How To Implement a New Strategy without
Disrupting Your Organization.” Harvard Business Review, March 2006, pp. 100-109.
Levitt, Ted. On Marketing. Boston: HBS Press, 2006.
Markower, Jack. Strategies For a Green Economy. NY: McGraw-Hill, 2009.
1-13
Product development: An organizational strategy that seeks growth through developing new
products primarily for present customers.
Situation analysis: This stage of the marketing planning process involves the analysis of the
past, present, and likely future in six major areas of concern: (1) the cooperative environment;
(2) the competitive environment; (3) the economic environment; (4) the social environment; (5)
the political environment; and (6) the legal environment. Opportunities for and constraints on
marketing activities arise from these environments.
Strategic business units (SBUs): Strategic business units (SBUs) are product lines and divisions
that can be considered a “business” for the purpose of the organizational portfolio plan. An SBU
must have a distinct mission, have its own competitors, be a single business or collection of
related businesses, and be able to be planned independently of the other SBUs.
Strategic planning: Strategic planning provides a blueprint for management actions for the
entire organization. It includes all the activities that lead to the development of a clear
organizational mission, organizational objectives, and appropriate strategies to achieve the
objectives for the entire organization.
ADDITIONAL RESOURCES
Austin, Robert D., Richard L. Nolan, and Shannon O’Donnell. Harder Than I Thought, Boston:
Harvard Business Review Press, 2013.
Charan, Ram. Leadership in The Era of Economic Uncertainty. NY: McGraw-Hill, 2009.
Christensen, Clayton, M., Scott Cook, and Tandy Hall. “Marketing Malpractice: The
Cause and The Cure.” Harvard Business Review, December 2005, pp.74-75.
Dixit, Avinash, K., and Barry J. Noblebuff. The Art of Strategy. NY: W.W. Norton and
Co., 2009.
Friedman, George. The Next Decade. NY: Doubleday, 2011.
Kaplan, Robert S. and David Norton. “How To Implement a New Strategy without
Disrupting Your Organization.” Harvard Business Review, March 2006, pp. 100-109.
Levitt, Ted. On Marketing. Boston: HBS Press, 2006.
Markower, Jack. Strategies For a Green Economy. NY: McGraw-Hill, 2009.
Loading page 14...
Chapter 01 - Strategic Planning and the Marketing Management Process
1-14
O'Sullivan, Don, and Andrew W. Abdela. “Marketing Performance Measurement
Ability and Performance.” Journal of Marketing, April 2007, pp. 79-93.
Silverstein, Michael J., Abheek Singhi, Carol Liao, and David Michael. The $10 Trillion Prize:
Captivating the Newly Affluent in China and India. Boston: Harvard Business Review Press,
2012.
1-14
O'Sullivan, Don, and Andrew W. Abdela. “Marketing Performance Measurement
Ability and Performance.” Journal of Marketing, April 2007, pp. 79-93.
Silverstein, Michael J., Abheek Singhi, Carol Liao, and David Michael. The $10 Trillion Prize:
Captivating the Newly Affluent in China and India. Boston: Harvard Business Review Press,
2012.
Loading page 15...
Chapter 02 - Marketing Research: Process and Systems for Decision Making
2-1
Chapter 2
Marketing Research: Process and Systems
for Decision Making
High-Level Chapter Outline
I. The Role of Marketing Research
II. The Marketing Research Process
A. Purpose of the Research
B. Plan of the Research
Primary versus Secondary Data
Qualitative versus Quantitative Research
Company versus Contract Research
C. Performance of the Research
D. Processing of Research Data
E. Preparation of the Research Report
F. Limitations of the Research Process
III. Marketing Information Systems
Detailed Chapter Outline
I. The Role of Marketing Research
• Marketing research is the process by which information about the environment is
generated, analyzed, and interpreted for use in marketing decision making.
• Marketing research does not make decisions, but it can substantially increase the chances
that good decisions are made.
• Marketing managers should recognize that:
o Even the most carefully executed research can be fraught with errors
o Marketing research does not forecast with certainty what will happen in the future
o They should make decisions in light of their own knowledge and experience, since
no marketing research study includes all of the factors that could influence the
success of a strategy
• Although marketing research does not make decisions, it can reduce the risk associated
with managing marketing strategies.
2-1
Chapter 2
Marketing Research: Process and Systems
for Decision Making
High-Level Chapter Outline
I. The Role of Marketing Research
II. The Marketing Research Process
A. Purpose of the Research
B. Plan of the Research
Primary versus Secondary Data
Qualitative versus Quantitative Research
Company versus Contract Research
C. Performance of the Research
D. Processing of Research Data
E. Preparation of the Research Report
F. Limitations of the Research Process
III. Marketing Information Systems
Detailed Chapter Outline
I. The Role of Marketing Research
• Marketing research is the process by which information about the environment is
generated, analyzed, and interpreted for use in marketing decision making.
• Marketing research does not make decisions, but it can substantially increase the chances
that good decisions are made.
• Marketing managers should recognize that:
o Even the most carefully executed research can be fraught with errors
o Marketing research does not forecast with certainty what will happen in the future
o They should make decisions in light of their own knowledge and experience, since
no marketing research study includes all of the factors that could influence the
success of a strategy
• Although marketing research does not make decisions, it can reduce the risk associated
with managing marketing strategies.
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Chapter 02 - Marketing Research: Process and Systems for Decision Making
2-2
• It is vital for investigating the effects of various marketing strategies after they have been
implemented.
• Today, many marketing researchers work hand-in-hand with marketing managers
throughout the research process and have responsibility for making strategic
recommendations based on the research.
II. The Marketing Research Process
• Marketing research can be viewed as the systematic process for obtaining information to
aid in decision-making.
• There are many types of marketing research.
• The five Ps of the research process are (Figure 2.1):
o Purpose of the research
o Plan of the research
o Performance of the research
o Processing of research data
o Preparation of research report
A. Purpose of the Research
• The first step in the research process is to determine explicitly why the research is
needed and what it is to accomplish.
• Quite often a situation or problem is recognized as needing research, yet the nature of
the problem is not clear or well defined nor is the appropriate type of research evident.
