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What is Marketing?
What makes a business idea work? Does it only take money? Why are some
products a huge success and similar products a dismal failure? How was Apple, a
computer company, able to create and launch the wildly successful iPod, yet
Microsoft's first foray into digital audio players was a total disaster? If the size of
the company and the money behind a product's launch were the difference,
Microsoft would have won. But for Microsoft to have won, it would have needed
something it has not had in a while—good marketing, so it could produce and sell
products that consumers want.
So how does good marketing get done?
Defining Marketing
Marketing is defined by the American Marketing Association 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" (American Marketing Association, n.d.). If you read the definition closely,
you see that there are four activities, or components, of marketing:
creating—the process of collaborating with suppliers and customers to
create offerings that have value
communicating—broadly, describing those offerings, as well as learning from
customers
delivering—getting those offerings to the consumer in a way that optimizes
value
exchanging—trading value for those offerings
The traditional way of viewing the components of marketing is via the four Ps:
product—goods and services (creating offerings)
promotion—communication
place—getting the product to a point at which the customer can purchase it
(delivering)
price—the monetary amount charged for the product (exchanging)
Introduced in the early 1950s, the four Ps were called the marketing mix,
meaning that a marketing plan is a mix of these four components.
Learning Resource
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If the four Ps are the same as creating, communicating, delivering, and
exchanging, you might be wondering why there was a change. The answer is that
they are not exactly the same. Product, price, place, and promotion are nouns. As
such, these words fail to capture all the activities of marketing. For example,
exchanging requires mechanisms for a transaction, which consist of more than
simply a price or place. Exchanging requires, among other things, the transfer of
ownership. For example, when you buy a car, you sign documents that transfer
the car's title from the seller to you. That's part of the exchange process.
Even the term product, which seems pretty obvious, is limited. Does the product
include services that come with your new car purchase (such as free
maintenance for a certain period of time on some models)? Or does the product
mean only the car itself?
Finally, none of the four Ps describes particularly well what marketing people do.
However, one of the goals of this book is to focus on exactly what marketing
professionals do.
Value
Value is at the center of everything marketers do. What does value mean?
When we use the term value, we mean the benefits buyers receive that meet
their needs. In other words, value is what the customer gets by purchasing and
consuming a company's offering. Although the offering is created by the
company, the value is determined by the customer.
Furthermore, our goal as marketers is to create a profitable exchange for
consumers. By profitable, we mean that the consumer's personal value equation
is positive. The personal value equation is
value = benefits received – [price + hassle].
Hassle is the time and effort the consumer puts into the shopping process. The
equation reflects personal impressions, because each consumer will judge the
benefits of a product differently, as with the time and effort he or she puts into
shopping. Value, then, varies for each consumer.
One way to think of value is to imagine a meal in a restaurant. If you and three
friends go to a restaurant and order the same dish, each of you will like it more
or less depending on your personal tastes. Yet the dish was exactly the same,
priced the same, and served exactly the same way. Because your tastes varied,
the benefits you received varied. Therefore, the value varied for each of you.
That's why we call it a personal value equation.
Value varies from customer to customer based on each customer's needs. The
marketing concept, a philosophy underlying all that marketers do, requires that
marketers seek to satisfy customer wants and needs. Firms operating with that
philosophy are said to be market oriented. At the same time, market-oriented
firms recognize that the exchange must be profitable for the company to be
successful. A marketing orientation is not an excuse to fail to make profit.
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Firms don't always embrace the marketing concept and a market orientation.
Beginning with the Industrial Revolution in the late 1800s, companies were
production oriented. They believed that the best way to compete was by
reducing production costs. In other words, companies thought that good
products would sell themselves. Perhaps the best example of such a product was
Henry Ford's Model A automobile, the first product of his production line
innovation. Ford's production line made the automobile cheap and affordable for
many more people. The production era lasted until the 1920s, when production-
capacity growth began to outpace demand growth, and new strategies were
called for. There are, however, companies that still focus on production as the
way to compete.
From the 1920s until after World War II, companies tended to be selling
oriented, meaning they believed it was necessary to push their products by
heavily emphasizing advertising and selling. Consumers during the Great
Depression and World War II did not have as much money, so the competition
for their available dollars was stiff. The result was this push approach during the
selling era. Companies like the Fuller Brush Company and Hoover Vacuum began
selling door-to-door, and the vacuum-cleaner salesperson position was created.
Just as with production, some companies still operate with a push focus.
In the post–World War II environment, demand for goods increased as the
economy soared. Some products, limited in supply during World War II, were
now plentiful to the point of surplus. Companies believed that to compete, they
had to sell different products than the competition, so many focused on product
innovation. This focus on product innovation is called the product orientation.
Companies like Procter & Gamble created many products that served the same
basic function as one another, but with a slight twist or difference in order to
appeal to a different consumer, and as a result products proliferated. But as
consumers had many choices available to them, companies had to find new ways
to compete. Which products were best to create? Why create them? The answer
was to create what customers wanted, leading to the development of the
marketing concept, and from about 1950 to 1990, businesses operated in the
marketing era.
So what era would you say we're in now? Some call it the value era, a time when
companies emphasize creating value for customers. Is that really different from
the marketing era, in which the emphasis was on fulfilling the marketing
concept? Maybe not. Others call today's business environment the one-to-one
era, meaning that the way to compete is to build relationships with customers
one at a time and to serve each customer's needs individually. For example, the
longer you are a customer of Amazon, the more details they gain about your
purchasing habits and the better they can target you with offers of new
products. With the advent of social media and the empowerment of consumers
through ubiquitous information from consumer reviews, there is clearly greater
emphasis on meeting customer needs. But is that substantially different from the
marketing concept?
Still others argue that this is the time of service-dominant logic, and that we are
in the service-dominant logic era.
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Service-dominant logic is an approach to business that recognizes that consumers want value no matter how it is delivered, whether it's via a product, a service, or a combination of the two.
Although there is merit in this belief, there is also merit to the value approach
and the one-to-one approach, and all three beliefs are intertwined. Perhaps,
then, the name for this era has yet to be decided.
Whatever era we're in now, most historians would agree that defining and
labeling it is difficult. Value and one-to-one approaches are both natural
extensions of the marketing concept, so we may still be in the marketing era. To
make matters more confusing, not all companies adopt the philosophy of the era.
For example, in the 1800s, Singer and National Cash Register adopted strategies
rooted in sales, so they operated in the selling era forty years before it existed.
Some companies are still in the selling era. Recently, many believed automobile
manufacturers had fallen into trouble because they had been working too hard
to sell or push product and not hard enough on delivering value.
Creating Offerings That Have Value
Marketing creates goods and services that the company offers at a price to its
customers or clients. The entire bundle consisting of the tangible good, the
intangible service, and the price is the company's offering. When you compare
one car to another, for example, you can evaluate each of these dimensions—the
tangible, the intangible, and the price—separately. However, you can't buy one
manufacturer's car, another manufacturer's service, and a third manufacturer's
price when you actually make a choice. Together, the three make up a single
firm's offer.
Marketing people do not create the offering alone. For example, when the iPad
was created, Apple's engineers were also involved in its design. Apple's financial
personnel had to review the costs of producing the offering and provide input on
how it should be priced. Apple's operations group needed to evaluate the
manufacturing requirements the iPad would need. The company's logistics
managers had to evaluate the cost and timing of getting the offering to retailers
and consumers. Apple's dealers also likely provided input regarding the iPad's
service policies and warranty structure. Marketing, however, has the biggest
responsibility because it is their responsibility to ensure that the new product
delivers value.
Communicating Offerings
Communicating is a broad term in marketing that means describing the offering
and its value to your potential and current customers, as well as learning from
customers what they want and like. Sometimes communicating means educating
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potential customers about the value of an offering, and sometimes it means
simply making customers aware of where they can find a product.
Communicating also means that customers get a chance to tell the company
what they think. Today, companies are finding that to be successful, they need a
more interactive dialogue with their customers. For example, Comcast customer
service representatives monitor Twitter. When they observe consumers tweeting
problems with Comcast, the customer service reps will post resolutions to their
problems. Similarly, JCPenney has created consumer groups that talk among
themselves on JCPenney-monitored websites. The company might post
questions, send samples, or engage in other activities designed to solicit
feedback from customers.
Mobile devices, like iPads and Droid smartphones, make mobile marketing
possible too. For example, if consumers check in at a shopping mall on
Foursquare or Facebook, stores in the mall can send coupons and other offers
directly to their phones and computers.
Companies use many forms of communication, including advertising on the
internet or television, on billboards or in magazines, through product placements
in movies, and through salespeople. Other forms of communication include
attempting to have news media cover the company's actions (part of public
relations), participating in special events such as the annual International
Consumer Electronics Show in which Apple and other companies introduce their
newest gadgets, and sponsoring special events like the Susan G. Komen Race for
the Cure.
Delivering Offerings
Marketing can't just promise value, it also has to deliver value. Delivering an
offering that has value is much more than simply getting the product into the
hands of the user; it also entails making sure the user understands how to get
the most out of the product and that he or she is taken care of if service is
required later on. Value is delivered in part through a company's supply chain.
The supply chain includes a number of organizations and functions that mine,
make, assemble, or deliver materials and products from a manufacturer to
consumers. The actual group of organizations can vary greatly from industry to
industry, and include wholesalers, transportation companies, and retailers.
Logistics, or the actual transportation and storage of materials and products, is
the primary component of supply-chain management, but there are other
aspects of supply-chain management that we will discuss later.
Exchanging Offerings
In addition to creating an offering, communicating its benefits to consumers, and
delivering the offering, there is the actual transaction, or exchange, that has to
occur. In most instances, we consider the exchange to be cash for products and
services. However, if you were to fly to Louisville, Kentucky, for the Kentucky
Derby, you could pay for your airline tickets using frequent-flier miles. You could
also use Hilton Honors points to pay for your hotel, and cash-back points on
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your Discover card to pay for meals. None of these transactions would actually
require cash. Other exchanges, such as information about your preferences
gathered through surveys, might not involve cash.
When consumers acquire, consume, and dispose of products and services, an
exchange occurs. For example, via Apple's One-to-One program, you can pay a
yearly fee in exchange for additional periodic product training sessions with an
Apple professional. Each time a training session occurs, another transaction takes
place. A transaction also occurs when you are finished with a product. For
example, you might sell your old iPhone to a friend, trade in a car, or ask the
Salvation Army to pick up your old refrigerator.
Disposing of products has become an important ecological issue. Batteries and
other components of cell phones, computers, and high-tech appliances can be
very harmful to the environment, and many consumers don't know how to
dispose of these products properly. Some companies, such as Office Depot, have
created recycling centers where customers can take their old electronics.
Apple has a web page where consumers can fill out a form, print it, and ship it to
Apple along with their old cell phones and MP3 players. Apple then pulls out the
materials that are recyclable and properly disposes of those that aren't. By
reducing the hassle associated with disposing products, Office Depot and Apple
add value to their product offerings.
The focus of marketing has changed from emphasizing the
product, price, place, and promotion mix to one that emphasizes
creating, communicating, delivering, and exchanging value. Value is
a function of the benefits an individual receives, and consists of
the price the consumer paid and the time and effort the person
expended making the purchase.
Key Points
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Question 1
What is the personal value equation?
value = benefits received – [price + hassle]
value = product + service
value = product + price + promotion + place
value = creating + communicating + delivering + exchanging
Question 2
What is the American Marketing Association’s current definition of
marketing?
value = benefits received – [price + hassle]
value = product + service
product, price, promotion, and place
creating, communicating, delivering, and exchanging
Question 3
Identify the two marketing mix terms that relate to offerings.
product and creating
promotion and communicating
place and delivering
price and exchanging
Who Does Marketing?
Check Your Knowledge
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The short answer to the question of who does marketing is "everybody!" But let's
take a moment and consider in greater detail how different types of
organizations engage in marketing.
For-Profit Companies
The obvious answer to the question, who does marketing? is for-profit
companies like McDonald's, Procter & Gamble (the makers of Tide detergent and
Crest toothpaste), and Walmart. For example, McDonald's creates a new
breakfast chicken sandwich for $1.99 (the offering), launches a television
campaign (communicating), makes the sandwiches available on certain dates
(delivering), and then sells them in its stores (exchanging). When Procter &
Gamble (P&G) creates a new Crest tartar-control toothpaste, it launches a direct-
mail campaign in which it sends information and samples for dentists to offer to
their patients. P&G then sells the toothpaste through retailers like Walmart,
which has a panel of consumers sample the product and provide feedback
through an online community. These are all examples of marketing activities.
For-profit companies can be defined by the nature of their customers. A
business-to-consumer (B2C) company like P&G sells products to be used by
consumers like you, while a business-to-business (B2B) company sells products
to be used within another company's operations, as well as by government
agencies and entities. To be sure, P&G sells toothpaste to other companies like
Walmart (and probably to the army, prisons, and other government agencies), but
the end user is an individual person.
Another way to categorize companies that engage in marketing is by the
functions they fulfill. P&G is a manufacturer, Walmart is a retailer, and Grocery
Supply Company is a wholesaler of grocery items that buys from companies like
P&G in order to sell to small convenience store chains. Though they have
different functions, all these types of for-profit companies engage in marketing
activities. Walmart, for example, advertises to consumers.
Grocery Supply Company salespeople will call on convenience store owners to
take orders and will build in-store displays. P&G might help Walmart or Grocery
Supply Company with templates for advertising or suggest special cartons to use
in an in-store display, but all the companies are using marketing to help sell
P&G's toothpaste.
Similarly, all the companies engage in dialogue with their customers to
understand what to sell. For Walmart and Grocery Supply, the dialogue may
result in changing what they buy and sell. For P&G, customer feedback may yield
a new product or a change in pricing strategy.
Nonprofit Organizations
Nonprofit organizations also engage in marketing. When the American Heart
Association (AHA) created a heart-healthy diet for people with high blood
pressure, it bound the diet into a small book, along with access to a special
website that people could use to plan their meals and record their health-related
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activities. The AHA then sent copies of the diet to doctors to give to patients.
When does an exchange take place, you might be wondering? And what does the
AHA get out of the transaction?
From a financial standpoint, the AHA does not directly benefit. Nonetheless, the
organization is meeting its mission, or purpose, of getting people to live heart-
healthy lives and considers the campaign a success when doctors give the books
to their patients. The point is that the AHA is engaged in the marketing activities
of creating, communicating, delivering, and exchanging. This won't involve the
same kind of exchange as a for-profit company, but it is still marketing.
When a nonprofit organization engages in marketing activities, this is called nonprofit marketing.
Some schools offer specific courses in nonprofit marketing, and many marketing
majors begin their careers with nonprofit organizations.
Government entities also engage in marketing activities. For example, when the
US Army advertises to parents of prospective recruits, sends brochures to high
schools, or brings a Bradley Fighting Vehicle to a state fair, the army is engaging
in marketing. The US Army also listens to its constituencies, as evidenced by
recent research aimed at understanding how to serve military families more
effectively. One result was advertising aimed at improving parents' responses to
their children's interest in joining the army. Another was a program aimed at
encouraging spouses of military personnel to access counseling services when
their spouse is serving overseas.
Similarly, the Environmental Protection Agency (EPA) runs a number of
advertising campaigns designed to promote environmentally friendly activities.
One such campaign promoted the responsible disposal of motor oil instead of
simply pouring it on the ground or into a storm sewer.
There is a difference between these two types of activities. When the army is
promoting the benefits of enlisting, it hopes young men and women will join the
army. By contrast, when the EPA runs commercials about how to properly
dispose of motor oil, it hopes to change people's attitudes and behaviors so that
social change occurs. Social marketing, which can be done by government
agencies, nonprofit institutions, religious organizations, and others, is conducted
in an effort to achieve certain social objectives. Convincing people that global
warming is a real threat via advertisements and commercials is social marketing,
as is the example regarding the EPA's campaign to promote the responsible
disposal of motor oil.
Individuals
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If you create a résumé, are you using marketing to communicate the value you
have to offer prospective employers? If you sell yourself in an interview, is that
marketing? When you work for a wage, you are delivering value in exchange for
pay. Is this marketing, too?
Some people argue that these are not marketing activities and that individuals do
not necessarily engage in marketing. (Some people also argue that social
marketing really isn't marketing either.) What do you think? Can individuals
market themselves and their ideas?