• Managers and researchers need to discuss and clarify the current situation and develop
a clear understanding of the problem.
• Managers and researchers should agree on:
o The current situation involving the problem to be researched
o The nature of the problem
o The specific question or questions the research is designed to investigate
• This step is crucial since it influences the type of research to be conducted and the
research design.
B. Plan of the Research
• A research plan spells out the nature of the research to be conducted and includes an
explanation of such things as the sample design, measures, and analysis techniques to
be used.
• Three critical issues influence the research plan are:
o Whether primary or secondary data are needed
2-2
• It is vital for investigating the effects of various marketing strategies after they have been
implemented.
• Today, many marketing researchers work hand-in-hand with marketing managers
throughout the research process and have responsibility for making strategic
recommendations based on the research.
II. The Marketing Research Process
• Marketing research can be viewed as the systematic process for obtaining information to
aid in decision-making.
• There are many types of marketing research.
• The five Ps of the research process are (Figure 2.1):
o Purpose of the research
o Plan of the research
o Performance of the research
o Processing of research data
o Preparation of research report
A. Purpose of the Research
• The first step in the research process is to determine explicitly why the research is
needed and what it is to accomplish.
• Quite often a situation or problem is recognized as needing research, yet the nature of
the problem is not clear or well defined nor is the appropriate type of research evident.
• Managers and researchers need to discuss and clarify the current situation and develop
a clear understanding of the problem.
• Managers and researchers should agree on:
o The current situation involving the problem to be researched
o The nature of the problem
o The specific question or questions the research is designed to investigate
• This step is crucial since it influences the type of research to be conducted and the
research design.
B. Plan of the Research
• A research plan spells out the nature of the research to be conducted and includes an
explanation of such things as the sample design, measures, and analysis techniques to
be used.
• Three critical issues influence the research plan are:
o Whether primary or secondary data are needed
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Chapter 02 - Marketing Research: Process and Systems for Decision Making
2-3
o Whether qualitative or quantitative research is needed
o Whether the company will do its own research or contract with a marketing
research specialist
Primary versus Secondary Data
• Primary data are the data collected specifically for the research problem under
investigation.
• Secondary data are the data that have previously been collected for other purposes
but can be used for the problem at hand.
• Secondary information has the advantage of usually being cheaper than primary
data, although it is not always available for strategy- specific research questions.
• There are many types of secondary data that could be useful for understanding a
market and for answering a particular research question.
• Some of these data can be found from sources internal to the organization such as
sales invoices, quarterly sales reports, and marketing research done by the
organization.
• Other secondary data must be obtained from sources external to the organization
and include information such as syndicated data providers and by the government,
such as U.S. census data.
• Figure 2.2 lists the common types of information that is available in a secondary
data research.
Qualitative versus Quantitative Research
• Qualitative research typically involves face-to-face interviews with respondents
designed to develop a better understanding of what they think and feel concerning
a research topic.
• The two most common types of qualitative research are focus group and long
interviews.
o Focus groups typically involve discussions among a small number of
consumers led by an interviewer and are designed to generate insights and
ideas about products and brands.
o Long interviews are conducted by an interviewer with a single respondent
for several hours.
• Quantitative research involves more systematic procedures designed to obtain and
analyze numerical data.
• There are four common types of quantitative research in marketing are
observation, surveys, experiments, and mathematical modeling.
o Observational research involves watching people and recording relevant
2-3
o Whether qualitative or quantitative research is needed
o Whether the company will do its own research or contract with a marketing
research specialist
Primary versus Secondary Data
• Primary data are the data collected specifically for the research problem under
investigation.
• Secondary data are the data that have previously been collected for other purposes
but can be used for the problem at hand.
• Secondary information has the advantage of usually being cheaper than primary
data, although it is not always available for strategy- specific research questions.
• There are many types of secondary data that could be useful for understanding a
market and for answering a particular research question.
• Some of these data can be found from sources internal to the organization such as
sales invoices, quarterly sales reports, and marketing research done by the
organization.
• Other secondary data must be obtained from sources external to the organization
and include information such as syndicated data providers and by the government,
such as U.S. census data.
• Figure 2.2 lists the common types of information that is available in a secondary
data research.
Qualitative versus Quantitative Research
• Qualitative research typically involves face-to-face interviews with respondents
designed to develop a better understanding of what they think and feel concerning
a research topic.
• The two most common types of qualitative research are focus group and long
interviews.
o Focus groups typically involve discussions among a small number of
consumers led by an interviewer and are designed to generate insights and
ideas about products and brands.
o Long interviews are conducted by an interviewer with a single respondent
for several hours.
• Quantitative research involves more systematic procedures designed to obtain and
analyze numerical data.
• There are four common types of quantitative research in marketing are
observation, surveys, experiments, and mathematical modeling.
o Observational research involves watching people and recording relevant
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Chapter 02 - Marketing Research: Process and Systems for Decision Making
2-4
facts and behaviors.
o Survey research involves the collection of data by means of a questionnaire
either by mail, phone, online or in person.
o Experimental research involves manipulating one variable and examining
its impact on other variables.
o Mathematical modeling research often involves secondary data. It is useful
because it provides an efficient way to study problems with extremely large
secondary data sets.
Company versus Contract Research
• Most large consumer goods companies have marketing research departments that
can perform a variety of types of research.
• In addition many marketing research firms, advertising agencies, and consulting
companies do marketing research on a contract basis.
C. Performance of the Research
• Performance of the research involves preparing for data collection and actually
collecting them.
• In terms of actual data collection, a cardinal rule is to obtain and record the maximal
amount of useful information, subject to the constraints of time, money, and
respondent privacy.
• Failure to obtain and record data clearly can obviously lead to a poor research study,
while failure to consider the rights of respondents raises both practical and ethical
problems.
• Thus, both the objectives and constraints of data collection must be closely monitored.
D. Processing of Research Data
• Processing research data includes the preparation of data for analysis and the actual
analysis of them.
• The appropriate analysis techniques for collected data depend on the nature of the
research questions and the design of the research.
• Qualitative research data consist of interview records that are content analyzed for
ideas or themes.
• Quantitative research data may be analyzed in a variety of ways depending on the
objectives of the research.
• A critical part of this stage is interpreting and assessing the research results.
• Marketing researchers should always double-check their analysis and avoid
2-4
facts and behaviors.
o Survey research involves the collection of data by means of a questionnaire
either by mail, phone, online or in person.
o Experimental research involves manipulating one variable and examining
its impact on other variables.
o Mathematical modeling research often involves secondary data. It is useful
because it provides an efficient way to study problems with extremely large
secondary data sets.
Company versus Contract Research
• Most large consumer goods companies have marketing research departments that
can perform a variety of types of research.
• In addition many marketing research firms, advertising agencies, and consulting
companies do marketing research on a contract basis.
C. Performance of the Research
• Performance of the research involves preparing for data collection and actually
collecting them.
• In terms of actual data collection, a cardinal rule is to obtain and record the maximal
amount of useful information, subject to the constraints of time, money, and
respondent privacy.
• Failure to obtain and record data clearly can obviously lead to a poor research study,
while failure to consider the rights of respondents raises both practical and ethical
problems.
• Thus, both the objectives and constraints of data collection must be closely monitored.
D. Processing of Research Data
• Processing research data includes the preparation of data for analysis and the actual
analysis of them.
• The appropriate analysis techniques for collected data depend on the nature of the
research questions and the design of the research.
• Qualitative research data consist of interview records that are content analyzed for
ideas or themes.
• Quantitative research data may be analyzed in a variety of ways depending on the
objectives of the research.
• A critical part of this stage is interpreting and assessing the research results.
• Marketing researchers should always double-check their analysis and avoid
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Chapter 02 - Marketing Research: Process and Systems for Decision Making
2-5
overstating the strength of their findings.
E. Preparation of the Research Report
• The research report is a complete statement of everything in a research project and
includes a write-up of each of the previous stages as well as the strategic
recommendations from the research.
• Figure 2.4 lists the types of questions marketing researchers and managers should
discuss prior to submitting the final research report.
• Research reports should be clear and unambiguous with respect to what was done and
what recommendations are made.
• Researchers should work closely with managers to ensure that the study and its
limitations are fully understood.
F. Limitations of the Research Process
• Many problems and difficulties must be overcome if a research study is to provide
valuable information for decision making.
• The major goal of most test marketing is to measure new product sales on a limited
basis where competitive retaliation and other factors are allowed to operate freely.
• Problems that could invalidate test marketing study results are listed below.
o Test market areas are not representatives of the market in general in terms of
population, characteristics, competition, and distribution outlets.
o Sample size and design are incorrectly formulated because of budget constraints.
o Pretest measurements of competitive brand sales are not made or are inaccurate,
limiting the meaningfulness of market share estimates.
o Test scores do not give complete support to the study, such that certain package
sizes may not be carried or prices may not be held constant during the test
period.
o Test-market products are advertised or promoted beyond a profitable level for
the market in general.
o The effects of factors influence sales, such as the sales force, season, weather
conditions, competitive retaliation, shelf space, and so forth, are ignored in the
research.
o The test-market period is too short to determine whether the product will be
repurchased by customers.
• Careful research planning, coordination, implementation, and control can help reduce
such problems and increase the value of research for decision making.
III. Marketing Information Systems
2-5
overstating the strength of their findings.
E. Preparation of the Research Report
• The research report is a complete statement of everything in a research project and
includes a write-up of each of the previous stages as well as the strategic
recommendations from the research.
• Figure 2.4 lists the types of questions marketing researchers and managers should
discuss prior to submitting the final research report.
• Research reports should be clear and unambiguous with respect to what was done and
what recommendations are made.
• Researchers should work closely with managers to ensure that the study and its
limitations are fully understood.
F. Limitations of the Research Process
• Many problems and difficulties must be overcome if a research study is to provide
valuable information for decision making.
• The major goal of most test marketing is to measure new product sales on a limited
basis where competitive retaliation and other factors are allowed to operate freely.
• Problems that could invalidate test marketing study results are listed below.
o Test market areas are not representatives of the market in general in terms of
population, characteristics, competition, and distribution outlets.
o Sample size and design are incorrectly formulated because of budget constraints.
o Pretest measurements of competitive brand sales are not made or are inaccurate,
limiting the meaningfulness of market share estimates.
o Test scores do not give complete support to the study, such that certain package
sizes may not be carried or prices may not be held constant during the test
period.
o Test-market products are advertised or promoted beyond a profitable level for
the market in general.
o The effects of factors influence sales, such as the sales force, season, weather
conditions, competitive retaliation, shelf space, and so forth, are ignored in the
research.
o The test-market period is too short to determine whether the product will be
repurchased by customers.
• Careful research planning, coordination, implementation, and control can help reduce
such problems and increase the value of research for decision making.
III. Marketing Information Systems
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Chapter 02 - Marketing Research: Process and Systems for Decision Making
2-6
• Most marketers use computer-based systems to help them gather, sort, store, and distribute
information for marketing decisions.
• A popular form of marketing information system is the marketing decision support system,
which is a coordinated collection of data, tools, and techniques involving both computer
hardware and software by which marketers gather and interpret relevant information for
decision making.
• These systems require three types of software:
o Database management software for sorting and retrieving data from external and
internal sources.
o Model base management software for manipulating data in ways that are useful for
marketing decision making.
o A dialog system that permits marketers to explore data base and use models to
produce information to address their decision-making needs.
• Marketing decision support systems are designed to handle information from both internal
and external sources.
• External information is gathered from outside the organization and concerns changes in the
environment that could influence marketing strategies.
KEY TERMS
Experimental research: Experimental research involves manipulating one variable and
examining its impact on other variables.
Focus groups: A type of qualitative research that typically involves discussions among a small
number of consumers led by an interviewer and designed to generate insights and ideas about
products and brands.
Long interviews: A type of qualitative research conducted by an interviewer with a single
respondent for several hours and designed to find out such things as the meanings various
products and brands have for the person or how a product influences the person's life.
Marketing research: Marketing research is the process by which information about the
environment is generated, analyzed, and interpreted for use in marketing decision making. Most
often consumers or organizational buyers are the subject of the research.
Mathematical modeling: Mathematical modeling involves developing equations to model
relationships among variables to investigate the impact of various strategies and tactics on sales
and brand choices.