Marketing can be thought of as a set of business practices that
for-profit organizations, nonprofit organizations, government
entities, and individuals can use. When a nonprofit organization
engages in marketing activities, this is called nonprofit marketing.
Marketing conducted in an effort to achieve certain social
objectives is called social marketing.
What types of companies engage in marketing?
What is the difference between nonprofit marketing and
social marketing?
What can individuals do for themselves that would be
considered marketing?
Why Study Marketing?
Products don't sell themselves. Generally, the "build it and they will come"
philosophy doesn't work. Good marketing educates customers so that they can
find the products they want, make better choices about those products, and
extract the most value from them. In this way, marketing helps facilitate
exchanges between buyers and sellers for the mutual benefit of both parties.
Likewise, good social marketing provides people with information and helps
them make healthier decisions for themselves and others.
Of course, all business students should understand all functional areas of the
firm, including marketing. There is more to marketing, however, than simply
understanding its role in the business. Marketing has a tremendous impact on
society.
Marketing Delivers Value
Key Points
Ask Yourself
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Marketing not only delivers value to customers, it also creates value for the firm
as it develops a reliable customer base and increases its sales and profitability.
Franklin D. Roosevelt, the US president with perhaps the greatest influence on
our economic system, once said, "If I were starting life over again, I am inclined
to think that I would go into the advertising business in preference to almost any
other. The general raising of the standards of modern civilization among all
groups of people during the past half century would have been impossible
without the spreading of the knowledge of higher standards by means of
advertising" (Famous Quotes and Authors, n.d.). Roosevelt referred to
advertising, but advertising alone is insufficient for delivering value. Marketing
finishes the job by ensuring that what is delivered is valuable.
Marketing Benefits Society
Marketing benefits society in general by improving people's lives in two ways.
First, as we mentioned, it facilitates trade. As you have learned, or will learn, in
economics, being able to trade makes people's lives better. Because better
marketing means more successful companies, jobs are created. This growth
generates wealth for workers, who are then able to make purchases, which, in
turn, creates more jobs.
The second way marketing improves the quality of life is through the function of
the value-delivery approach in creating choices for consumers. When you add all
the marketers together who are trying to deliver offerings of greater value to
consumers and are effectively communicating that value, consumers are able to
make more informed decisions about a wider array of choices. From an economic
perspective, more choices and smarter consumers are indicative of a higher
quality of life.
Marketing Costs Money
Marketing can sometimes be the largest expense associated with producing a
product. In the soft drink business, marketing expenses account for about one-
third of a product's price—about the same as the ingredients used to make the
soft drink itself.
Some people argue that society does not benefit from marketing when it
represents such a huge chunk of a product's final price. In some cases, that
argument is justified. Yet when marketing results in more informed consumers
receiving a greater amount of value, the cost is justified.
Marketing Offers People Career Opportunities
Marketing is the interface between producers and consumers, shouldering the
responsibility for both making money for the company and delivering satisfaction
to customers. In addition, because marketing can be such an expensive part of a
business and is so critical to its success, companies actively seek strong
marketing employees. There are a variety of jobs available in the marketing
profession. The following positions represent only a few of the opportunities
available in the field.
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marketing research—Personnel in marketing research are responsible for
studying markets and customers in order to understand what strategies or
tactics might work best for firms.
merchandising—In retailing, merchandisers are responsible for developing
strategies regarding what products wholesalers should carry to sell to
retailers such as Target and Walmart.
sales—Salespeople meet with customers, determine their needs, propose
offerings, and make sure that the customer is satisfied. Sales departments
can also include sales support teams who work on creating the offering.
advertising—Whether it's for an advertising agency or inside a company,
some marketing personnel work on advertising. Television commercials and
print ads are only part of the advertising mix. Many people who work in
advertising spend all their time creating advertising for electronic media,
such as websites and their pop-up ads, podcasts, etc.
product development—People in product development are responsible for
identifying and creating features that meet the needs of a firm's customers.
They often work with engineers or other technical personnel to ensure that
value is created.
direct marketing—Professionals in direct marketing communicate directly
with customers about a company's product offerings via channels such as e-
mail, chat lines, telephone, or direct mail.
digital media—Digital media professionals combine advertising, direct
marketing, and other areas of marketing to communicate directly with
customers via social media, the web, and mobile media (including texts).
They also work with statisticians in order to determine which consumers
receive which message, and with IT professionals to create the right look
and feel of digital media.
event marketing—Some marketing personnel plan special events,
orchestrating face-to-face conversations with potential and current
customers in a special setting.
nonprofit marketing—Nonprofit marketers often don't get to do everything
listed previously, as nonprofits typically have smaller budgets. But their
work is always very important as they try to change behaviors without
having a product to sell.
A career in marketing can begin in a variety of ways. Entry-level positions for
new college graduates are available in many of the roles previously mentioned.
A growing number of CEOs are people with marketing backgrounds. Some
legendary CEOs, like Ross Perot and Mary Kay Ash, got their start in marketing.
More recently, CEOs like Mark Hurd, CEO of Oracle, and Jeffrey Immelt at GE,
are showing how marketing careers can lead to the highest position of an
organization.
Criticisms of Marketing
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Marketing is not without its critics. We already mentioned that one reason to
study marketing is because it is costly, and business leaders need to understand
the cost/benefit ratio of marketing in order to make wise investments. Yet that
cost is precisely why some criticize marketing. Some allege that if that money
could be put into research and development of new products, perhaps the
consumers would be better satisfied. Or, some critics argue, prices could be
lowered. But marketing executives do not intentionally waste money on
marketing, and are always on the lookout for less expensive ways to have the
same performance.
Another criticism is that marketing creates wants among consumers for products
and services that aren't really needed. For example, fashion marketing creates
demand for high-dollar jeans when much less expensive jeans can fulfill the same
basic function. Taken to the extreme, consumers may take on significant credit
card debt to satisfy wants created by marketing, with serious negative
consequences. When marketers target their messages carefully so an audience
that can afford such products is the only group reached, such extreme
consequences can be avoided.
By facilitating transactions, marketing delivers value to both
consumers and firms. At the broader level, this process creates
jobs and improves the quality of life in a society. Marketing can be
costly, so firms need to hire strong employees to manage their
marketing activities. Being responsible for both making money for
your company and delivering satisfaction to your customers makes
marketing a great career.
Why study marketing?
How does marketing provide value?
Why does marketing cost so much? Is marketing worth it?
What is the main cost of marketing?
Themes in Marketing
We previously discussed marketing as a set of activities that anyone can do.
Marketing is also a functional area in companies, just like operations and
accounting. Within a company, marketing might be the title of a department, but
some marketing functions, such as sales, might be handled by another
department. Marketing activities do not occur separately from the rest of the
company, however.
Key Points
Ask Yourself
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As we have explained, pricing an offering, for example, will involve a company's
finance and accounting departments in addition to the marketing team. Similarly,
a marketing strategy is not created solely by a firm's marketing personnel.
Instead, it flows from the company's overall strategy.
Everything Starts with Customers
Most organizations start with an idea of how to serve customers better. Apple's
engineers began working on the iPod by looking at the available technology and
thinking about how customers would like to improve the availability and
affordability of their music, through downloading.
Many companies think about potential markets and customers when they start.
John Deere, for example, founded his company on the principle of serving
customers. When admonished for making constant improvements to his
products even though farmers would take whatever they could get, Deere
reportedly replied, "They haven't got to take what we make and somebody else
will beat us, and we will lose our trade" (John Deere, n.d.). He recognized that if
his company failed to meet customers' evolving needs, someone else would.
Here are a few mission statements from other companies. Note that they all refer
to their customers, directly or indirectly. Note also how these are written to
inspire employees and others who interact with the company.
Company Mission Statements
IBM
IBM will be driven by these values:
Dedication to every client's success.
Innovation that matters, for our company
and for the world.
Trust and personal responsibility in all
relationships. (IBM, n.d.)
Coca-Cola
Everything we do is inspired by our enduring
mission:
To refresh the world in body, mind, and
spirit.
To inspire moments of optimism through our
brands and our actions.
To create value and make a difference
everywhere we engage. (Coca-Cola
Company, n.d.)
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Not all companies create mission statements that reflect a marketing orientation.
Note Apple's mission statement: "Apple ignited the personal computer revolution
in the 1970s with the Apple II and reinvented the personal computer in the
1980s with the Macintosh. Today, Apple continues to lead the industry in
innovation with its award-winning computers, OS X operating system and iLife
and professional applications. Apple is also spearheading the digital media
revolution with its iPod portable music and video players and iTunes online store,
and has entered the mobile phone market with its revolutionary iPhone" (Apple,
Inc, 2009). This mission statement reflects a product orientation, or an operating
philosophy based on the premise that Apple's success is due to great products
and that simply supplying them will lead to demand for them. Apple, and for that
matter, many other companies, have fallen prey to thinking that they knew what
a great product was without asking their customers. In fact, Apple's first attempt
at a graphic user interface (GUI) was the LISA, a dismal failure.
The Marketing Plan
The marketing plan is the strategy for implementing the components of
marketing: creating, communicating, delivering, and exchanging value. Once a
company has decided what business it is in and expressed that in a mission
statement, the firm then develops a corporate strategy. Marketing strategists
subsequently use the corporate strategy and mission and combine that with an
understanding of the market to develop the company's marketing plan.
Marketers also want to know their customers—who they are and what they like
to do—so as to uncover this information. Generally, this requires marketing
researchers to collect sales and other related customer data and analyze it. In
this pursuit, there are three important goals: understanding the customer's wants
and needs, understanding how the customer wants to acquire, consume, and
dispose of the offering, and determining what makes up their personal value
equation.
McDonald’s
To be our customers' favorite place and way to
eat (McDonald's, n.d.).
Merck
To provide innovative and distinctive products
and services that save and improve lives and
satisfy customer needs, to be recognized as a
great place to work, and to provide investors
with a superior rate of return (Merck & Co., n.d.).
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Once this information is gathered and digested, the planners can work to create
the right offering. Products and services are developed, bundled together at a
price, and then tested in the market. Decisions have to be made about when to
alter the offerings, add new ones, or drop old ones. These decisions are the focus
of the next set of chapters and are the second step in marketing planning.
Following the material on offerings, we explore the decisions associated with
building the value chain. Once an offering is designed, the company has to be
able to make it and then be able to get it to the market. This step, planning for
the delivery of value, is the third step in the marketing plan.
The fourth step is creating the plan for communicating value. How does the firm
make consumers aware of the value it has to offer? How can it help them
recognize that value and decide that they should purchase products? These are
important questions for marketing planners.
Once a customer has decided that her personal value equation is likely to be
positive, she will decide to purchase the product. That decision still has to be
acted on, however, which is the exchange. As exchanges occur, marketing
planners then refine their plans based on the feedback they receive from their
customers, as well as what their competitors are doing and how market
conditions are changing.
The Changing Marketing Environment
We previously mentioned that the view of marketing has changed from a static
set of four Ps to a dynamic set of processes that involve marketing professionals
as well as many other employees in an organization. The way business is being
conducted today is changing, too, and marketing is changing along with it. There
are several themes that underscore these changes.
ethics and social responsibility—Businesses exist only because society
allows them to. When businesses begin to fail society, society will punish
them or revoke their license. The crackdown on companies in the subprime
mortgage–lending industry is one example. These companies created and
sold loans (products) that could only be paid back under ideal circumstances,
and when consumers couldn't pay these loans back, the entire economy
suffered greatly. Scandals such as these illustrate how society responds to
unethical business practices. However, whereas ethics require only that you
do no harm, the concept of social responsibility requires that you actively
seek to improve the lives of others. Today, people are demanding businesses
take a proactive stance in terms of social responsibility, and companies are
being held to ever-higher standards of conduct.
sustainability—An example of social responsibility, sustainability involves
engaging in practices that do not diminish the earth's resources. Coca-Cola,
for example, is working with governments in Africa to ensure clean water
availability, not just for manufacturing Coke products but for all consumers
in that region. Further, the company seeks to engage the participation of
American by offering opportunities to contribute to clean-water programs.
Right now, companies do not have to engage in these practices, but because
firms represent the people behind them (their owners and employees),
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forward-thinking executives are seeking ways to reduce the impact their
companies are having on the planet.
service-dominant logic—You might have noticed that we use the word
offering a lot instead of the term product. That's because of service-
dominant logic, the approach to business that recognizes that consumers
want value no matter how it is delivered—whether through a tangible
product or through intangible services. This emphasis on value drives the
functional approach to value that we've taken—that is, creating,
communicating, delivering, and exchanging value.
metrics—Technology has increased the amount of information available to
decision makers. As such, the amount and quality of data for evaluating a
firm's performance is increasing. Earlier in our discussion of the marketing
plan, we explained that customers communicate via transactions. Although
this sounds both simple and obvious, better information technology has
given us a much more complete picture of each exchange. Cabela's, for
example, combines data from Web browsing activity with purchase history
in order to determine the likely next-best offer. Using data from many
sources, we can build more-effective metrics that can then be used to
create better offerings, better communication plans, and so forth.
a global environment—Every business is influenced by global issues. The
price of oil, for example, is a global concern that affects everyone's prices
and even the availability of some offerings. We already mentioned Coke's
concern for clean water. But Coke also has to be concerned with
distribution systems in areas with poor or nonexistent roads, a myriad of
government policies and regulations, workforce availability, and many more
issues associated with selling and delivering Coke around the world. Even
companies with smaller markets source some or all their offerings from
companies in other countries or else face some sort of direct competition
from companies based in other countries. Every business professional,
whether working in marketing or elsewhere, needs some understanding of
the global environment in which companies operate.
A company's marketing plan flows from its strategic plan. Both
begin with a focus on customers. The essential components of the
plan are understanding customers, creating an offering that
delivers value, communicating the value to the customer,
exchanging with the customer, and evaluating the firm's
performance. A marketing plan is influenced by environmental
trends such as social responsibility, sustainability, service-
dominant logic, the increased availability of data and effective
metrics, and the global nature of the business environment.
Key Points
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Why does everything start with customers? Or is it only
marketing that starts with customers?
What are the key parts of a marketing plan?
What is the relationship between social responsibility,
sustainability, service-dominant logic, and the global business
environment? How does the concept of metrics fit?
References
American Marketing Association. (n.d.). Definition of marketing. Retrieved from
http://www.marketingpower.com/AboutAMA/Pages/DefinitionofMarketing.aspx?
sq=definition+of+marketing
Apple, Inc. (2009). Apple's app store downloads top 1.5 billion in first year.
Retrieved from http://www.apple.com/hk/en/pr/library/ 2009/07/14apps.html
Coca-Cola Company. (n.d.). Mission, vision & values. Retrieved from
http://www.thecoca-colacompany.com/ourcompany/mission_vision_values.html
Famous Quotes and Authors. (n.d.). Franklin D. Roosevelt quotes and quotations.
Retrieved from
http://www.famousquotesandauthors.com/authors/franklin_d__roosevelt_quotes.html
IBM. (n.d.). About IBM. Retrieved from http://www.ibm.com/ibm/us/en
John Deere (n.d.). John Deere: A biography. Retrieved from
http://www.deere.com/en_US/compinfo/history/johndeere2.html
McDonald's. (n.d.). Our company. Retrieved from
http://aboutmcdonalds.com/mcd/our_company/mcd_faq/student_research.html#1
Merck & Co. (n.d.). The new Merck. Retrieved from
http://www.merck.com/about/Merck%20Vision%20Mission.pdf
Licenses and Attributions
Chapter 1: What Is Marketing?
(https://2012books.lardbucket.org/books/marketing-principles-v2.0/s04-what-
is-marketing.html) from Marketing Principles is available under a Creative
Commons Attribution-NonCommercial-ShareAlike 3.0 Unported
(https://creativecommons.org/licenses/by-nc-sa/3.0/) license without
attribution as requested by the site’s original creator or licensee. UMUC has
modified this work and it is available under the original license.
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Ask Yourself
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Value Proposition
Companies address their customers through their value proposition, which is the
totality of the benefits offered to satisfy customer needs and wants. The product
or service will only be successful if it delivers value and satisfies the target
customer. In other words, the value proposition is more than just the core
positioning of the product or service; it represents the whole set of benefits that
a company promises to deliver. Accordingly, astute product or service positioning
will result in a successful customer-focused value proposition (i.e., a clear reason
why the target customers should buy the offering) (Kotler & Keller, 2015).