2-6
• Most marketers use computer-based systems to help them gather, sort, store, and distribute
information for marketing decisions.
• A popular form of marketing information system is the marketing decision support system,
which is a coordinated collection of data, tools, and techniques involving both computer
hardware and software by which marketers gather and interpret relevant information for
decision making.
• These systems require three types of software:
o Database management software for sorting and retrieving data from external and
internal sources.
o Model base management software for manipulating data in ways that are useful for
marketing decision making.
o A dialog system that permits marketers to explore data base and use models to
produce information to address their decision-making needs.
• Marketing decision support systems are designed to handle information from both internal
and external sources.
• External information is gathered from outside the organization and concerns changes in the
environment that could influence marketing strategies.
KEY TERMS
Experimental research: Experimental research involves manipulating one variable and
examining its impact on other variables.
Focus groups: A type of qualitative research that typically involves discussions among a small
number of consumers led by an interviewer and designed to generate insights and ideas about
products and brands.
Long interviews: A type of qualitative research conducted by an interviewer with a single
respondent for several hours and designed to find out such things as the meanings various
products and brands have for the person or how a product influences the person's life.
Marketing research: Marketing research is the process by which information about the
environment is generated, analyzed, and interpreted for use in marketing decision making. Most
often consumers or organizational buyers are the subject of the research.
Mathematical modeling: Mathematical modeling involves developing equations to model
relationships among variables to investigate the impact of various strategies and tactics on sales
and brand choices.
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Chapter 02 - Marketing Research: Process and Systems for Decision Making
2-7
Observational research: Observational research involves watching people and recording
relevant facts and behaviors.
Primary data: Primary data are data collected specifically for the research problem under
investigation.
Qualitative research: Qualitative research typically involves face-to-face interviews with
respondents designed to develop a better understanding of what they think and feel concerning a
research topic, such as a brand name, a product, a package, or an advertisement.
Quantitative research: Quantitative research involves more systematic procedures designed to
obtain and analyze numerical data.
Secondary data: Secondary data are those that have previously been collected for other
purposes but can be used for the problem at hand.
Survey research: Survey research involves the collection of data by means of a questionnaire
either by mail, phone, or in person.
Test marketing: The major goal of most test marketing is to measure new product sales on a
limited basis where competitive retaliation and other factors are allowed to operate freely. In this
way, future sales potential can often be estimated reasonably well.
ADDITIONAL RESOURCES
Burns, Alvin C. and Ronald Bush. Marketing Research, 7th ed. Upper Saddle River, NJ:
Prentice-Hall, 2014.
Churchill, Gilbert A., Jr.; Tom J. Brown; and Tracy A. Suter. Basic Marketing Research. 8th ed.
Mason, OH: Thomson South-Western, 2014.
Hair, Joseph F., Jr., Robert P. Bush, and David J. Ortinau. Marketing Research. 4th ed. Burr
Ridge, IL: McGraw Hill/Irwin, 2009.
Iacobucci Dawn, and Gilbert A. Churchill, Jr. Marketing Research: Methodological
Foundations. 10th ed. Mason, OH: Thomson South-Western, 2010.
Molhatra, Naresh K. Marketing Research. 6th ed. Upper Saddle River, NJ: Pearson Education,
2010.
2-7
Observational research: Observational research involves watching people and recording
relevant facts and behaviors.
Primary data: Primary data are data collected specifically for the research problem under
investigation.
Qualitative research: Qualitative research typically involves face-to-face interviews with
respondents designed to develop a better understanding of what they think and feel concerning a
research topic, such as a brand name, a product, a package, or an advertisement.
Quantitative research: Quantitative research involves more systematic procedures designed to
obtain and analyze numerical data.
Secondary data: Secondary data are those that have previously been collected for other
purposes but can be used for the problem at hand.
Survey research: Survey research involves the collection of data by means of a questionnaire
either by mail, phone, or in person.
Test marketing: The major goal of most test marketing is to measure new product sales on a
limited basis where competitive retaliation and other factors are allowed to operate freely. In this
way, future sales potential can often be estimated reasonably well.
ADDITIONAL RESOURCES
Burns, Alvin C. and Ronald Bush. Marketing Research, 7th ed. Upper Saddle River, NJ:
Prentice-Hall, 2014.
Churchill, Gilbert A., Jr.; Tom J. Brown; and Tracy A. Suter. Basic Marketing Research. 8th ed.
Mason, OH: Thomson South-Western, 2014.
Hair, Joseph F., Jr., Robert P. Bush, and David J. Ortinau. Marketing Research. 4th ed. Burr
Ridge, IL: McGraw Hill/Irwin, 2009.
Iacobucci Dawn, and Gilbert A. Churchill, Jr. Marketing Research: Methodological
Foundations. 10th ed. Mason, OH: Thomson South-Western, 2010.
Molhatra, Naresh K. Marketing Research. 6th ed. Upper Saddle River, NJ: Pearson Education,
2010.
Loading page 22...
Chapter 02 - Marketing Research: Process and Systems for Decision Making
2-8
Zikmund William G., and Barry J. Babin. Essentials of Marketing Research. 5th ed. Mason, OH:
Thomson South-Western, 2013.
2-8
Zikmund William G., and Barry J. Babin. Essentials of Marketing Research. 5th ed. Mason, OH:
Thomson South-Western, 2013.
Loading page 23...
Chapter 03 - Consumer Behavior
3-1
Chapter 3
Consumer Behavior
High-Level Chapter Outline
I. Social Influences on Consumer Decision Making
A. Culture and Subculture
B. Social Class
C. Reference Groups and Families
II. Marketing Influences on Consumer Decision Making
A. Product Influences
B. Price Influences
C. Promotion Influences
D. Place Influences
III. Situational Influences on Consumer Decision Making
IV. Psychological Influences on Consumer Decision Making
A. Product Knowledge
B. Product Involvement
V. Consumer Decision Making
A. Need Recognition
B. Alternative Search
C. Alternative Evaluation
D. Purchase Decision
E. Postpurchase Evaluation
Detailed Chapter Outline
I. Social Influences on Consumer Decision Making
• Behavioral scientists have become increasingly aware of the powerful effects of the social
environment and personal interactions on human behavior.
• In terms of consumer behavior, culture, social class, and reference group influences have
been related to purchase and consumption decisions.
• These influences can have both direct and indirect effects on the buying process.
A. Culture and Subculture
3-1
Chapter 3
Consumer Behavior
High-Level Chapter Outline
I. Social Influences on Consumer Decision Making
A. Culture and Subculture
B. Social Class
C. Reference Groups and Families
II. Marketing Influences on Consumer Decision Making
A. Product Influences
B. Price Influences
C. Promotion Influences
D. Place Influences
III. Situational Influences on Consumer Decision Making
IV. Psychological Influences on Consumer Decision Making
A. Product Knowledge
B. Product Involvement
V. Consumer Decision Making
A. Need Recognition
B. Alternative Search
C. Alternative Evaluation
D. Purchase Decision
E. Postpurchase Evaluation
Detailed Chapter Outline
I. Social Influences on Consumer Decision Making
• Behavioral scientists have become increasingly aware of the powerful effects of the social
environment and personal interactions on human behavior.
• In terms of consumer behavior, culture, social class, and reference group influences have
been related to purchase and consumption decisions.
• These influences can have both direct and indirect effects on the buying process.
A. Culture and Subculture
Loading page 24...
Chapter 03 - Consumer Behavior
3-2
• Culture is one of the most basic influences on an individual’s needs, wants, and
behavior.
• Cultural antecedents affect everyday behavior, and there is empirical support for the
notion that culture is a determinant of certain aspects of consumer behavior.
• Cultural values are transmitted through three basic organizations: the family, religious
organizations, and educational institutions.
• Marketing managers should adapt the marketing mix to cultural values and constantly
monitor value changes and differences in both domestic and global markets.
• In large nations such as the United States, the population is bound to lose a significant
amount of its homogeneity, and thus subcultures arise.
• Subcultures are based on such things as geographic areas, religion, nationalities, ethnic
groups, and age.
• Many subcultural barriers are decreasing because of mass communication, mass
transit, and a decline in the influence of religious values.
• However, age groups, such as the teen market, baby boomers, and the mature market,
have become increasingly important for marketing strategy.
• Marketing Insight 3–1 provides a summary of American cultural values.
B. Social Class
• Social classes develop on the basis of such things as wealth, skill, and power.
• The single best indicator of social class is occupation.
• For marketing purposes, four different social classes have been identified:
o Upper Americans comprise 14 percent of the population and are differentiated
mainly by having high incomes.
▪ This class remains the group in which quality merchandise is most prized
and prestige brands are commonly sought.
o The middle class comprises 34 percent of the population, and these consumers
want to do the right and buy what is popular.
▪ They are concerned with fashion and buying what experts in the media
recommend.
o The working class comprises 38 percent of the population, people who are
“family folk” who depend heavily on relatives for economic and emotional
support.
▪ The emphasis on family ties is only one sign of how much more limited
and different working-class horizons are socially, psychologically, and
geographically compared to those of the middle class.
o Lower Americans comprise 16 percent of the population and are as diverse in
values and consumption goals as are other social levels.
3-2
• Culture is one of the most basic influences on an individual’s needs, wants, and
behavior.
• Cultural antecedents affect everyday behavior, and there is empirical support for the
notion that culture is a determinant of certain aspects of consumer behavior.
• Cultural values are transmitted through three basic organizations: the family, religious
organizations, and educational institutions.
• Marketing managers should adapt the marketing mix to cultural values and constantly
monitor value changes and differences in both domestic and global markets.
• In large nations such as the United States, the population is bound to lose a significant
amount of its homogeneity, and thus subcultures arise.
• Subcultures are based on such things as geographic areas, religion, nationalities, ethnic
groups, and age.
• Many subcultural barriers are decreasing because of mass communication, mass
transit, and a decline in the influence of religious values.
• However, age groups, such as the teen market, baby boomers, and the mature market,
have become increasingly important for marketing strategy.
• Marketing Insight 3–1 provides a summary of American cultural values.
B. Social Class
• Social classes develop on the basis of such things as wealth, skill, and power.
• The single best indicator of social class is occupation.
• For marketing purposes, four different social classes have been identified:
o Upper Americans comprise 14 percent of the population and are differentiated
mainly by having high incomes.
▪ This class remains the group in which quality merchandise is most prized
and prestige brands are commonly sought.
o The middle class comprises 34 percent of the population, and these consumers
want to do the right and buy what is popular.
▪ They are concerned with fashion and buying what experts in the media
recommend.
o The working class comprises 38 percent of the population, people who are
“family folk” who depend heavily on relatives for economic and emotional
support.
▪ The emphasis on family ties is only one sign of how much more limited
and different working-class horizons are socially, psychologically, and
geographically compared to those of the middle class.
o Lower Americans comprise 16 percent of the population and are as diverse in
values and consumption goals as are other social levels.
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Chapter 03 - Consumer Behavior
3-3
▪ Some members of this group are homeless and penniless although most
work part-time or full-time jobs at low wages.
▪ The primary demands of this group are food, clothing and other staples.
C. Reference Groups and Families
• Groups that an individual looks to (uses as a reference) when forming attitudes and
opinions are described as reference groups.
• Primary reference groups include family and close friends, while secondary reference
groups include fraternal organizations and professional associations.
• Secondary reference groups include fraternal organizations and professional
associations.
• A person normally has several reference groups or reference individuals for various
subjects or different decisions.
• The family is generally recognized to be an important reference group, and it has been
suggested that the household, rather than the individual, is the relevant unit for
studying consumer behavior.
• It is important for marketing managers to determine not only who makes the actual
purchase but also who makes the decision to purchase.
• It has been recognized that the needs, income, assets, debts, and expenditure patterns
change over the course of what is called the family life cycle.
• The family life cycle can be divided into a number of stages ranging from single, to
married, to married with children of different age groups, to older couples, to solitary
survivors.
• The lifecycle is a useful way of classifying and segmenting individuals and families
because it combines trends in earning power with demands placed on income.
II. Marketing Influences on Consumer Decision Making
• Marketing strategies are often designed to influence consumer decision making and lead to
profitable exchanges.