References
Kotler, P. & Keller, K. L. (2015). Marketing management (15th ed.). Upper Saddle
River, NJ: Pearson.
Resources
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Learning Topic
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E-MARKETING: A MODERN APPROACH OF BUSINESS AT THE DOOR OF CONSUMER
DR. MANOJKUMAR JYOTIRAM GAIKWAD ASST. PROFESSOR
DEPARTMENT OF ECONOMICS VASANTRAO NAIK COLLEGE OF ARTS & SCIENCE
SHAHADA DIST NANDUBAR
PARIKSHITKUMAR HIRALAL KATE RESEARCH SCHOLAR
NORTH MAHARASHTRA UNIVERSITY JALGAON
ABSTRACT
Marketing is backbone of any business environment. With evolution of internet technology, E-marketing becomes necessary for making successful business impact. E-marketing means applications of marketing principles & technologies via electronic media. E-marketing is more advantageous in current business scenario and allows marketers to define their marketing strategies. E-marketing is combination of digital technologies which differentiate your products & services from com- petitors. E-marketing includes both direct response marketing & indirect marketing elements. E-marketing directs different marketing activities via World Wide Web with aim attracting new opportunities in business and retaining the existing one. Due to technological advancement and increased competition, e-marketing can be term as one of the major shuffle in business strategies. In this, paper author discussed about different e-marketing methodologies and their use in current business scenario. The author finds out that by using different e-marketing methodology, traditional approach of marketing has changed due to the door step service for consumer.
KEYWORDS direct marketing, e-marketing, indirect marketing
INTRODUCTION arketing has been around forever in one form or another. From the time of human evolution trading has been integral part of human living. With the effect of barter exchange system marketing has play is own role to makes other humans to trade. Rapidly evolving internet technologies has reduced the production & service cost and extends geographical boundaries by bringing buyers and seller together.
With the advancement in technology and global economic environment globalization has opened a new door of marketing. E-marketing is combination of both direct and indirect marketing elements and uses numbers technologies for connecting with their customers. E-marketing is most important business strategies in present business context. For any business marketing is a key mantra. E-marketing varied a lot in past decade. Starting from traditional marketing to e-marketing in today’s life style there are numerous techniques, methods which had played a vital role in the development of marketing strategies. E-marketing is not new but with the e-evolution in India marketers need to adapt to it and learn how to use it. Revenue in the United States grew to an estimated $7.1 billion in 2001 or about 3.1 percent of overall advertising spending. The dot.com bust weakened early online advertising industry and reduced the demand for online advertising and its related services. With introduction of Web 2.0 in 2004 the industry regained momentum. Numbers of new businesses are immerging such as advertising space on web pages, generation of web traffic by giving away the content and sell that traffic to advertisers. According to IAB Internet Advertising Revenue Report (2007), in the first half of 2007 alone advertisers in the US spent more than $10 billion advertising on websites. That was about 14 percent of all advertising spending. As online retail sales continue to increase at a slower pace than expected, practi- tioners and academics alike are still searching for factors that influence the consumer’s online shopping behavior (Korgaonkar and Karson 2007).
REVIEW OF LITERATURE To achieve marketing objectives E-marketing plays an important role (Chaffey et al. 2006). To reach products & services to customers, to make customers aware about products & service it is essential to follow the latest technologies or concepts of E- marketing (Srinivasan and Jollyvinisheeba 2013). Online advertising began in 1994 when HotWired sold the first banner ads to several advertisers (Kaye and Medoff 2001). While previous research has examined Internet usage (Teo et al. 1999), online shopping (Teo and Yu 2004), commercial websites (Gonzalez and Palacios 2004), website design (Kim et al. 2003), and website effectiveness from the consumers’ perspective (Bell and Tang 1998), there is a general lack of research on specific online marketing tools and the effectiveness of these tools.
IMPORTANCE OF THE STUDY Indian retail environment is shifting from brick & mortar to online business model. In diversely competitive new environment traditional marketing channel will not be effective. So marketer need to adapt new marketing initiatives. As a result of technical enhancement different e-marketing techniques emerge. Paper throws light on effective use of e-marketing channels with practical implementations by different industry leaders.
STATEMENT OF THE PROBLEM Evolution of internet and its rapid acceptance in Indian society has opened a new door for markers to reach their customers by means of e-marketing. In the Indian context e-marketing is new and it is important that markers should know effective use of different e-marketing tools. Paper discussed different e-marketing methods and their effective use.
OBJECTIVES To know the effectiveness of following in successful e-marking: • Newsletters • Social Media • SEO • Mobile • Webinar • Video
M
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• Content • Paid advertising • Email
RESEARCH METHODOLOGY The research paper is original work based on the attentive observation of the researcher on current e-marketing strategies of e-retailers in India. The Paper also makes use of secondary research.
DISCUSSION MARKETING Marketing means communicating value of your products or services to your desired customer. E-MARKETING E-marketing is communicating value of your products or services to your desired customer using digital technologies mainly on the internet.
DIFFERENT E-MARKETING METHODS NEWSLETTERS Newsletters are electronic “one page” documents sent by email to a defined list of recipients who have signed up to receive. Newsletter emails are commonly sent from 3rd party service providers. Newsletters with pictures and videos will engage 50 to 70 % more clicks than text. Newsletter is the best way to reach consumers who cannot be reaching by social media. Below is the newsletter by Luxifier which attracting customers by giving offers on his products. Most of the times customers unmodified about offers & discounts so Newsletters is effective medium of e-marketing.
FIGURE 1: NEWSLETTER FROM – LUXIFIER: THE INDIA’S LEADING WATCHES / PERFUMES / GROOMING ACCESSORIES ONLINE STORE
Source: A Newsletter in Email box
SOCIAL MEDIA The best method of marketing is through ‘word of mouth’. When people share different information thru social media in their network it becomes recommenda- tions for the other people for using that product. According to a report by the Internet and Mobile Association of India (IAMAI), 66% of the 180 million Internet users in urban India regularly access social media platforms. Social media facilitates sharing products/ services information via social channels like LinkedIn, Twitter, and Facebook etc. So Social Media is one of the best medium for reaching your customers. Figure 2 shows how flipkart has use twitter as a medium of marketing of his offerings.
FIGURE 2: USE OF TWITTER BY FLIPKART FOR MARKETING PURPOSE
Source: Screenshot from www.twitter.com
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SEO Search Engine Optimization is the process of affecting the visibility of a website or a web page in a search engine's unpaid results. Customers are more likely to click an organic link as compared to paid links. Organic search takes 94% of overall market Goodwin (2012). SEO is must for any online marketing as it connects to new customers who may not connected by other channels. Basic training is required for effective implementation of SEO for any business. Google Keyword tool is one of the best for SEO practice. Below we can see how Amazon has implemented SEO while searching products.
FIGURE 3: AMAZON USES SEO FOR ITS PRODUCT SEARCH ON ITS WEBSITE
Source: Creation from www.amazon.in
MOBILE The use of the mobile medium as a means of marketing communication provide customers with time and location sensitive, personalized information that pro- motes products, services. According to Internet and Mobile Association of India (IAMAI), the number of mobile internet users in India is expected to reach 371 million by June 2016. According to recent reports, 40% of user’s internet time is spent on mobile devices. eMarketers should consider this continual growth in the number of Smartphone’s internet users in making their e-marketing strategies. Various means of connecting to people are via Mobile App, Mobile ads, in-game mobile ads, location based marketing, sms. Figure 4 shows mobile ads pops up while playing game. Figure 5 shows device specific apps of Amazon so that they can increase their market reach among people having hand held devices.
FIGURE 4: MOBILE ADS IN GAMES
Source: Mobile Game
FIGURE 5: MOBILE APP – MEDIUM OF E-MARKETING
Source: Google images
WEBINAR Webinars are seminars held on the web and they used for promotions, product knowledge etc. They use for giving value to potential customers, demonstrate your company’s capabilities such as expertise, product. Its uses multimedia capabilities such as presentations, demo of products which is followed by QA session. Webinar can also be recorded and posted on different websites for reuse purpose so webinar has virtually global reach wherever your target may be. Figure 6 shows how Infibeam has use Webinar as e-marketing tool in their marketing strategy.
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FIGURE 6: WEBINAR INVITE BY INFIBEAM
Source: Google images
VIDEO As long as video are reasonably short, entertaining, and effective people will like them. With Mobile internet evolution videos can be very effective to get your company or product message across quickly and effectively, especially for busy people. Imperial Blue’s video campaign men will be men is one of the best video marketing campaign. CONTENT Different content that supports e-marketing initiatives are blogging, Press release (PR) distribution, news items and feeds. A blog is online presence in which the owner posts updates, stories, media etc. A blog can be a website. If blogs are updated regularly they will get better search ranking than website on google search results. Articles posted in the blog can also be reused in social media, newsletters, etc. A press release is an article written about your company for any product release or any other event. It is mostly done through 3rd party online services that provide feeds of news. It offers content in a format that allows other sites and services to add your PR to their websites easily thus boosting their content and value. Figure 7 shows blog of LG India for marketing their electronics products.
FIGURE 7: LG INDIA USES BLOG AS CONTENT MARKETING TOOL
Source: LG India website
PAID ADVERTISING Paid advertising is any kind of advertising that you have to pay for. It includes paying for search engine prioritization, pay-per-click through other websites, banner ads, and paid content distribution. One can pay to display his company content online or for your ad to be shown in search results. Whenever we search google or any other website or we are browsing any content then we can see related ads in the ads web space. These ads are nothing but the paid ads. Number of company provides paid ads services are Google, Facebook, and LinkedIn etc.
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FIGURE 8: PAID ADVERTISING OF askmebazaar.com
Source: Creation from www.priceprice.com
If a user search for MI mobiles then paid ads comes up of askmebazaar.com, here ad provider identified the content which user search then posted the relevant advertise in ads web space. EMAIL Email marketing is direct marketing technique use to target a group of people. In its broadest sense, every email sent to a potential or current customer could be considered as email marketing. Now days number of email marketing software’s are available in the market. This gives more insight about the email campaigns like number people open email, not open etc. All these efforts help marketers in positioning their market offerings.
FIGURE 9: EMAIL MARKETING BY SBI
Source: An Email in Email box
FINDINGS Various industries like Banking, Ecommerce, Electronics and Game are implementing different E-marketing techniques for marketing their products. Author has taken examples of Luxifier, Flipkart, Amazon India, Ingibeam, LG India, askmebazaar.com, SBI in the discussion section. And find out that every company is targeting different segments of their targeted audience by implementing suitable e-marketing technique.
CONCLUSIONS Main reason for growing effectiveness of internet marketing is the increasing awareness about internet among people. For sustaining in today’s competitive business environment marketer need to understand consumer behavior and depending up on their business should adapt suitable e-marketing methodology. Every methodology has its own way of success with respect to offerings & target audience. By understanding effective methodology and with efficient implemen- tation marketers will get more success rate.
REFERENCES PAPERS 1. Bell, H., & Tang, N. K. H. (1998). “The effectiveness of commercial Internet websites: a user’s perspective.” Internet Research: Electronic Networking Applica-
tions and Policy, 8(3), 219–228. 2. Gonzalez, F. J. M., & Palacios, T. M. B. (2004). “Quantitative evaluation of commercial websites: an empirical study of Spanish firms.” International Journal of
Information Management, 24(4), 313–328. 3. Goodwin, Danny (2012): Organic vs. Paid Search Results: Organic Wins 94% of Time, Viewed on 16 May 2016, https://searchen-
ginewatch.com/sew/news/2200730/organic-vs-paid-search-results-organic-wins-94-of-time 4. “IAB Internet Advertising Revenue Report,” October 2007, Available: http://www.iab.net/media/file/IAB_PwC_2007Q2.pdf [Accessed on 16th May 2016] 5. Kim, S. E., Shaw, T., & Schneider, H. (2003). “Web site design benchmarking within industry groups.” Internet Research, 13(1), 17–26. 6. Korgaonkar, P. and Karson, E. (2007), “The Influence of Perceived Product Risk on Consumers’ E- Tailer Shopping Preferences.” Journal of Business and
Psychology, Vol. 22, No.1, pp. 55-64.
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7. Srinivasan R., Jollyvinisheeba J. (2013). “Essential and Strategies of E-marketing.” International Journal of Scientific Research & Management, 251-255, 2013 8. Teo, T. S. H., & Yu, Y. (2004). “Online buying behavior: a transaction cost economics perspective.” Omega, 33, 451-465. 9. Teo, T. S. H., Lim, V. K. G., & Lai, R. Y. C. (1999). “Intrinsic and extrinsic motivation in Internet usage.” Omega, 27, 25–37. BOOKS 10. Chaffey, D., Ellis-Chadwick, F., Johnston, K. and Mayer, R. 2006. Internet Marketing: Strategy, Implementation and Practice. Pearson publication 11. Kaye, Barbara K. and Medoff, Norman J., (2001), Just A Click Away: Advertising on the Internet. Allyn and Bacon publishing, Massachusetts WEBSITE 12. http://ijrcm.org.in
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Strategic Planning
What Is a Value Proposition?
Individual buyers and organizational buyers evaluate products and services to
see if they provide desired benefits. For example, when you're exploring vacation
options, you want to know the benefits of each destination and the value you
will get by going to each place. Before you (or a firm) can develop a strategy or
create a strategic plan, you have to develop a value proposition. A value
proposition is a 30-second elevator speech stating the specific benefits a
product or service offering provides a buyer. It shows why the product or service
is superior to competing offers. The value proposition answers the questions,
"Why should I buy from you or why should I hire you?" As such, the value
proposition becomes a critical component in shaping strategy.
The following is an example of a value proposition developed by a sales
consulting firm: "Our clients grow their business, large or small, typically by a
minimum of 30 percent to 50 percent over the previous year. They accomplish
this without working 80-hour weeks and sacrificing their personal lives" (Lake,
2016).
Note that although a value proposition will hopefully lead to profits for a firm,
when the firm presents its value proposition to its customers, it doesn't mention
its own profits. That's because the goal is to focus on the external market or
what customers want.
Firms typically segment markets and then identify different target markets, or
groups of customers, that they want to reach when firms are developing their
value propositions. Be aware that companies sometimes develop different value
propositions for different target markets just as individuals may develop a
different value proposition for different employers. The value proposition tells
groups of customers (or potential employers) why they should buy a product or
service, vacation to a particular destination, donate to an organization, hire you,
etc.
Once the benefits of a product or service are clear, the firm must develop
strategies that support the value proposition. The value proposition serves as a
guide for this process. In the case of our sales consulting firm, the strategies it
develops must help clients improve their sales by 30 percent to 50 percent.
Likewise, if a company's value proposition states that the firm is the largest
retailer in the region with the most stores and best product selection, opening
stores or increasing the firm's inventory might be a key part of the company's
Learning Resource
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strategy. Looking at Amazon's value proposition, "Low price, wide selection with
added convenience anytime, anywhere," one can easily see how Amazon has
been so successful (InfoMarketersZone.com, n.d.).
Individuals and students should also develop their personal value propositions.
Tell companies why they should hire you or why a graduate school should accept
you. Show the value you bring. A value proposition will help you in different
situations. Think about how your internship experience and/or study abroad
experience may help a future employer. For example, you could explain to the
employer the benefits and value of going abroad. Perhaps your study abroad
experience helped you understand customers that buy from Company X and
your customer service experience during your internship increased your ability to
generate sales, which improved your employer's profit margin. Thus you may be
able to quickly contribute to Company X, something that Company X might
value.
A value proposition is a 30-second elevator speech stating the
specific value a product or service provides to a target market.
Firms may develop different value propositions for different
groups of customers. The value proposition shows why the
product or service is superior to competing offers and why the
customer should buy it or why a firm should hire you.