• Each element of the marketing mix (product, price, promotion, and place) can affect
consumers in various ways.
A. Product Influences
• Many attributes of a company’s product, including brand name, quality, newness, and
complexity, can affect consumer behavior.
• One of the key tasks of marketers is to differentiate their products from those of
competitors and create consumer perceptions that the product is worth purchasing.
3-3
▪ Some members of this group are homeless and penniless although most
work part-time or full-time jobs at low wages.
▪ The primary demands of this group are food, clothing and other staples.
C. Reference Groups and Families
• Groups that an individual looks to (uses as a reference) when forming attitudes and
opinions are described as reference groups.
• Primary reference groups include family and close friends, while secondary reference
groups include fraternal organizations and professional associations.
• Secondary reference groups include fraternal organizations and professional
associations.
• A person normally has several reference groups or reference individuals for various
subjects or different decisions.
• The family is generally recognized to be an important reference group, and it has been
suggested that the household, rather than the individual, is the relevant unit for
studying consumer behavior.
• It is important for marketing managers to determine not only who makes the actual
purchase but also who makes the decision to purchase.
• It has been recognized that the needs, income, assets, debts, and expenditure patterns
change over the course of what is called the family life cycle.
• The family life cycle can be divided into a number of stages ranging from single, to
married, to married with children of different age groups, to older couples, to solitary
survivors.
• The lifecycle is a useful way of classifying and segmenting individuals and families
because it combines trends in earning power with demands placed on income.
II. Marketing Influences on Consumer Decision Making
• Marketing strategies are often designed to influence consumer decision making and lead to
profitable exchanges.
• Each element of the marketing mix (product, price, promotion, and place) can affect
consumers in various ways.
A. Product Influences
• Many attributes of a company’s product, including brand name, quality, newness, and
complexity, can affect consumer behavior.
• One of the key tasks of marketers is to differentiate their products from those of
competitors and create consumer perceptions that the product is worth purchasing.
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Chapter 03 - Consumer Behavior
3-4
B. Price Influences
• The price of products and services often influences whether consumers will purchase
them at all, and, if so, which competitive offering is selected.
• For some offerings, higher prices may not deter purchase because consumers believe
that the products or services are higher quality or are more prestigious.
• Many of today’s value-conscious consumers may buy products more on the basis of
price than other attributes.
C. Promotion Influences
• Advertising, sales, promotions, salespeople, and publicity can influence what
consumers think about products, what emotions they experience in purchasing and
using them, and what behaviors they perform, including shopping in particular stores
and purchasing specific brands.
• Since consumers receive so much information from marketers and screen out a good
deal of it, it is important for marketers to devise communications that:
o Offer consistent messages about their products
o Are placed in media that consumers in the target market are likely to use
D. Place Influences
• The marketer’s strategy for distributing products can influence consumers in several
ways:
o Products that are convenient to buy in a variety of stores increase the chances of
consumers finding and buying them. When consumers are seeking low-
involvement products, they are unlikely to engage in extensive search, so ready
availability is important.
o Products sold in exclusive outlets may be perceived by consumers as having
higher quality.
o Offering products by nonstore methods, such as on the Internet or in catalogs,
can create consumer perceptions that the products are innovative, exclusive, or
tailored for specific target markets.
III. Situational Influences on Consumer Decision Making
• Situational influences can be defined as all those factors particular to a time and place that
have a demonstrable and systematic effect on current behavior.
• These influences may be perceived either consciously or subconsciously and may have
3-4
B. Price Influences
• The price of products and services often influences whether consumers will purchase
them at all, and, if so, which competitive offering is selected.
• For some offerings, higher prices may not deter purchase because consumers believe
that the products or services are higher quality or are more prestigious.
• Many of today’s value-conscious consumers may buy products more on the basis of
price than other attributes.
C. Promotion Influences
• Advertising, sales, promotions, salespeople, and publicity can influence what
consumers think about products, what emotions they experience in purchasing and
using them, and what behaviors they perform, including shopping in particular stores
and purchasing specific brands.
• Since consumers receive so much information from marketers and screen out a good
deal of it, it is important for marketers to devise communications that:
o Offer consistent messages about their products
o Are placed in media that consumers in the target market are likely to use
D. Place Influences
• The marketer’s strategy for distributing products can influence consumers in several
ways:
o Products that are convenient to buy in a variety of stores increase the chances of
consumers finding and buying them. When consumers are seeking low-
involvement products, they are unlikely to engage in extensive search, so ready
availability is important.
o Products sold in exclusive outlets may be perceived by consumers as having
higher quality.
o Offering products by nonstore methods, such as on the Internet or in catalogs,
can create consumer perceptions that the products are innovative, exclusive, or
tailored for specific target markets.
III. Situational Influences on Consumer Decision Making
• Situational influences can be defined as all those factors particular to a time and place that
have a demonstrable and systematic effect on current behavior.
• These influences may be perceived either consciously or subconsciously and may have
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Chapter 03 - Consumer Behavior
3-5
considerable effect on product and brand choice.
o Physical features are the most readily apparent features of a situation. These features
include geographical and institutional location, decor, sounds, aromas, lighting,
weather, and visible configurations of merchandise or other materials.
o Social features provide additional depth to a description of a situation. These include
other persons present, their characteristics, their apparent roles and interpersonal
interactions.
o Time is a dimension of situations that may be specified in units ranging from time of
day to season of the year. Time also may be measured relative to some past or future
event for the situational participant.
o Task features of a situation include an intent or requirement to select, shop for, or
obtain information about a general or specific purchase. Task may reflect different
buyer and user roles anticipated by the individual.
o Current conditions make up final features that characterize a situation. These are
momentary moods (such as acute anxiety, pleasantness, hostility, and excitation) or
momentary conditions (such as cash on hand, fatigue, and illness) rather than chronic
individual traits.
IV. Psychological Influences on Consumer Decision Making
• Information from group, marketing, and situational influences affect what consumers think
and feel about particular products and brands.
• However, a number of psychological factors influence how this information is interpreted
and used and how it affects the consumer decision-making process.
• Two of the most important psychological factors are product knowledge and product
involvement.