Components of the Strategic Planning Process
Conducting a Situation Analysis
As part of the strategic planning process, a situation analysis must be conducted
before a company can decide on specific actions. A situation analysis involves
analyzing both the external (macro and micro factors outside the organization)
and the internal (company) environments. The firm's internal environment—such
as its financial resources, technological resources, and the capabilities of its
personnel and their performance—has to be examined. It is also critical to
examine the external macro and micro environments the firm faces, such as the
economy and its competitors. The external environment significantly affects the
decisions a firm makes, and thus must be continuously evaluated. For example,
during the economic downturn in 2008–2009, businesses found that many
competitors drastically cut the prices of their products. Other companies
reduced package sizes or the amount of product in packages. Firms also offered
customers incentives (free shipping, free gift cards with purchase, rebates, etc.)
to purchase their goods and services online, which allowed businesses to cut
back on the personnel needed to staff their brick-and-mortar stores. While a
business cannot control things such as the economy, changes in demographic
trends, or what competitors do, it must decide what actions to take to remain
competitive—actions that depend in part on the internal environment.
Key Points
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Conducting a SWOT Analysis
Based on the situation analysis, organizations analyze their strengths,
weaknesses, opportunities, and threats, conducting what's called a SWOT
analysis. Strengths and weaknesses are internal factors and are somewhat
controllable. For example, an organization's strengths might include its brand
name, efficient distribution network, reputation for great service, and strong
financial position. A firm's weaknesses might include lack of awareness of its
products in the marketplace, a lack of human resources talent, and a poor
location. Opportunities and threats are factors that are external to the firm and
largely uncontrollable. Opportunities might entail the international demand for
the type of products the firm makes, few competitors, and favorable social
trends such as people living longer. Threats might include a bad economy, high
interest rates that increase a firm's borrowing costs, and an aging population that
makes it hard for the business to find workers.
You can conduct a SWOT analysis of yourself to help determine your
competitive advantage. Perhaps your strengths include strong leadership abilities
and communication skills, whereas your weaknesses include a lack of
organization. Opportunities for you might exist in specific careers and industries;
however, the economy and other people competing for the same position might
be threats.
Moreover, a factor that is a strength for one person (say, strong accounting skills)
might be a weakness for another person (poor accounting skills). The same is true
for businesses.
The easiest way to determine if a factor is external or internal is to take away the
company, organization, or individual and see if the factor still exists. Internal
factors such as strengths and weaknesses are specific to a company or individual,
whereas external factors such as opportunities and threats affect multiple
individuals and organizations in the marketplace. For example, if you are doing a
situation analysis on PepsiCo and are looking at the weak economy, take PepsiCo
out of the picture and see what factors remain. If the factor—the weak economy
—is still there, it is an external factor. Even if PepsiCo hadn't been around in
2008–2009, the weak economy reduced consumer spending and affected a lot
of companies.
Assessing the Internal Environment
When an organization evaluates which factors are its strengths and weaknesses,
it is assessing its internal environment. Once companies determine their
strengths, they can use those strengths to capitalize on opportunities and
develop their competitive advantage. For example, strengths for PepsiCo are
what are called "mega" brands, or brands that individually generate over $1
billion in sales (PepsiCo, n.d.). These brands are also designed to contribute to
PepsiCo's environmental and social responsibilities.
PepsiCo's brand awareness, profitability, and strong presence in global markets
are also strengths. Especially in foreign markets, the loyalty of a firm's employees
can be a major strength, which can provide it with a competitive advantage.
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Loyal and knowledgeable employees are easier to train and tend to develop
better relationships with customers. This helps organizations pursue more
opportunities.
Although the brand awareness for PepsiCo's products is strong, smaller
companies often struggle with weaknesses such as low brand awareness, low
financial reserves, and poor locations. When organizations assess their internal
environments, they must look at factors such as performance and costs as well
as brand awareness and location. Managers need to examine both the past and
current strategies of their firms and determine what strategies succeeded and
which ones failed. This helps a company plan its future actions and improves the
odds it will be successful. For example, a company might look at packaging that
worked very well for a product and use the same type of packaging for new
products. Firms may also look at customers' reactions to changes in products,
including packaging, to see what works and doesn't work. When PepsiCo
changed the packaging of major brands in 2008, customers had mixed responses.
Tropicana switched from the familiar orange with the straw in it to a new
package and customers did not like it. As a result, Tropicana changed back to the
familiar orange with a straw after spending $35 million for the new package
design.
Individuals are also wise to look at the strategies they have tried in the past to
see which ones failed and which ones succeeded. Have you ever done poorly on
an exam? Was it the instructor's fault, the strategy you used to study, or did you
decide not to study? See which strategies work best for you and perhaps try the
same type of strategies for future exams. If a strategy did not work, see what
went wrong and change it. Doing so is similar to what organizations do when
they analyze their internal environments.
Assessing the External Environment
Analyzing the external environment involves tracking conditions in the macro
and micro marketplace that, although largely uncontrollable, affect the way an
organization does business. The macro environment includes economic factors,
demographic trends, cultural and social trends, political and legal regulations,
technological changes, and the price and availability of natural resources. The
micro environment includes competition, suppliers, marketing intermediaries
(retailers, wholesalers), the public, the company, and customers.
When firms globalize, analyzing the environment becomes more complex
because they must examine the external environment in each country in which
they do business. Regulations, competitors, technological development, and the
economy may be different in each country and will affect how firms do business.
Although the external environment affects all organizations, companies must
focus on factors that are relevant for their operations. For example, government
regulations on food packaging will affect PepsiCo but not Goodyear. Similarly,
students getting a business degree don't need to focus on job opportunities for
registered nurses.
The Competitive Environment
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All organizations must consider their competition, whether it is direct or indirect
competition vying for the consumer's dollar. Both nonprofit and for-profit
organizations compete for customers' resources. Coke and Pepsi are direct
competitors in the soft drink industry, Hilton and Sheraton are competitors in the
hospitality industry, and organizations such as United Way and the American
Cancer Society compete for resources in the nonprofit sector. However, hotels
must also consider other options that people have when selecting a place to stay,
such as hostels, dorms, bed and breakfasts, or rental homes.
A group of competitors that provide similar products or services form an
industry. Michael Porter, a professor at Harvard University and a leading
authority on competitive strategy, developed an approach for analyzing
industries. Called the five forces model (Porter, 1980, pp. 3–33), the framework
helps organizations understand their current competitors as well as organizations
that could become competitors in the future. As such, firms can find the best
way to defend their position in the industry.
Competitive Analysis
When a firm conducts a competitive analysis, it tends to focus on direct
competitors and tries to determine a firm's strengths and weaknesses, its image,
and its resources. Doing so helps the firm figure out how much money a
competitor may be able to spend on things such as research, new product
development, promotion, and new locations. Competitive analysis involves
looking at any information (annual reports, financial statements, news stories,
observation details obtained on visits, etc.) available on competitors. Another
means of collecting competitive information is using mystery shoppers, or
people who act like customers. Mystery shoppers might visit competitors to
learn about their customer service and their products. Imagine going to a
competitor's restaurant and studying the menu and the prices and watching
customers to see what items are popular and then changing your menu to better
compete. Competitors battle for the customer's dollar, and they must know what
other firms are doing. Individuals and teams also compete for jobs, titles, and
prizes and must figure out the competitors' weaknesses and plans in order to
take advantage of their strengths and have a better chance of winning.
According to Porter, in addition to their direct competitors (competitive rivals),
organizations must consider the strength and impact the following could have
(Porter, 1980, pp. 3–33):
substitute products
potential entrants (new competitors) in the marketplace
the bargaining power of suppliers
the bargaining power of buyers
When any of these factors change, companies may have to respond by changing
their strategies. For example, because buyers are consuming fewer soft drinks
these days, companies such as Coke and Pepsi have had to develop new,
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substitute offerings such as vitamin water and sports drinks. However, other
companies such as Dannon or Nestlé may also be potential entrants in the
flavored water market.
When you select a hamburger fast-food chain, you also had the option of
substitutes such as getting food at the grocery or going to a pizza place. When
computers entered the market, they were a substitute for typewriters. Most
students may not have ever used a typewriter, but some consumers still use
typewriters for forms and letters.
Suppliers, the companies that supply ingredients as well as packaging materials
to other companies, must also be considered. If a company cannot get the
supplies it needs, it's in trouble. Also, sometimes suppliers see how lucrative
their customers' markets are and decide to enter them. Buyers, who are the
focus of marketing and strategic plans, must also be considered because they
have bargaining power and must be satisfied. If a buyer is large enough, and
doesn't purchase a product or service, it can affect a selling company's
performance. Walmart, for instance, is a buyer with a great deal of bargaining
power. Firms that do business with Walmart must be prepared to make
concessions to them if they want their products on the company's store shelves.
Lastly, the world is becoming "smaller" and more of a global marketplace.
Companies everywhere are finding that no matter what they make, numerous
firms around the world are producing the same "widget" or a similar offering
(substitute) and are eager to compete. Employees are in the same position. The
Internet has made it easier than ever for customers to find products and services
and for workers to find the best jobs, even if they are abroad. Companies are also
acquiring foreign firms. These factors all have an effect on the strategic decisions
companies make.
The Political and Legal Environment
All organizations must comply with government regulations and understand the
political and legal environments in which they do business. Different government
agencies enforce the regulations that have been established to protect both
consumers and businesses. For example, the Sherman Act (1890) prohibits US
firms from restraining trade by creating monopolies and cartels. The regulations
related to the act are enforced by the Federal Trade Commission (FTC), which
also regulates deceptive advertising. The US Food and Drug Administration
(FDA) regulates the labeling of consumable products, such as food and medicine.
One organization that has been extremely busy is the Consumer Product Safety
Commission, the group that sets safety standards for consumer products.
When organizations conduct business in multiple markets, they must understand
that regulations vary across countries and across states. Many states and
countries have different laws that affect strategy. For example, suppose you are
opening a new factory because you cannot keep up with the demand for your
products. If you are considering opening the factory in France (perhaps because
the demand in Europe for your product is strong), you need to know that it is
illegal for employees in that country to work more than 35 hours per week.
The Economic Environment
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The economy has a major impact on spending by both consumers and
businesses, which, in turn, affects the goals and strategies of organizations.
Economic factors include variables such as inflation, unemployment, interest
rates, and whether the economy is in a growth period or a recession. Inflation
occurs when the cost of living continues to rise, eroding the purchasing power of
money. When this happens, you and other consumers and businesses need more
money to purchase goods and services. Interest rates often rise when inflation
rises. Recessions can also occur when inflation rises because higher prices
sometimes cause low or negative growth in the economy.
During a recessionary period, it is possible for both high-end and low-end
products to sell well. Consumers who can afford luxury goods may continue to
buy them, while consumers with lower incomes tend to become more value-
conscious. Other goods and services, such as products sold in traditional
department stores, may suffer. In the face of a severe economic downturn, even
the sales of luxury goods can suffer. The economic downturn that began in 2008
affected consumers and businesses at all levels worldwide. Consumers reduced
their spending, holiday sales dropped, financial institutions went bankrupt, the
mortgage industry collapsed, and the "Big Three" US auto manufacturers
(Chrysler, Ford, and General Motors) asked for emergency loans.
The Demographic and Social and Cultural Environments
The demographic and social and cultural environments—including social trends,
such as people's attitudes toward fitness and nutrition; demographic
characteristics, such as people's age, income, marital status, education, and
occupation; and culture, which relates to people's beliefs and values—are
constantly changing in the global marketplace. Fitness, nutrition, and health
trends affect the product offerings of many firms. For example, PepsiCo
produces vitamin water and sports drinks. More women are working, which has
led to a rise in the demand for services such as house cleaning and daycare. US
baby boomers are reaching retirement age, sending their children to college, and
trying to care for their elderly parents all at the same time. Firms are responding
to the time constraints their buyers face by creating products that are more
convenient, such as frozen meals and nutritious snacks.
The composition of the population is also constantly changing. Hispanics are the
fastest-growing minority in the United States. Consumers in this group and other
diverse groups prefer different types of products and brands. In many cities,
stores cater specifically to Hispanic customers.
Technology
The technology available in the world is changing the way people communicate
and the way firms do business. Everyone is affected by technological changes.
Self-scanners and video displays at stores, ATMs, the Internet, and mobile
phones are a few examples of how technology is affecting businesses and
consumers. Many consumers get information, read the news, use text messaging,
and shop online. As a result, marketers have begun allocating more of their
promotion budgets to online ads and mobile marketing and not just to traditional
print media such as newspapers and magazines. Applications for telephones and
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electronic devices are changing the way people obtain information and shop,
allowing customers to comparison shop without having to visit multiple stores.
Many young people may rely more on electronic books, magazines, and
newspapers and depend on mobile devices for most of their information needs.
Organizations must adapt to new technologies in order to succeed.
Natural Resources
Natural resources are scarce commodities, and consumers are becoming
increasingly aware of this. Today, many firms are doing more to engage in
"sustainable" practices that help protect the environment and conserve natural
resources. Green marketing involves marketing environmentally safe products
and services in a way that is good for the environment. Water shortages often
occur in the summer months, so many restaurants now only serve patrons water
upon request. Hotels voluntarily conserve water by not washing guests' sheets
and towels every day unless the guests request it. Reusing packages (refillable
containers) and reducing the amount of packaging, paper, energy, and water in
the production of goods and services are becoming key considerations for many
organizations, whether they sell their products to other businesses or to final
users (consumers). Construction companies are using more energy-efficient
materials and often have to comply with green building solutions. Green
marketing not only helps the environment but also saves the company, and
ultimately the consumer, money. Sustainability, ethics (doing the right things),
and social responsibility (helping society, communities, and other people)
influence an organization's planning process and the strategies it implements.
Although environmental conditions change and must be monitored continuously,
the situation analysis is a critical input to an organization's or an individual's
strategic plan.
The Mission Statement
The firm's mission statement states the purpose of the organization and why it
exists. Both profit and nonprofit organizations have mission statements, which
they often publicize.
PepsiCo's mission statement is as follows: "Our mission is to be the world's
premier consumer products company focused on convenient foods and
beverages. We seek to produce financial rewards to investors as we provide
opportunities for growth and enrichment to our employees, our business
partners and the communities in which we operate. And in everything we do, we
strive for honesty, fairness and integrity" (PepsiCo, Mission and Vision, n.d.).
The United Way's mission statement reads, "United Way improves lives by
mobilizing the caring power of communities around the world to advance the
common good" (United Way, n.d.).
Sometimes SBUs develop separate mission statements. For example, PepsiCo
Americas Beverages, PepsiCo Americas Foods, and PepsiCo International might
each develop a different mission statement.
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A firm must analyze factors in the external and internal
environments it faces throughout the strategic planning process.
These factors are inputs to the planning process. As they change,
the company must be prepared to adjust its plans. Different
factors are relevant for different companies. Once a company has
analyzed its internal and external environments, managers can
begin to decide which strategies are best, given the firm's mission
statement.
Developing Organizational Objectives and Formulating Strategies
Developing Objectives
Objectives are what organizations want to accomplish—the end results they want
to achieve—in a given time frame. In addition to being accomplished within a
certain time frame, objectives should be realistic (achievable) and be measurable,
if possible. "To increase sales by 2 percent by the end of the year" is an example
of an objective an organization might develop. You have probably set objectives
for yourself that you want to achieve in a given time frame. For example, your
objectives might be to maintain a certain grade-point average and get work
experience or an internship before you graduate.
Objectives help guide and motivate a company's employees and give its
managers reference points for evaluating the firm's marketing actions. Although
many organizations publish their mission statements, most for-profit companies
do not publish their objectives. Accomplishments at each level of the
organization have helped PepsiCo meet its corporate objectives. PepsiCo's
business units (divisions) have increased the number of their facilities to grow
their brands and enter new markets. PepsiCo's beverage and snack units have
gained market share by developing healthier products and products that are
more convenient to use.
A firm's marketing objectives should be consistent with the company's objectives
at other levels, such as the corporate level and business level. An example of a
marketing objective for PepsiCo might be "to increase by 4 percent the market
share of Gatorade by the end of the year."
Formulating Strategies
Strategies are the means to the ends, the game plan, or what a firm is going to do
to achieve its objectives. Successful strategies help organizations establish and
maintain a competitive advantage that competitors cannot imitate easily. Tactics
include specific actions, such as coupons, television commercials, banner ads,
etc., taken to execute the strategy. PepsiCo attempts to sustain its competitive
advantage by constantly developing new products and innovations, including
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"mega brands," which include individual brands that generate over $1 billion in
sales each. The tactics may consist of specific actions (commercials during the
Super Bowl; coupons; buy one, get one free, etc.) to advertise each brand.
Firms often use multiple strategies to accomplish their objectives and capitalize
on marketing opportunities. For example, in addition to pursuing a low-cost
strategy (selling products inexpensively), Walmart has simultaneously pursued a
strategy of opening new stores rapidly around the world. Many companies
develop marketing strategies as part of their general, overall business plans.
Other companies prepare separate marketing plans.
A marketing plan is a strategic plan at the functional level that provides a firm's
marketing group with direction. It is a road map that improves the firm's
understanding of its competitive situation. The marketing plan also helps the firm
allocate resources and divvy the tasks that employees need to do for the
company to meet its objectives.
Market penetration strategies focus on increasing a firm's sales of its existing
products to its existing customers. Companies often offer consumers special
promotions or low prices to increase their products' use and encourage
consumers to buy products. When Frito-Lay distributes money-saving coupons
to customers or offers them discounts to buy multiple packages of snacks, the
company is using a penetration strategy. The Campbell Soup Company gets
consumers to buy more soup by providing easy recipes using soup as an
ingredient for cooking quick meals.
Product development strategies involve creating new products for existing
customers. A new product can be a new innovation, an improved product, or a
product with enhanced value, such as one with a new feature. Cell phones that
allow consumers to charge purchases with the phone or take pictures are
examples of a product with enhanced value. A new product can also be one that
comes in different variations, such as new flavors, colors, and sizes. Mountain
Dew Voltage, introduced by PepsiCo Americas Beverages in 2009, is an example.
Keep in mind, however, that what works for one company might not work for
another. For example, just after Starbucks announced it was cutting back on the
number of its lunch offerings, Dunkin' Donuts announced it was adding items to
its lunch menu.
Market development strategies focus on entering new markets with existing
products. For example, during a recent economic downturn, manufacturers of
high-end coffee makers began targeting customers who go to coffee shops. The
manufacturers are hoping to develop the market for their products by making
sure consumers know they can brew a great cup of coffee at home for a fraction
of what they spend at Starbucks.
New markets can include any new groups of customers such as different age
groups, new geographic areas, or international markets. Many companies,
including PepsiCo and Hyundai, have entered—and been successful in—emerging
markets such as Russia, China, and India. Decisions to enter foreign markets are
based on a company's resources as well as the complexity of factors such as the
political environmental, economic conditions, competition, customer knowledge,
and probability of success in the desired market. There are different ways, or
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strategies, by which firms can enter international markets. The strategies vary in
the amount of risk, control, and investment firms face. Firms can simply export,
or sell their products to buyers abroad, which is the least risky and least
expensive method but also offers the least amount of control. Many small firms
export their products to foreign markets.
Firms can also license, or sell the right to use some aspect of their production
processes, trademarks, or patents to individuals or firms in foreign markets.
Licensing is a popular strategy, but firms must figure out how to protect their
interests if the licensee decides to open its own business and void the license
agreement. The French luggage and handbag maker Louis Vuitton faced this
problem when it entered China. Competitors started illegally putting the Louis
Vuitton logo on different products, which cut into Louis Vuitton's profits.
Franchising is a longer-term (and thus riskier) form of licensing that is popular
with service firms, such as restaurants like McDonald's and Subway, hotels like
Holiday Inn Express, and cleaning companies like Stanley Steemer. Franchisees
pay a fee and must adhere to certain standards; however, they benefit from the
advertising and brand recognition the franchising company provides.
Contract manufacturing allows companies to hire manufacturers to produce
their products in another country. The manufacturers are provided specifications
for the products, which are then manufactured and sold on behalf of the
company that contracted the manufacturing. Contract manufacturing may
provide tax incentives and may be more profitable than manufacturing the
products in the home country. Examples of products in which contract
manufacturing is often used include cell phones, computers, and printers.
Joint ventures combine the expertise and investments of two companies and
help companies enter foreign markets. The firms in each country share the risks
as well as the investments. Some countries such as China often require
companies to form a joint venture with a domestic firm in order to enter the
market. After entering the market in a partnership with a domestic firm and
becoming established in the market, some firms may decide to separate from
their partner and become their own business. Fuji Xerox Co. Ltd. is an example of
a joint venture between the Japanese Fuji Photo Film Co. and the American
document management company Xerox. Another example of a joint venture is
Sony Ericsson. The venture combined the Japanese company Sony's electronic
expertise with the Swedish company Ericsson's telecommunication expertise.
With investment by both companies, joint ventures are riskier than exporting,
licensing, franchising, and contract manufacturing but also provide more control
to each partner.
Direct investment (owning a company or facility overseas) is another way to
enter a foreign market, providing the most control but also having the most risk.
For example, In Bev, the Dutch maker of Beck's beer, was able to capture market
share in the United States by purchasing St. Louis-based Anheuser-Busch. A
direct investment strategy involves the most risk and investment but offers the
most control. Other companies such as advertising agencies may want to invest
and develop their own businesses directly in international markets rather than
trying to do so via other companies.
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Diversification strategies involve entering new markets with new products or
doing something outside a firm's current businesses. Firms that have little
experience with different markets or different products often diversify their
product lines by acquiring other companies. Diversification can be profitable, but
it can also be risky if a company does not have the expertise or resources it
needs to successfully implement the strategy. Warner Music Group's purchase of
the concert promoter Bulldog Entertainment is an example of a diversification
attempt that failed.
The strategic planning process includes a company's mission
(purpose), objectives (end results desired), and strategies (means).
Sometimes the different SBUs of a firm have different mission
statements. A firm's objectives should be realistic (achievable) and
measurable. The different product market strategies firms pursue
include market penetration, product development, market
development, and diversification.
Where Strategic Planning Occurs Within Firms
Strategic planning is a long-term process that helps an organization allocate its
resources to take advantage of different opportunities. In addition to marketing
plans, strategic planning may occur at different levels within an organization. For
example, in large organizations, top executives will develop strategic plans for
the corporation as a whole. These are corporate-level plans. In addition, many
large firms have different divisions, or businesses, called strategic business units.
A strategic business unit (SBU) is a business or product line within an
organization that has its own competitors, customers, and profit center for
accounting purposes. A firm's SBUs may also have their own mission statements
(purpose) and will generally develop strategic plans for themselves. These are
called business-level plans. The different departments, or functions (accounting,
finance, marketing) within a company or SBU might also develop strategic plans.
For example, a company may develop a marketing plan or a financial plan, which
are functional-level plans.
The number of levels can vary, depending on the size and structure of an
organization. Not every organization will have every level or have every type of
plan.
The strategies and actions implemented at the functional (department) level
must be consistent with an organization's objectives and help an organization
achieve those objectives at both the business and corporate levels, and vice
versa. The SBUs at the business level must also be consistent with an
organization's corporate-level objects and help an organization achieve those
corporate objectives. For example, if a company wants to increase its profits at
the corporate level and owns multiple business units, each unit might develop
strategic plans to increase its own profits and thereby the firm's profits as a
whole. At the functional level, a firm's marketing department might develop
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strategic plans to increase sales and the market share of the firm's most
profitable products, which will increase profits at the business level and help the
corporation's profitability. Both business level and functional plans should help
the firm increase its profits, so that the company's corporate-level strategic
objectives can be met.
At the functional (marketing) level, for example, to increase PepsiCo's profits,
employees responsible for different products or product categories such as
beverages or foods might focus on developing healthier products and making
their packaging more environmentally friendly so the company captures more
market share. For example, the new Aquafina bottle uses less plastic and has a
smaller label, which helps the environment by reducing the amount of waste.
Organizations can use multiple methods and strategies at different levels in the
corporation to accomplish their goals just as you may use different strategies to
accomplish your goals. However, the basic components of the strategic planning
process are the same at each of the different levels.
Strategic planning can occur at different levels (corporate,
business, and functional) in an organization. The number of levels
may vary. However, if a company has multiple planning levels, the
plans must be consistent, and all must help achieve the overall
goals of the corporation.
Strategic Portfolio Planning Approaches
When a firm has multiple strategic business units as PepsiCo does, it must decide
what the objectives and strategies for each business are and how to allocate
resources among them. A group of businesses can be considered a portfolio, just
as a collection of artwork or investments compose a portfolio. In order to
evaluate each business, companies sometimes use what's called a portfolio
planning approach. A portfolio planning approach involves analyzing a firm's
entire collection of businesses relative to one another. Two of the most widely
used portfolio planning approaches include the Boston Consulting Group (BCG)
matrix and the General Electric (GE) approach.
The Boston Consulting Matrix
The Boston Consulting Group (BCG) matrix helps companies evaluate each of its
strategic business units based on two factors: the SBU's market growth rate (i.e.,
how fast the unit is growing compared to the industry in which it competes) and
the SBU's relative market share (i.e., how the unit's share of the market compares
to the market share of its competitors). Because the BCG matrix assumes that
profitability and market share are highly related, it is a useful approach for
making business and investment decisions. However, the BCG matrix is
Key Points
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subjective, and managers should also use their judgment and other planning
approaches before making decisions. Using the BCG matrix, managers can
categorize their SBUs (products) into one of four categories:
stars—Everyone wants to be a star. A star is a product with high growth and
a high market share. To maintain the growth of its star products, a company
may have to invest money to improve them and how they are distributed as
well as promote them. The iPod, when it was first released, was an example
of a star product.
cash cows—A cash cow is a product with low growth and a high market
share. Cash cows have a large share of a shrinking market. Although they
generate a lot of cash, they do not have a long-term future. For example,
DVD players were a cash cow for Sony. Eventually, DVDs are likely to be
replaced by digital downloads, just like MP3s replaced CDs. Companies with
cash cows need to manage them so that they continue to generate revenue
to fund star products.
question marks or problem children—Did you ever hear an adult say they
didn't know what to do with a child? The same question or problem arises
when a product has a low share of a high-growth market. Managers classify
these products as question marks or problem children. They must decide
whether to invest in them and hope they become stars, or gradually
eliminate them or sell them. For example, as the price of gasoline soared in
2008, many consumers purchased motorcycles and mopeds, which get
better gas mileage. However, some manufacturers have a very low share of
this market. These manufacturers now have to decide what they should do
with these products.
dogs—In business, it is not good to be considered a dog. A dog is a product
with low growth and low market share. Dogs do not make much money and
do not have a promising future. Companies often get rid of dogs. However,
some companies are hesitant to classify any of their products as dogs. As a
result, they keep producing products and services they shouldn't or invest in
dogs in hopes they'll succeed..
The BCG matrix helps managers make resource allocation decisions once
different products are classified. Depending on the product, a firm might decide
on a number of different strategies for it. One strategy is to build market share
for a business or product, especially a product that might become a star. Many
companies invest in question marks because market share is available for them
to capture. The success sequence is often used as a means to help question
marks become stars. With the success sequence, money is taken from cash cows
(if available) and invested into question marks in hopes of them becoming stars.
Holding market share means the company wants to keep the product's share at
the same level. When a firm pursues this strategy, it only invests what it has to in
order to maintain the product's market share. When a company decides to
harvest a product, the firm lowers its investment in it. The goal is to try to
generate short-term profits from the product regardless of the long-term impact
on its survival. If a company decides to divest a product, the firm drops or sells it.
That's what Procter & Gamble did in 2008 when it sold its Folgers coffee brand
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to Smuckers. Proctor & Gamble also sold Jif peanut butter brand to Smuckers.
Many dogs are divested, but companies may also divest products because they
want to focus on other brands they have in their portfolio.
As competitors enter the market, technology advances, and consumer
preferences change, the position of a company's products in the BCG matrix is
also likely to change. The company has to continually evaluate the situation and
adjust its investments and product promotion strategies accordingly. The firm
must also keep in mind that the BCG matrix is just one planning approach and
that other variables can affect the success of products.
The General Electric Approach
Another portfolio planning approach that helps a business determine whether to
invest in opportunities is the General Electric (GE) approach. The GE approach
examines a business's strengths and the attractiveness of the industry in which it
competes. As we have indicated, a business's strengths are factors internal to the
company, including strong human resources capabilities (talented personnel),
strong technical capabilities, and the fact that the firm holds a large share of the
market. The attractiveness of an industry can include aspects such as whether
there is a great deal of growth in the industry, whether the profits earned by the
firms competing within it are high or low, and whether it is difficult to enter the
market. For example, the automobile industry is not attractive in times of
economic downturn such as the recession in 2009, so many automobile
manufacturers don't want to invest more in production. They want to cut or stop
spending as much as possible to improve their profitability. Hotels and airlines
face similar situations.
Companies evaluate their strengths and the attractiveness of industries as high,
medium, and low. The firms then determine their investment strategies based on
how well the two correlate with one another. The investment options outlined in
the GE approach can be compared to a traffic light. For example, if a company
feels that it does not have the business strengths to compete in an industry and
that the industry is not attractive, this will result in a low rating, which is
comparable to a red light. In that case, the company should harvest the business
(slowly reduce the investments made in it), divest the business (drop or sell it), or
stop investing in it, which is what happened with many automotive
manufacturers.
Although many people may think a yellow light means "speed up," it actually
means caution. Companies with a medium rating on industry attractiveness and
business strengths should be cautious when investing and attempt to hold the
market share they have. If a company rates itself high on business strengths and
the industry is very attractive (also rated high), this is comparable to a green light.
In this case, the firm should invest in the business and build market share. During
bad economic times, many industries are not attractive. However, when the
economy improves, businesses must reevaluate opportunities.
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A group of businesses is called a portfolio. Organizations that have
multiple business units must decide how to allocate resources to
them and decide what objectives and strategies are feasible for
them. Portfolio planning approaches help firms analyze the
businesses relative to each other. The BCG and GE approaches are
two or the most common portfolio planning methods.
References
InfoMarketersZone.com. (n.d.). How do you develop a unique value proposition?
Retrieved from http://www.infomarketerszone.com/public/182.cfm
Lake, L. (2016). Develop your value proposition. Retrieved from
http://marketing.about.com/od/marketingplanandstrategy/a/valueprop.htm
PepsiCo Inc. (n.d.). PepsiCo brands. Retrieved from
http://www.pepsico.com/Brands/BrandExplorer
PepsiCo Mission and Vision (n.d.). Retrieved from
http://www.pepsico.com/Company/Our-Mission-and-Vision.html
Porter, M. (1980). Competitive strategy. New York, NY: The Free Press, pp. 3–33.
United Way. (n.d.). Our mission. Retrieved from
http://www.liveunited.org/about/missvis.cfm
Licenses and Attributions
Chapter 2: Strategic Planning
(https://2012books.lardbucket.org/books/marketing-principles-v2.0/s05-
strategic-planning.html) from Marketing Principles is available under a
Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported
(https://creativecommons.org/licenses/by-nc-sa/3.0/) license without
attribution as requested by the site's original creator or licensee. UMUC has
modified this work and it is available under the original license.
© 2020 University of Maryland Global Campus
All links to external sites were verified at the time of publication. UMGC is not responsible for the validity or
integrity of information located at external sites.
Key Points
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Journal of Knowledge Globalization, Volume 8, Number 2, 2015
Management, Strategies, Tools, and Practices in
eMarketing
Sirous Tabrizi
University of Windsor, Windsor, Canada
Mohammad Kabirnejat
Islamic Azad University, Hashtrood Branch, Iran
Abstract
Globalization has resulted in significant changes in the way business is conducted
all over the world. For instance, outsourcing specialist jobs, alliances among large
multinational companies, and high degree of government involvement in markets
have all forced companies to adjust their structures, practices, and policies. For
marketers, two major changes have influenced their practices: increasingly global
demographic and deeper customer engagement. Since “push” advertising is
becoming increasingly irrelevant, companies need to do more outside the
traditional marketing approaches. emarketing is one of the new approaches
towards marketing that shows significant promise, especially given the
increasingly dominant role played by the Internet in society and popular culture.
This article discusses some of the changes necessary to take an e-marketing
approach in a business, and focus specifically on several important instruments
(the SOSTAC and SMART frameworks) that can help develop consistent
strategies. Some conjectured examples are presented to help understand the main
argument.