A. Product Knowledge
• Product knowledge refers to the amount of information a consumer has stored in her or
his memory about particular product classes, product forms, models, and ways to
purchase them.
• Group marketing and situational influences determine the initial level of product
knowledge as well as changes in it.
• The initial level of product knowledge may influence how much information is sought
when deciding to make a purchase.
• Product knowledge influences how quickly a consumer goes through the decision-
making process.
B. Product Involvement
3-5
considerable effect on product and brand choice.
o Physical features are the most readily apparent features of a situation. These features
include geographical and institutional location, decor, sounds, aromas, lighting,
weather, and visible configurations of merchandise or other materials.
o Social features provide additional depth to a description of a situation. These include
other persons present, their characteristics, their apparent roles and interpersonal
interactions.
o Time is a dimension of situations that may be specified in units ranging from time of
day to season of the year. Time also may be measured relative to some past or future
event for the situational participant.
o Task features of a situation include an intent or requirement to select, shop for, or
obtain information about a general or specific purchase. Task may reflect different
buyer and user roles anticipated by the individual.
o Current conditions make up final features that characterize a situation. These are
momentary moods (such as acute anxiety, pleasantness, hostility, and excitation) or
momentary conditions (such as cash on hand, fatigue, and illness) rather than chronic
individual traits.
IV. Psychological Influences on Consumer Decision Making
• Information from group, marketing, and situational influences affect what consumers think
and feel about particular products and brands.
• However, a number of psychological factors influence how this information is interpreted
and used and how it affects the consumer decision-making process.
• Two of the most important psychological factors are product knowledge and product
involvement.
A. Product Knowledge
• Product knowledge refers to the amount of information a consumer has stored in her or
his memory about particular product classes, product forms, models, and ways to
purchase them.
• Group marketing and situational influences determine the initial level of product
knowledge as well as changes in it.
• The initial level of product knowledge may influence how much information is sought
when deciding to make a purchase.
• Product knowledge influences how quickly a consumer goes through the decision-
making process.
B. Product Involvement
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Chapter 03 - Consumer Behavior
3-6
• Product involvement refers to a consumer’s perception of the importance or personal
relevance of an item.
• Product involvement influences consumer decision making in two ways:
o If the purchase is for a high-involvement product, consumers are likely to
develop a high degree of product knowledge so that they can be confident that
the item they purchase is just right for them.
o A high degree of product involvement encourages extensive decision making by
consumers, which likely increases the time it takes to go through the decision-
making process.
V. Consumer Decision Making
• Consumers recognize a need for a product, search for information about alternatives to
meet the need, evaluate the information, make purchases, and evaluate the decision after
the purchase. The process by which consumers make decisions to purchase various
products and brands is shown in Figure 3.2.
• There are three types of decision making, which vary in terms of how complex or
expensive a product is and how involved a consumer is in purchasing it.
o Extensive decision making requires the most time and effort since the purchase
involves a highly complex or expensive product that is important to the consumer.
o Limited decision making is more moderate but still involves some time and effort
searching for and comparing alternatives.
o Routine decision making is the most common type and the way consumers purchase
most packaged goods.
A. Need Recognition
• The starting point in the buying process is the consumer’s recognition of an unsatisfied
need.
• Any number of either internal or external stimuli may activate needs or wants and
recognition of them.
• Internal stimuli are such things as feeling hungry and wanting some food, feeling a
headache coming on and wanting some Excedrin, or feeling bored and looking for a
movie to go to.
• External stimuli are such things as seeing a McDonald’s sign and then feeling hungry
or seeing a sale sign for winter parkas and remembering that last year’s coat is worn
out.
• A well-known classification of needs was developed many years ago by Abraham
Maslow and includes five types.
3-6
• Product involvement refers to a consumer’s perception of the importance or personal
relevance of an item.
• Product involvement influences consumer decision making in two ways:
o If the purchase is for a high-involvement product, consumers are likely to
develop a high degree of product knowledge so that they can be confident that
the item they purchase is just right for them.
o A high degree of product involvement encourages extensive decision making by
consumers, which likely increases the time it takes to go through the decision-
making process.
V. Consumer Decision Making
• Consumers recognize a need for a product, search for information about alternatives to
meet the need, evaluate the information, make purchases, and evaluate the decision after
the purchase. The process by which consumers make decisions to purchase various
products and brands is shown in Figure 3.2.
• There are three types of decision making, which vary in terms of how complex or
expensive a product is and how involved a consumer is in purchasing it.
o Extensive decision making requires the most time and effort since the purchase
involves a highly complex or expensive product that is important to the consumer.
o Limited decision making is more moderate but still involves some time and effort
searching for and comparing alternatives.
o Routine decision making is the most common type and the way consumers purchase
most packaged goods.
A. Need Recognition
• The starting point in the buying process is the consumer’s recognition of an unsatisfied
need.
• Any number of either internal or external stimuli may activate needs or wants and
recognition of them.
• Internal stimuli are such things as feeling hungry and wanting some food, feeling a
headache coming on and wanting some Excedrin, or feeling bored and looking for a
movie to go to.
• External stimuli are such things as seeing a McDonald’s sign and then feeling hungry
or seeing a sale sign for winter parkas and remembering that last year’s coat is worn
out.
• A well-known classification of needs was developed many years ago by Abraham
Maslow and includes five types.
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Chapter 03 - Consumer Behavior
3-7
• Maslow’s view is that lower-level needs, starting with physiological and safety needs,
must be attended to before higher-level needs can be satisfied.
• Maslow’s hierarchy is described below:
o Physiological needs—this category consists of primary needs of the human
body. Physiological needs will dominate when all needs are unsatisfied.
o Safety needs—these needs consist of such things as protection from physical
harm, ill health, and economic disaster and avoidance of the unexpected.
o Belongingness and love needs—these needs are related to the social and
gregarious nature of humans and the need for companionship.
o Esteem needs—these needs consist of both the need for awareness of importance
to others (self-esteem) and actual esteem from others. Satisfaction of these needs
leads to feelings of self-confidence and prestige.
o Self-actualization needs—these can be defined as the desire to become
everything one is capable of becoming. This means that the individual will fully
realize her or his talents and capabilities.