Keywords: Globalization, eMarketing, SOSTAC, SMART, branding, marketing
mix, emarketing management style
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Introduction
Globalization has resulted in significant changes in the way business is conducted
all over the world. For instance, numerous companies including such as IBM,
Microsoft, and Philips have started outsourcing specialists from various parts of
the world, enabling global movement of people for jobs and requiring structural
changes to the company (Engardio, Bernstein, & Kripalani, 2003). In addition ,
globalization has had a positive effect on the economic situation of many
developing countries, such as China, India and Bangladesh. However, companies
all over the world have to take the practical marketing strategies to give better
services to customers.
Philip Kotler, who is considered as the father of modern marketing, by many,
defines marketing as “the science and art of exploring, creating, and delivering
value to satisfy the needs of a target market at a profit. Marketing identifies
unfulfilled needs and desires. It defines, measures, and quantifies the size of the
identified market and the profit potential. It pinpoints which segments the
company is capable of serving best and it designs and promotes the appropriate
products and services” (Kotler, 2005; p.10).
In the specific case of e-marketing , a more comprehensive and practical definition
is provided by specialists at CISCO: “Electronic Marketing (E-Marketing) is a
generic term utilized for a wide range of activities -advertising, customer
communications, branding, fidelity programs etc. - using the internet” (Otlacan,
2007). In other words, E-Marketing is the process of finding, attracting, winning,
and retaining customers through electronic means (Stokes, 2008). Primarily this
is accomplished through the Internet but also through e-mail, social networking,
and various forms of wireless media. Hence, it is not just producing a website but
through facilitating online dialog between consumers and the company (Stokes,
2008).
“E-Marketing is also known as Internet Marketing, Web Marketing, Digital
Marketing, and Online Marketing” (Levinson & Neitlich, 2011, p. 89). It includes
both direct response marketing and indirect marketing elements, and is a continual
process rather than something which is executed only once. The messages and
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stories developed through traditional marketing can be improved through
technology and electronic means in a variety of ways.
eMarketing adds new dimensions and meaning to traditional marketing. Such as
reach, scope, interactivity, immediacy, demographic, supply chain, value chain,
and financial chain.
Reach:
Due to the nature of the Internet, E-Marketing can have a global reach and access
potential customers from all over the world. This can also be performed on a much
smaller budget than what was normally necessary for a comparable reach (Dann
& Dann, 2011).
Scope:
E-Marketing allows a variety of methods for reaching customers and enables a
wide range of products and services that can be offered. Therefore, the marketing
of a product is combined with other areas such as brand formation, public
relations, customer service, and information management in a way that was
traditionally not possible (Dann & Dann, 2011).
Interactivity:
Since E-Marketing is a dialog between customers and companies, there is a degree
of interaction between the two that does not exist in traditional marketing.
Companies can use the responses, complaints, and commendations of customers
to further develop their brands and better their own image (Krishnamurthy, 2006).
On the other hand, customers feel more engaged with the company and can
become empowered to promote the product through their own actions and
discussions. The marketing landscape thus becomes more dynamic, adaptive, and
capable of achieving faster and deeper growth.
Immediacy:
The Internet, being pervasive and always accessible, provides a constant and
continual means through which customers can be engaged and view and buy
products. E-Marketing effectively closes the gap between providing information,
advertising, and buy opportunities and eliciting a reaction from customers
(Krishnamurthy, 2006; Dann & Dann, 2011).
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Demographics:
Generally speaking, Internet users have a significant buying power, as they are
skewed towards the middle-classes, and are often capable of organizing
themselves into focused groupings and sub-populations (Krishnamurthy, 2006;
Dann & Dann, 2011). As such, savvy marketers can find access to desired niche
markets in addition to being able to easily and effective target such groups
(Parsons, & Maclaran, 2009).
Literature
From the very beginning, marketing in the 21st century has been different.
Marketers today have a greater number and variety of choices in support, media
opportunities, and methods of communications but they also face increasing
competition due to the Internet facilitating virtual competition (Andreasen, 2006).
E-marketing is the application of marketing techniques, principles, and practices
using electronic media, especially the Internet (Pride & Ferrell, 2011). It
encompasses all the activities which a company conducts through the Internet so
as to attract new business, retain current business, or develop its brand identity. In
an analysis of e-business components and accepted marketing concepts, Albert
and Sanders (2003) developed this definition:
“E-business marketing is a concept and process of adapting the relevant and
current technologies to the philosophy of marketing and its management. Focused
attention on the areas of e-commerce, business intelligence, customer relationship
management, supply chain management, and enterprise resource planning provide
a framework for effective adaptation. Although the electronic environment
experiences rapid changes, the reliance on proven marketing models, in these
areas, ensures continuity of the marketing process both online and off-line.” (P.
10)
Management for E-Marketing
Management plays an important role in E-Marketing, one which establishes the
system for decision making, improving customer knowledge, efficient targeting
of advertising, and so on (Chan, 2005). The style of management is an important
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consideration when attempting to implement any E-Marketing plan (Chan, 2005).
Generally speaking, there are two kinds of management styles - centralized and
decentralized - though there is a range of styles between those two values (Albert
& Sanders, 2003). Although the approach style depends on the size of the
company and the management context, for E-Marketing it is generally better to
use a decentralized approach.
In a decentralized approach, decision making authority is distributed throughout
a larger group such that lower level individuals have higher authority than they
would in other contexts (Daft & Marcic, 2005). For E-Marketing, this is valuable
for adapting to customer feedback, responding positively to emerging trends, and
providing opportunities for individual employees to engage with customers in a
more natural manner. Given that decision making is distributed across the group,
it also enables customers to be part of the decision-making process without
jeopardizing the authority of the company. Hence, companies can learn the desires
and interests of the customers, so as to better market products to them, while
customers can feel as though the company takes them seriously and are able to
form stronger attachment to company brands (Pride & Ferrell, 2011).
However, a decentralized management style can be problematic in terms of
cooperation. Since all individuals in the decision-making process have similar
authority, they may refuse to cooperate or may go in completely different
directions for solving some problem (Daft & Marcic, 2005). Hence, the role of a
manager becomes one who guides other employees with common vision, goals,
and objectives so that there is cooperation in terms of results. Each individual
should be able to use their own strengths to accomplish the goal. In order to
accomplish this , managers need to understand the strengths and weaknesses of
the employees and be able to create objectives that can be tailor to specific
strengths. Managers cannot do this unless they have the desire to know and
understand others: other employees and the customers (Daft & Marcic, 2005).
This desire to know others, for the purpose of cooperation, is part of what is
commonly called a social-justice leader. Hence, the role of management in E-
Marketing is to provide leadership in cooperation, in understanding the desires
and strengths of others, and being able to guide by objectives and by example.
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Management for emarketing needs different kind of skills set and leadership style
than in-person marketing. In marketing most leadership functions are exerted
through technology rather than face-to-face. There is an absolute need to have a
clear and well defined system of management control for feedback and
motivation. A manager must have online communication proficiency,
comfortable with tools and techniques and must follow etiquette of online
communication. Managers and the employees mush have real-time access to
reports, feedback, updates and guidelines.
Strategy
Once good objectives have been identified it is time to develop a strategy. For
example, consider a company with a 40% market share with their phone card. A
possible objective would be to increase that market share to 45% or to 60%, either
of which will have different hurdles to overcome. What strategy would be
developed? It could be through increasing sales, through building a better brand,
through reducing the price of the product, and so on. However, some strategies
may not be appropriate for the objective. For instance, improving the quality of
the product may not increase market share but instead would be better for an
objective of maintaining a hold on the existing 40%. As well, some strategies may
be more time intensive than others. For instance, consider a brand name of this
phone card as the CC Phone Card. Improving the brand of CC may be difficult in
an English context due to the similarity of the name with the English word “sissy”,
an already derogatory and insulting name. It may be easier to use a different name
of the card in an English context, and keep the name for a context where the sound
does not have the same connotation. For instance, in Spanish CC is similar to
saying “Yes Yes”, which may have a positive connotation. Hence, the calling card
could be marketed as CC in Spanish areas but something else in English areas.
Tactics
Once the overall strategy has been developed, it is necessary to make that strategy
achievable in a practical sense. Since a strategy is very general and may be meant
for years, it is difficult for individual employees to determine how they can be
involved in accomplishing it. Thus, a series of tactics will be useful. These are
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Journal of Knowledge Globalization, Volume 8, Number 2, 2015
short-term or small-scope sets of actions that employees can perform so as to
accomplish the strategy. While still somewhat general, so that each employee can
apply their own strengths to it, these are far more focused in intention and may be
directed to specific groups of employees or even specific employees.
For instance, consider the strategy of improving the brand name. Some tactics
could involve advertising campaigns, engaging with customer groups, providing
information for blogs to get the name out there in the Internet, monitoring the
response of different groups, and so on. No employee would do all of these things;
they would only focus on one or two while others would engage in the remaining
tactics. Similarly, tactics are meant to change regularly as the strategy is put into
action.
Action
Once the tactics have been identified, employees engage in daily and weekly
actions for implementing them. Therefore, the actions are the realm of each
employee. However, monitoring these actions to identify problems and measure
progress is important. One effective means for doing so is through using Gantt
charts. These charts are meant for identifying how long certain actions may take,
and can be updated regularly by employees so that progress in accomplishing an
action is easily identifiable. Similarly, by allowing employees to monitor their
own progress, it reduces the likelihood of managerial interruption and the negative
aspects of managerial control.
Control
The SOSTAC framework is a continuous one, which involves a cycle of steps.
The final step of control is there to allow reflection, monitoring of results, and a
means of adapting to new circumstances. As progress in implementing an E-
Marketing plan occurs, it is important to identify markers of progress and
problems. In doing so, it becomes possible to take advantage of positive
circumstances for a company (such as a new fad being developed around the
product) and to quickly respond to problems (such as a viral video depicting the
product as bad). Hence, this step is meant to continually monitor the environment
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surrounding the product to ensure progress continues to be made in achieving the
objectives.
Finding
It is important to identify the strengths and weaknesses of the company in different
areas. For instance, what is the product being developed? What strengths does this
company have in developing and marketing that product? What weaknesses are
there and how can the company change to eliminate those weaknesses? While
many possible areas could be examined, Table 2 below contains an example of
critical areas to consider first.
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Table 2: Marketing Strengths and Weaknesses for a Company
Now that company’s situation is well analyzed, it is time to examine competitors.
This involves researching who they are, how they compete against your company
Marketing Mix Strength Weakness Action Required
Product (Calling Card) High
quality
High quality. Low product
differentiation (not
unique).
Reduce cost of card
possibly through lower
quality.
Decent packaging.
Price ($5.00 CA) Cheaper than some
competitors.
Not leader in
lowest price.
Decrease price to
remain competitive.
Accessible to r
customers.
Place (Distribution through Available in many
stores, and
different chains.
Sales dependent
on store hours.
brick--and--mortar stores) Available in several
countries.
No online
distribution.
Promotion (Word-of-mouth
advertising)
Very low cost. Not innovative
compared to online
options.
Promotional prizes of
discounts for frequent
users.
Service Reliable service. Cards with very
People (Customers and
Employees)
Usable by people
from many different
nationalities and
languages.
Low integration
in non-immigrant
North American
market.
Processes Cards are easily and
efficiently
produced.
Selling through
distributors
distances
company from
customers.
Physicals (the physical
calling card)
Cards do not easily
break. Card is good
size and shape.
Suggestions of
scratch pad on
back being
carcinogenic.
Numbers on back
are hard to read
for many people.
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in terms of products, what overlap exists between products, how market share is
divided between the companies, and what strategies your company has for dealing
with competition.
Table 3: Competition Analysis
Main Competitors Strengths Weaknesses Our Strategy to
Compete
Rechargeable cards.
Rechargeable online,
no need to constantly
buy new cards.
People who have
difficulty using
computers or
Take an analyzer
approach to
competing.
Account summaries of
calls, minutes, costs,
easily accessible.
People who lack a
credit card cannot
be customers.
Engage in horizontal
integration. For
example, combine
reviewing remaining
balance on a card
with other existing
services.
Online purchasing of
cards.
Limited offline
purchasing.
Take a reactive
approach to
competing.
Cost comparison of
different brands on
their website to find
cheapest card
available.
Only available in
major countries.
Ensure our card is
available in same
location as theirs.
Available in a variety
of countries.
expand availability to
other areas. Offline
competition remains
very strong.
Angry Calling Card
BB Calling Card
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Conclusion
E-Marketing allows companies to reach a much wider audience for products and
services that are traditionally possible, and engage in a productive dialog with
customers and the managers that takes the traditional method of marketing to a
newer level. However, developing and implementing an e-marketing plan is very
complex. Not only do we have to come up with appropriate ideas and strategies
but also it is the point where a company discovers whether an idea is actually
going to work in practice. Critical to the success of implementing a plan is the
original objectives setting process. Objectives that are unclear will result in
unfocused and potentially unproductive actions.
Despite the importance of e-marketing in businesses, the theory is difficult to
actualize in practice for companies operating within countries where the citizens
has limited or restricted Internet access. Other cultural or normative practices can
also lead to difficulties. For instance, in a multi-lingual country, such as Iran, the
communication between customers and a company will greatly benefit from
having a variety of languages available for customers to engage in business. If
someone in one part of the country wants to speak with a marketing representative
in Arabic, the company will greatly benefit by having a representative who is able
to communicate in Arabic. However, if management does not see the value in
having alternative languages available, they may lose the opportunity of engaging
with a potentially significant portion of the country’s population.
The complexity of the E-Marketing environment and the number of variables in
the marketing strategy mean that the company have plenty of choice when it
comes to determining a specific implementation approach. Therefore,
measurement and analysis at all stages is crucial to ensure the plan is on track, to
identify when it falls off track, and how to take action to get back on track and
continue.
Effective E-Marketing requires knowledgeable management and manpower, such
that traditional management models like “top-down management” is not
appropriate.. In addition, the needs of E-Marketing customers should be the top
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priority; engendering customer commitment and loyalty are extremely important.
Hence, management must be even more serious in its attempts to supply the needs
of customers.
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Social Networks and the Buying Behavior of the Consumer
Introduction
An innovation is a new or novel idea for a product, service, or process, or an
enhancement to those offerings (Hivner, Hopkins, & Hopkins, 2003). Diffusion is
the process by which an innovation is communicated through specific channels
over time among members of a social system that are linked via networks
(Rogers, 1995). Thus, innovation diffusion involves the capacity to spread the
production and the use of an innovation in practice through the social network
structure of a group of stakeholders (Muzzi & Kautz, 2004; Dosi, 1988; Enos,
1962). Innovation diffusion is a central issue in high technology sectors of the
economy, such as information technology and telecommunications, which
continue to experience rapid technological changes and continuous innovation.
With network innovations, institutional networks have to be established to
ensure that innovations are diffused successfully in the community of the
adopters. Successful diffusion may require specific institutional actors, such as
opinion leaders and change agents, to initiate and carry out interdisciplinary
undertakings involving different stakeholder communities.
Structural network theorists argue that there are two aspects that determine the
behavior and the propensity of a stakeholder toward adopting technological
innovations: network density and centrality (Rowley, 1997; Nambisan & Agarwal,
1998). Network density characterizes the network as a whole. It measures its
interconnectedness in terms of "the relative number of ties in the network that
link actors together" (Rowley, 1997). The rationale of technologies is to provide
social benefits that can be derived from positive network externalities associated
with mass adoption (Papazafeiropoulou, 2004; Markus, 1990; Markus, 1990).
Such technologies constitute "network innovations" that diffuse through social
networks linking individuals and organizations (King, et al., 1994). The diffusion
of network innovations, at the environmental level, which includes institutional
and regulatory entities, is highly complex and has been relatively neglected in the
literature. Therefore, this paper aims, through a general overview of the
literature on the subject, to understand how the spread of social networks
influence the economy of enterprise. In other words, the research question,
which, the paper tries to answer, is, Can firms' use of social networks influence
the purchasing behavior of consumers, and if so, how?
Learning Resource
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In the first section, we study the main factors, according to academic literature,
that can influence the purchasing behavior of consumers. Then, we proceed to a
general overview of how and with whom social networks have spread, trying to
figure out if and how they can influence the management of firms and
organizations. Next, we investigate demand output and, in particular, the
purchasing behavior of the consumer, trying to study if and how the use of social
networks can influence the purchasing decisions of consumers. The fourth
section describes the methodology that is based on the literature review of the
topics covered by this work. Finally, we present the discussions and conclusions
of the paper.
The Purchasing Behavior of Consumers
Consumers' buying behavior has always been a popular marketing topic,
extensively studied and debated over the last decades, and no contemporary
marketing textbook is complete without a chapter dedicated to this subject. The
predominant approach describes the consumer buying process as learning,
information-processing, and decision-making activities divided into four steps:
1. problem identification
2. information search
3. purchasing decision
4. post-purchase behavior
According to much of the academic literature, demographic, social, economic,
cultural, psychological and other personal factors, largely beyond the control and
influence of marketing, have a major impact on consumer behavior and
purchasing decisions.
Therefore, purchasing decisions are influenced by a complex combination of
internal and external influences. Among these, Kotler and Armstrong (2010)
identify group membership and social networks.
In recent years, online social networking has emerged as a strong component of
social interaction. Social networking includes sites like blogs, networking
websites such as YouTube, and entire virtual worlds like Facebook. The new
social networking technologies offer a genuine communication channel that is
much more credible than any advertising company (Anya, 2006).
Furthermore, the use of social networks increases the word-of-mouth effect. For
this reason, marketers often try to identify or even create their own opinion
leaders for their products, who address their marketing activities. Companies like
Sony, Microsoft, McDonald's, and Procter & Gamble create their own leader of
opinions to facilitate the interactions between consumers (Voight, 2007).
Pellinen, Torma, Uusitalo, & Raijas (2010) indicate that financial skills and
competence are based on financial knowledge and understanding, and are
influenced by personal attitudes in spending and saving. For example, some
consumers are reluctant to make most of their purchases with credit cards
because of the fear that they may not be able to make full payment when their
credit bills are due (Chakravorti, 2003). Some researchers have posited that age,
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income level, occupation, and marital status influence credit card holders'
spending behavior (Erdem, 2008; Ming-Yen, Chong, & Mid Yong, 2013). A
number of interesting findings have been documented concerning age of credit
card holders. Devlin, Worthington, and Gerrard (2007) found that the older the
respondent, the more likely they are to possess one or more credit card.
However, college students and young credit card holders, albeit possessing fewer
credit cards, have been increasingly identified as contributors to credit card debt,
compared to more senior card holders.
In the same way, several studies have looked at the impact of income level on
credit card ownership and use. The findings are, however, not without varying
conclusions. Devlin, Worthington, and Gerrard (2007) found that households
with higher incomes tend to hold more credit cards. Nevertheless, due to their
high income, they are more likely to pay off their credit card debts (Balasundram
& Ronald, 2006). Slocum and Matthews (1970) argue that those from the lowest
category of income always think wisely before making any kind of money-related
decision.
Other studies also show that employment plays an important role in consumers'
purchasing decisions. In fact, Joo and Pauwels (2003) assert that occupation
could influence a person's consumption behavior. They found in their study that
managers and those in the self-employed category are most likely to be heavy
users of credit cards. On the other hand, students are often categorized as
having an occupation, and it has been recognized that many students are living
on the verge of financial crisis (Joo, Grable, & Bagwell, 2003; Manning, 2000). It
is for this reason that usage of credit cards by college students has received
increased visibility throughout the media.
Kinsey (1981) and Steidle (1994) also demonstrate that marital status and length
of marriage affect spending behavior. Devlin et al. (2007) discovered that
married respondents who participated in their research had more departmental
store credit cards than those who are single, separated, or divorced. This is not
difficult to understand, as married consumers are likely to have higher
expenditures than nonmarried consumers.
Bank policies and attitude toward money also play a role in spending behavior.
Many issuing banks and nonbanks offer incentives to entice consumers to apply
for credit cards (Chakravorti, 2003). These incentives include no annual fees
(which have been packaged as an annual fees waiver), cash rebates, point
rewards, airline miles, installment payment plan, and discounts for identified
purchases. Several researchers have argued that green consumer behavior is
determined by a multitude of factors depending on type of behavior and
involvement with the product and behavior. Stern (2000) presents four
categories of determinants of green consumer behaviors:
contextual forces
attitudinal factors
habits or routines
personal capabilities
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Contextual forces affect behavior indirectly through attitudinal factors.
Consumption attitudes are context-specific dispositions that connect personal,
stable values to actual consumption-level attitudes and behaviors (Cleveland,
Kalamas, & Laroche, 2005; Pickett-Baker & Ozaki, 2008). Using this notion, the
value-belief-norm theory has been developed and found valid in a wide variety
of green consumer (curtailment) behavior contexts, such as household energy
use, conservation behavior, and car use reduction (Stern, 2000; Poortinga, Steg,
& Vlek, 2004; Kaiser, Hubner, & Bogner, 2005; Eriksson, Garvill, & Nordlund,
2006; Nordlund & Garvill, 2003).
VBN theory postulates that the factors that influence the relationship between
values and actual behavior are personal moral norms that guide the actions of an
individual. Personal norms, experienced as feelings of moral obligation to act, are
postulated to create a willingness to act pro-environmentally. Personal norms are
in this respect assumed to be formed by incorporating social norms into a
consistent personal value system. The analysis of the literature has identified a
number of factors that, in some way, affect the actions of consumers on the
market.
Social Network and Management
Knowledge is one of the most decisive factors in achieving competitive
advantages for supply chain partners. However, economic systems based on
small and medium-sized enterprises (SMEs) are an important barrier for
transitions from traditional economies to knowledge-based ones. Malhotra,
Gosain, and El Sawy (2001) maintain that supply chain partners engage in
interlinked processes that enable rich information sharing and building
information technology infrastructures to process the information obtained from
partners, a scenario that creates new knowledge. There are different ways of
understanding and classifying knowledge, and most focus on knowledge types:
tacit, explicit, individual, organizational, etc.
Nonetheless, there are many other factors to consider, among which the
interdependence between knowledge and the organizational context stands out
(Zheng, Yang, & McLean, 2010). The literature on innovation has been extremely
broad incorporating perspectives as diverse as traditional structuralist
approaches through to more process-oriented approaches. From the structuralist
perspective, innovation is seen as a thing or entity with fixed parameters (e.g., a
new technology or management practice), which is developed externally,
packaged ("black boxed") by suppliers, and then transferred to potential users
where it can be seen to offer them competitive advantage (Wolfe, 1994).
Structuralist perspectives have been criticized for underemphasizing the
dependency of innovation on the social and organizational context (Scarbrough
& Corbett, 1992). In contrast, process perspectives argue that innovation should
be seen, not simply as a thing to be transferred from place to place, but as a
complex, time-phased, politically-charged design and decision process often
involving multiple social groups within organizations. According to this approach,
innovation may be defined as the development and implementation of new ideas
by people who over time engage in transactions with others in an institutional
context (Van de Ven, 1986). Networking as a social communication process that
encourages the sharing of knowledge among communities is center stage in
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process perspectives, which is reflected in this definition. Therefore, the need
and the possibility for the management company to have new knowledge,
creates the conditions for the creation of a lasting competitive advantage. The
company management can effectively manage the resources at its disposal only
if it has adequate information and if there is a regular flow of information
between the different sectors.
One of the first things to be said about knowledge management (KM) and
innovation is that definitions abound. A broad definition encompasses any
processes and practices concerned with the creation, acquisition, capture,
sharing and use of knowledge, skills, and expertise—whether or not these
practices are explicitly labeled KM. There are also clearly organizational trends
aligned to this focus on KM in innovation. In organizational terms, the new era is
typified by flatter structures, debureaucratization, decentralization, and
coordination through increasing use of information and communication
technologies (ICT).
There have been several theoretical studies and research efforts to explain how
societies can affect actors' behaviors, decisions, and strategies. Granovetter's
(1985) impressive article claims that economic action is socially constructed and
is determined by the ongoing relationships between economic actors. The social-
embeddedness approach emerged as a critique to the "rational actor"
assumption of classical and neoclassical economic models. According to many
researchers, the social capital of individuals helps them find better jobs and
affects occupational success. Organizations and individuals that have numerous
network ties can use these connections to transfer knowledge, reach resources,
and influence others in their environment (Gargiulo & Benassi, 2000).
The measurement of social capital in organizations and individuals is a central
issue in social network research. The high frequency of interactions between two
actors can create acquaintanceship, according to some authors. Tsai and Ghoshal
(1998) state that the increasing interactions between actors in the course of time
can lead to perceptions of mutual trust, and parties start identifying each other's
personal characteristics. Tymon and Stumpf (2003) similarly define social capital
of actors as being developed by the transformation of arms-length ties into
social relations in a period. Individuals who occupy central organizational
positions usually have a high frequency of interactions, which may be sufficient
to strengthen arms-length ties. Hence, the increasing number of reports woven
into business practices enhances confidence of the different actors involved in
the process of value creation. In this way, an engaging process guarantees the
spread of awareness about new technologies and allows actors to create a
climate of social cohesion and develop suitable processes of value creation for all
stakeholders.
In fact, the leveraging of interfirm networks is increasingly considered a strategic
resource that can be shaped by managerial action. Interfirm networks in this
context are defined as consisting of the interactions and relationships
organizations use to access knowledge. These may be in the form of alliances
concerning formalized collaboration and joint ventures that allow access to the
knowledge held by other actors as a means of facilitating innovation. Some
studies introduce the concept of "network resources" to understand the
advantages bestowed by such networks in allowing firms to leverage valuable
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information and resources possessed by their interfirm network partners. Gulati
(2007) defines network resources as an umbrella concept to describe and
understand the resources or capital generated by interfirm networks. The
academic literature highlights the importance of the spread of social networks
and how they can help improve relations within companies and organizations. On
this track it becomes interesting to study whether and how the use of social
networks can influence the purchasing behavior of consumers.
Social media has aroused a lot of interest among researchers and academics. As
use of social media has increased at an amazing rate, companies have allocated
an increasing budget to social media to communicate and reach customers. It is
difficult to measure a real return on investment, though many studies have
sought to quantify this sum.
How the Use of Social Networks Influences Buying Behavior
There is a strong consensus among scholars and practitioners that developments
in information technology (IT) affect several aspects of marketing in significant
ways. In particular, the role of information technology in influencing buying
behavior has been well recognized. A central concern in marketing,
organizational buying behavior has been an important domain of scholarly
investigation for a long time [78 (https://www.omicsonline.org/open-
access/social-networks-and-the-buying-behavior-of-the-consumer-2375-4389-
1000163.php?aid=64942#78)-82 (https://www.omicsonline.org/open-
access/social-networks-and-the-buying-behavior-of-the-consumer-2375-4389-
1000163.php?aid=64942#82)]. The use of new information and communications
technology allows for a better flow of information and thus a greater connection
between the different actors.
Social networking websites act as a platform for bringing together people with
similar interests, beliefs, and ideas. Users of social networking websites connect
to each other with the purpose of finding and exchanging content. Social
networking can also be used are for self-disclosure and self-representation and
thus create and manage a social or even a professional identity (Haythornthwaite
& Wellman, 1998). Social media, especially social network sites, might be an
important agent of consumer socialization because it provides a virtual space for
people to communicate through the use of internet.
Social media provides three conditions that encourage consumer socialization
among peers online. First, blogs and social networking sites all provide
communication tools that make the socialization process easy and convenient
(Muratore, 2008). For example, in virtual communities Ahuja and Galvin (2003)
find that new members can be socialized easily into virtual groups and quickly
learn task-related knowledge and skills through their interactions with other
members. Second, increasing numbers of consumers visit social media websites
to find information to help them make various buying decisions (Lueg & Finney,
2007). Third, social media provides vast product information and evaluations,
acting as a socialization agent between friend and peer by facilitating education
and information (Gershoff & Gita, 2006; Taylor, Lewin, & Strutton, 2011).
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In line with this opinion Taylor, Lewin, and Strutton (2011) find that online
consumers' attitudes toward social network advertising depend on socialization
factors (i.e., peers). According Wang, Yu and Wei (2012), online consumer
socialization through peer communication also affects purchasing decisions in
two way: directly (conformity with peers) and indirectly by reinforcing product
involvement. Lueg and Finney (2007) further suggest retailers should encourage
such communication by setting up tell-a-friend functions on websites because
they find that peer communications online can influence consumers so strongly
that they convert others into internet shoppers. The rapid growth of social media
has revolutionized methods of communication and sharing information and
interests, redefining the priorities of businesses and marketers and creating a
new place of interaction and communication among people (Yogesh & Yesha,
2014).
A key business component of social media is that the tool allows consumers to
evaluate products, make recommendations to contacts, and link current
purchases to future purchases through status updates and Twitter feeds. In
addition, the use of social media presents a valuable tool for firms in which a
satisfied user of a product can recommend that product (good or service) to
other potential users. Forbes and Vespoli (2013) investigate consumers who
made a purchase of an item based on the recommendation of a peer or contact
via social media. Their results indicate that consumers are basing their buying
decisions on recommendations from people they would not consider "opinion
influencers or leaders." Sharma and Rehman (2012) find that positive or negative
information about a product on social media has a significant overall influence on
consumer purchase behavior. Thus, companies could influence opinions through
the word-of-mouth effect among consumers by encouraging them to
recommend their products through social. Online word-of-mouth communication
allows consumers to share and obtain information from a variety of groups of
people—not only from people they know—and it has a greater impact than
traditional marketing tools marketing (Ratchford, Talukdar, & Lee, 2001; Lee,
Cheung, Lim, & Sia, 2006; Katz & Lazarsfeld, 1955). In fact before making any
purchasing decision, especially when buying something new, many consumers
check other consumers' recommendations (Kim & Srivastava, 2007).
Consumers researching on the online community had a sufficient amount of
inquiries to make their decision. According to Li, Bernoff, Pflaum, & Glass (2007),
50 percent of adult users of online social networks recommend products that
they like. One of the main advantages of online social networking is the ability to
create and manage a diffuse network of weak ties. Information exchange on
social networking websites happens between a larger and broader group of
actors, compared to offline exchanges, and encourages the amassing of as many
contacts as possible without deepening connections between the actors in order
to gain business advantages. These benefits are transferred to consumer
behavior.
In fact, the network effect is the extra utility that a consumer derives from the
consumption of a good or the service when there is an increase in the network
size of that good or service. The literature has identified two types of network
effects (Katz & Shapiro, 1985). Growth in the size of the network increases the
value of the network to all users. Facebook is a leading social network, and
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several authors have conducted studies on its use and how it can influence the
purchasing behavior of consumers. Pietro and Pantano (2012) find that
enjoyment is a key determinant of social networks usage as tool for supporting
purchasing decisions. They also suggest a casual positive relationship between
the attitude of customers toward social media and behavioral intention.
Leerapong and Mardjo (2013) focus on the online purchase decision and through
the study of Facebook, examine the factors that influence their decision. In this
study, customers ranked in order of importance relative advantage, trust,
perceived risk, and compatibility as the factors that encouraged or discouraged
them from purchasing product through Facebook. The academic literature on the
subject shows that the spread of social networks and their use may affect the
behavior of social actors.
Methodology
This study presents the results of the review of 111 academic papers selected
from a large pool. Direct network effects have been defined as those generated
through a direct physical effect of the number of purchasers on the value of a
product (e.g., fax machines). Indirect network effects are seen in the market for
systems, where the consumer's utility function does not directly depend on the
adoption decision of other consumers.
Selected papers demonstrated a focus on studying the effects of controllable
factors that influence consumer behavior. The papers selected for the review
were published after 1955. Out of the 111 papers, 64 were published between
the years 2000 and 2014 and 47 between 1955 and 1999. The majority of
papers were drawn from the Journal of Electronic Commerce Research, the
Journal of Consumer Marketing, the Journal of Information Management, and
the Journal of Internet Research. The elements identified in the literature as
influencing online buying behavior were grouped into three main categories and
five subcategories, each one including several of these elements. The selection
of papers and the review and allocation of the web experience elements to one
of the above categories and subcategories was done by the author, in order to
ensure the conformity of the selection criteria. A minimum of one literature
reference was necessary for including a given component in the classification.
Discussions and Conclusions
Analysis of the literature has shown that social networks can bring about a
certain degree of influence on the choices of consumers changing their buying
behavior. In fact, the use of new information and communications technology
allows a better flow of information and thus a greater connection between the
different actors.
The use of social networks is a valuable tool that helps businesses increase the
chances of survival through a the word-of-mouth effect among members of the
virtual community. That finding is confirmed by the arguments of many
researchers, but needs a further study to examine the reasons that are the basis
of this influence.