B. Alternative Search
• Once a need is recognized, the individual then searches for alternatives for satisfying
the need.
• The individual can collect information from five basic sources for a particular
purchase decision:
o Internal sources: For many purchases, consumers have had previous experience
dealing with particular needs and wants. Thus, consumers can usually “search”
through their memories for stored information and experience dealing with need
satisfying alternatives. This is quite common for routine or habitual purchases.
o Group sources: A common source of information for purchase decision comes
from communication with other people. Group sources are often the most
powerful influence on purchase decisions.
o Marketing sources: Marketing sources include factors such as advertising,
salespeople, dealers, packaging, and displays. It provides a major means by
which consumers learn about purchase options.
o Public sources: Public sources of information include such things as product
ratings in Consumer Reports; buyer reviews on websites like Amazon.com; and
articles written about the product in newspapers, in magazines, on independent
blogs, and on other websites.
o Experimental sources: Experimental sources refer to handling, examining, and
perhaps trying on or using a product.
• Information processing is viewed as a four-step process in which the individual is:
o Exposed to information
3-7
• Maslow’s view is that lower-level needs, starting with physiological and safety needs,
must be attended to before higher-level needs can be satisfied.
• Maslow’s hierarchy is described below:
o Physiological needs—this category consists of primary needs of the human
body. Physiological needs will dominate when all needs are unsatisfied.
o Safety needs—these needs consist of such things as protection from physical
harm, ill health, and economic disaster and avoidance of the unexpected.
o Belongingness and love needs—these needs are related to the social and
gregarious nature of humans and the need for companionship.
o Esteem needs—these needs consist of both the need for awareness of importance
to others (self-esteem) and actual esteem from others. Satisfaction of these needs
leads to feelings of self-confidence and prestige.
o Self-actualization needs—these can be defined as the desire to become
everything one is capable of becoming. This means that the individual will fully
realize her or his talents and capabilities.
B. Alternative Search
• Once a need is recognized, the individual then searches for alternatives for satisfying
the need.
• The individual can collect information from five basic sources for a particular
purchase decision:
o Internal sources: For many purchases, consumers have had previous experience
dealing with particular needs and wants. Thus, consumers can usually “search”
through their memories for stored information and experience dealing with need
satisfying alternatives. This is quite common for routine or habitual purchases.
o Group sources: A common source of information for purchase decision comes
from communication with other people. Group sources are often the most
powerful influence on purchase decisions.
o Marketing sources: Marketing sources include factors such as advertising,
salespeople, dealers, packaging, and displays. It provides a major means by
which consumers learn about purchase options.
o Public sources: Public sources of information include such things as product
ratings in Consumer Reports; buyer reviews on websites like Amazon.com; and
articles written about the product in newspapers, in magazines, on independent
blogs, and on other websites.
o Experimental sources: Experimental sources refer to handling, examining, and
perhaps trying on or using a product.
• Information processing is viewed as a four-step process in which the individual is:
o Exposed to information
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Chapter 03 - Consumer Behavior
3-8
o Becomes attentive to the information
o Understands the information
o Retains the information
C. Alternative Evaluation
• During the process of collecting information or, in some cases, after information is
acquired, the consumer evaluates alternatives on the basis of what he or she has
learned. One approach to describing the evaluation process is as follows:
o The consumer has information about the number of brands in a product class.
o The consumer perceives that at least some of the brands in a product class are
viable alternatives for satisfying a recognized need.
o Each of these brands has a set of attributes (color, quality, size, and so forth).
o A set of these attributes is relevant to the consumer, and the consumer perceives
that different brands vary in how much of each attribute they possess.
o The brand that is perceived as offering the greatest number of desired attributes
in the desired amounts and the desired order will be the brand the consumer will
like best.
o The brand the consumer likes best is the brand the consumer will intend to
purchase.
D. Purchase Decision
• If no other factors intervene after the consumer has decided on the brand that is
intended for purchase, the actual purchase is a common result of search and
evaluation.
• Actually, a purchase involves many decisions, which include product type, brand,
model, dealer selection, and method of payment, among other factors.
• Traditional risk theorists believe that consumers tend to make risk-minimizing
decisions based on their perceived definition of the particular purchase.
• The perception of risk is based on the possible consequences and uncertainties
involved.
• Perceived risk may be either functional (related to financial and performance
considerations) or psychosocial (related to whether the product will further one’s self-
or reference-group image).
• The perceived risk literature emphasizes that consumers generally try to reduce risk in
their decision making.
• In general, the more information the consumer collects prior to purchase, the less
likely postpurchase dissonance is to occur.
3-8
o Becomes attentive to the information
o Understands the information
o Retains the information
C. Alternative Evaluation
• During the process of collecting information or, in some cases, after information is
acquired, the consumer evaluates alternatives on the basis of what he or she has
learned. One approach to describing the evaluation process is as follows:
o The consumer has information about the number of brands in a product class.
o The consumer perceives that at least some of the brands in a product class are
viable alternatives for satisfying a recognized need.
o Each of these brands has a set of attributes (color, quality, size, and so forth).
o A set of these attributes is relevant to the consumer, and the consumer perceives
that different brands vary in how much of each attribute they possess.
o The brand that is perceived as offering the greatest number of desired attributes
in the desired amounts and the desired order will be the brand the consumer will
like best.
o The brand the consumer likes best is the brand the consumer will intend to
purchase.
D. Purchase Decision
• If no other factors intervene after the consumer has decided on the brand that is
intended for purchase, the actual purchase is a common result of search and
evaluation.
• Actually, a purchase involves many decisions, which include product type, brand,
model, dealer selection, and method of payment, among other factors.
• Traditional risk theorists believe that consumers tend to make risk-minimizing
decisions based on their perceived definition of the particular purchase.
• The perception of risk is based on the possible consequences and uncertainties
involved.
• Perceived risk may be either functional (related to financial and performance
considerations) or psychosocial (related to whether the product will further one’s self-
or reference-group image).
• The perceived risk literature emphasizes that consumers generally try to reduce risk in
their decision making.
• In general, the more information the consumer collects prior to purchase, the less
likely postpurchase dissonance is to occur.
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