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Licenses and Attributions
Social Networks and the Buying Behavior of the Consumer
(https://www.omicsonline.org/open-access/social-networks-and-the-buying-
behavior-of-the-consumer-2375-4389-1000163.php?aid=64942) by Rassega
et al. from Journal of Global Economics is available under a Creative Commons
Attribution 4.0 International (http://creativecommons.org/licenses/by/4.0/)
license. © 2015, Rassega V, et al. UMUC has modified this work and it is
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Primary and Secondary Research
The American Marketing Association (AMA) defines marketing research as
follows: “the function that links the consumer, customer, and public to the
marketer through information—information used to identify and define
marketing opportunities and problems; generate, refine, and evaluate marketing
actions; monitor marketing performance; and improve understanding of
marketing as a process. Marketing research specifies the information required to
address these issues, designs the method for collecting information, manages
and implements the data collection process, analyzes the results, and
communicates the findings and their implications.” (AMA, 2013, para. 2)
There are two types of research (Marshall & Johnston, 2011):
primary research—Data is collected specifically for a certain research
question, (i.e., primary data). Data may be quantitative (statistical analysis),
or qualitative (e.g., surveys, focus groups, and interviews). Primary research
is important when making strategic decisions. While primary research is
costly and more time consuming, it is more accurate and reliable.
secondary research—Data was collected for some other purpose than the
research question at hand. Secondary research may involve an internet
search, periodicals, CRM data, government sources (e.g., economic census),
and market research organizations. Secondary data is cheaper to obtain and
is less time consuming to use because it is readily available; however, it may
be outdated or unreliable. In addition, secondary research may not be a
perfect fit for the research question. In general, primary research usually
starts with a scan of the available secondary information to help further
refine the search.
References
AMA (2013). Marketing research definition. Retrieved from www.ama.org
Marshall, G. W., & Johnston, M. W. (2011). Essentials of marketing management.
New York, NY: McGraw-Hill.
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Resources
Conducting Online Market Research
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resourcelist/conducting-onlinemarketresearch.html?ou=447146)
Gathering and Using Information: Marketing Research and Market
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usinginformationmarketingresearchandmarketintellig.html?
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Big Data in Market Research: Why More Data Does Not Automatically
Mean Better Information (http://ezproxy.umuc.edu/login?
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Offerings
Why do buyers purchase something? Why do you own anything? Many of us
own an iPhone because it allows us to call, text, and use apps. Or we own one
because we have been influenced to buy one. Shortly after the iPhone's
introduction, some people undoubtedly purchased the devices because they
were considered trendy. Now iPhones are so ubiquitous that no one gives them a
second glance. The impact that iPhones have had on our lives has been huge
because the product revolutionized the way we interact with the world.
What Composes an Offering?
People buy things to meet needs. In the case of the iPhone, the need is to have
better access to communicate, to look keep up with technological trends, or
both. Offerings are products and services designed to deliver value to customers
—either to fulfill their needs, satisfy their wants, or both. By the end of this text,
we will understand how marketing fills those needs through the creation and
delivery of offerings.
Product, Price, and Service
Most offerings consist of a product, or a tangible good people can buy, sell, and
own. Purchasing a classic iPod, for example, will allow you to store up to 40,000
songs or 200 hours of video. The amount of storage is an example of a feature,
or characteristic of the offering. If your playlist consists of 20,000 songs, then
this feature delivers a benefit to you—the benefit of ample storage. However, the
feature will only benefit you up to a point. For example, you won't be willing to
pay more for the extra storage if you only need half that much. When a feature
satisfies a need or want, there is a benefit. Features, then, matter differently to
different consumers based on each individual's needs.
Remember, the value equation is different for every customer.
An offering also consists of a price, or the amount people pay to receive the
offering's benefits. The price paid can consist of a one-time payment, or it can
consist of something more than that. Many consumers think of a product's price
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as only the amount they paid. However, the true cost of owning an iPod, for
example, is the cost of the device itself plus the cost of the music or videos
downloaded onto it. The total cost of ownership (TCO), then, is the total amount
someone pays to own, use, and eventually dispose of a product.
TCO is usually thought of as a concept that businesses use to compare offerings.
However, consumers also use the concept. For example, suppose you are
comparing two sweaters, one that can be hand-washed and one that must be
dry-cleaned. The hand-washable sweater will cost you less to own in dollars but
may cost more to own in terms of your time and hassle. A smart consumer would
take that into consideration. A TCO approach accounts for the time and effort
related to owning the product—in this case, the time and effort to handwash the
sweater.
A service is an action that provides a buyer with an intangible benefit. A haircut
is a service. When you purchase a haircut, it's not something you can hold, give
to another person, or resell. Pure services are offerings that don't have any
tangible characteristics associated with them. Skydiving is an example of a pure
service. You are left with nothing after the jump but the memory of it. Yes, a
plane is required, and it is certainly tangible. But it isn't the product—the jump is.
At times people use the term product to mean an offering that's either tangible
or intangible. Banks, for example, often advertise specific types of loans, or
financial products they offer consumers. Yet truly these products are financial
services. The term product is frequently used to describe an offering of either
type.
The intangibility of a service creates interesting challenges for marketers and
buyers when they try to judge the relative merits of one service over another. An
old riddle asks, "You enter a barbershop to get a haircut and encounter two
barbers—one with a bad haircut and the other with a great haircut. Which do you
choose?" The answer is the one with the bad haircut; he cut the hair of the other
barber. But in many instances, judging how well a barber will do before the
haircut is difficult. Thus, services can suffer from high variability in quality
because they are often created as they are received.
Services usually also require the consumer to be physically present or involved. A
haircut, a night in a hotel, and a flight all require the consumer to be physically
present. Consumption of the service is not separate from the creation of the
service. Unlike a physical product, which can be created and purchased off a
shelf, a service often (but not always) involves the consumer in its creation.
Another challenge for many services providers is that services are perishable—
they can't be stored. A night at a hotel, for example, can't be saved and sold later.
If it isn't sold that day, it is lost forever. A barber isn't really paid for a haircut (to
use the riddle) but for time. Services have difficult management and marketing
challenges because of their intangibility.
Many tangible products have an intangible service component attached to them,
however. When Hewlett-Packard (HP) introduced its first piece of audio testing
equipment, a key concern for buyers was the service HP could offer with it.
Could a new company such as HP back up the product, should something go
wrong with it? As you can probably tell, a service does not have to be consumed
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to be an important aspect of an offering. HP's ability to provide good after-sales
service in a timely fashion was an important selling characteristic of the audio
oscillator, even if buyers never had to use the service.
What services do you get when you purchase a can of soup? You might think
that a can of soup is as close to a pure product devoid of services that you can
get. But think for a moment about your choices in terms of how to purchase the
can of soup. You can buy it at a convenience store, a grocery store, or online.
Your choice of how to get it is a function of the product's intangible service
benefits, such as the way you are able to shop for it.
The Product-Dominant Approach to Marketing
From the traditional product-dominant perspective of business, marketers
consider products, services, and prices as three separate and distinguishable
characteristics. To some extent, they are. HP could, for example, add or strip out
features from a piece of testing equipment and not change its service policies or
the equipment's price. The product-dominant marketing perspective has its roots
in the Industrial Revolution. During this era, businesspeople focused on the
development of products that could be mass produced cheaply. In other words,
firms became product-oriented, meaning that they believed the best way to
capture market share was to create and manufacture better products at lower
prices. Marketing remained oriented that way until after World War II.
The Service-Dominant Approach to Marketing
Who determines which products are better? Customers do, of course. Thus,
taking a product-oriented approach can result in marketing professionals
focusing too much on the product itself and not enough on the customer or
service-related factors that customers want. Most customers will compare
tangible products and the prices charged for them in conjunction with the
services that come with them. In other words, the complete offering is the basis
of comparison. So, although a buyer will compare the price of product A to the
price of product B, in the end, the prices are compared in conjunction with the
other features and services of the products. The dominance of any one of these
dimensions is a function of the buyer's needs.
The advantage of the service-dominant approach is that it integrates the product, price, and service dimensions of an offering. This integration helps marketers think more like their customers, which can help them add value to their firm's products.
In addition to the offering itself, marketers should consider what services it takes
for the customer to acquire their offerings (e.g., the need to learn about the
product from a sales clerk), to enjoy them, and to dispose of them (e.g., someone
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to move the product out of the house and haul it away), because each of these
activities creates costs for their customers—either money or time and hassle.
Critics of the service-dominant approach argue that the product-dominant
approach also integrated services (though not price). The argument is that at the
core of an offering is the product, such as an iPod or iPhone. The physical
product, in this case an iPhone, is the core product. Surrounding it are services
and accessories, called the augmented product, which support the core product.
Together, these make up the complete product. One limitation of this approach
has already been mentioned; price is left out. But for many "pure" products, this
conceptualization can be helpful in bundling different augmentations for
different markets.
Customers are now becoming more involved in the creation of benefits. Consider
a "pure" product like Campbell's cream of chicken soup. The consumer may
prepare that can as a bowl of soup, but it could also be used as an ingredient in a
recipe like king ranch chicken. As far as the consumer goes, no benefit is
experienced until the soup is eaten; thus, the consumer played a part in the
creation of the final product when the soup was an ingredient in the king ranch
chicken recipe. Or suppose your school's cafeteria made king ranch chicken for
you to consume. In that case, you both ate a product and consumed a service.
Some people argue that focusing too much on the customer can lead to too little
product development or poor product development. These people believe that
customers often have difficulty seeing how an innovative new technology can
create benefits for them. Researchers and entrepreneurs frequently make many
discoveries, and then products are created as a result of those discoveries. 3M's
Post-it notes are an example. The adhesive that made it possible for Post-it notes
to stick and restick was created by a 3M scientist who was actually in the
process of trying to make something else. Post-it notes came later.
Product Levels and Product Lines
A product's technology platform is the core technology on which it is built. Take
for example, the iPod, which is based on MP3 technology. In many cases, the
development of a new offering is to take a technology platform and rebundle its
benefits in order to create a different version of an already-existing offering. For
example, in addition to the iPod Touch, Apple offers the Shuffle and the Nano.
Both are based on the same core technology.
In some instances, a new offering is based on a technology platform originally
designed to solve a different problem. For example, a number of products
originally were designed to solve the problems facing NASA's space-traveling
astronauts. Later, that technology was used to develop new types of offerings.
EQyss's Micro Tek pet spray, which stops pets from scratching and biting
themselves, is an example. The spray contains a trademarked formula developed
by NASA to decontaminate astronauts after they return from space.
A technology platform isn't limited to tangible products. Knowledge can be a
type of technology platform in a pure services environment. For example, the
bioesthetic treatment model was developed to help people who suffer from TMJ,
a jaw disorder that makes chewing painful. A dentist can be trained on the
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bioesthetic technology platform and then provide services based on it. There are,
however, other ways to treat TMJ that involve other platforms or bases of
knowledge and procedures (such as surgery).
Few firms survive by selling only one product. Most firms sell several offerings
designed to work together to satisfy a broad range of customer needs and
desires. A product line is group of related offerings. Product lines are created to
make marketing strategies more efficient. Campbell's condensed soups, for
example, are basic soups sold in cans with red labels. But Campbell's Chunky is a
ready-to-eat soup sold in cans that are labeled differently. Most consumers
expect there to be differences between Campbell's red-label chicken soup and
Chunky chicken soup, even though they are both made by the same company.
When new but similar products are added to the product line, it is called a line extension.
A product line can be broad, as in the case of Campbell's condensed soup line,
which consists of several dozen different flavors. Or, a product line can be
narrow, as in the case of Apple's iPod line, which consists of only a few different
devices. The number of offerings in a single product line—that is, whether the
product line is broad or narrow—is called line depth. When new but similar
products are added to the product line, it is called a line extension. If Apple
introduces a new iPhone to the iPhone family, that would be a line extension.
Companies can also offer many different product lines. Line breadth (or width) is
a function of how many different, or distinct, product lines a company has. For
example, Campbell's has a Chunky soup line, condensed soup line, kids' soup
line, lower sodium soup line, and a number of nonsoup lines, like Pace Picante
sauces, Prego Italian sauces, and crackers. The entire assortment of products that
a firm offers is called the product mix.
There are four offering levels:
the basic offering (e.g., the iPod Shuffle)
the offering's technology platform (the MP3 format or storage system used
by the Shuffle)
the product line to which the offering belongs (Apple's iPod line of MP3
music players)
the product category to which the offering belongs (MP3 players as
opposed to iPhones)
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Companies market offerings composed of a combination of
tangible and intangible characteristics for certain prices. During
the Industrial Revolution, firms focused primarily on products and
not so much on customers. The service-dominant perspective to
marketing integrates three different dimensions of an offering—
not only the product, but also its price and the services associated
with it. This perspective helps marketers think more like their
customers, which helps firms add value to their offerings. An
offering is based on a technology platform, which can be used to
create a product line. A product line is a group of similar offerings.
A product line can be deep (many offerings of a similar type)
and/or broad (offerings that are very different from one another
and cover a wide range of customers' needs). The entire
assortment of products that a company offers is called the product
mix.
Types of Consumer Offerings
Consumer offerings fall into four general categories:
convenience offerings
shopping offerings
specialty offerings
unsought offerings
In this section, we will discuss each of these categories. Keep in mind that the
categories are not a function of the characteristic of the offerings themselves.
Rather, they are a function of how consumers want to purchase them, which can
vary from consumer to consumer. What one consumer considers a shopping
good might be a convenience good to another consumer.
Convenience Offerings
Convenience offerings are products and services consumers generally don't want
to put much effort into shopping for because they see little difference between
competing brands. For many consumers, bread is a convenience offering. A
consumer might choose the store in which to buy the bread but be willing to buy
whatever brand of bread the store has available. Marketing convenience items is
often limited to simply trying to get the product in as many places as possible
where a purchase could occur.
Closely related to convenience offerings are impulse offerings, or items
purchased without any planning. The classic example is Life Savers, originally
manufactured by the Life Savers Candy Company, beginning in 1913. The
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company encouraged retailers and restaurants to display the candy beside their
cash registers and to always give customers a nickel back as part of their change
to encourage them to buy one additional item—a roll of Life Savers, of course!
Shopping Offeringss
A shopping offering is one for which the consumer will make an effort to
compare and select a brand. Consumers believe there are differences between
similar shopping offerings and want to find the right one or the best price.
Buyers might visit multiple retail locations or spend a considerable amount of
time visiting websites and reading reviews about the product, such as the
reviews found in Consumer Reports.
Consumers often care about brand names when they're deciding on shopping
goods. If a store is out of a particular brand, then another brand might not do.
For example, if you prefer Crest Whitening Expressions toothpaste and the store
you're shopping at is out of it, you might put off buying the toothpaste until your
next trip to the store. Or you might go to a different store, or buy a small tube of
some other toothpaste until you can get what you want. Note that even
something as simple as toothpaste can become a shopping good for someone
very interested in dental health—perhaps after they've read online product
reviews or consulted with her dentist. That's why companies like Procter &
Gamble, the maker of Crest, work hard to influence not only consumers but also
people like dentists, who can influence the sale of their products.
Specialty Offerings
Specialty offerings are highly differentiated offerings, and the brands under
which they are marketed are very different across companies, too. For example,
an Orange County Chopper or Iron Horse motorcycle is likely to be far different
than a Kawasaki or Suzuki motorcycle in terms of its available features. Typically,
specialty items are available only through limited channels. For example, exotic
perfumes available only in exclusive outlets are considered specialty offerings.
Specialty offerings are purchased less frequently than convenience offerings.
Therefore, the profit margin on them tends to be greater.
Note that while marketers try to distinguish between specialty offerings,
shopping offerings, and convenience offerings, it is the consumer who ultimately
makes the decision. Therefore, what might be a specialty offering to one
consumer may be a convenience offering to another. For example, one consumer
may never go to Sport Clips or Ultra-Cuts because hair styling is seen as a
specialty offering. A consumer at Sport Clips might consider it a shopping
offering, while a consumer for Ultra-Cuts may view it as a convenience offering.
The choice is the consumer's.
Marketing specialty goods requires building brand name recognition in the minds
of consumers and educating them about your product's key differences. This is
critical. For fashion goods, the only point of difference may be the logo on the
product (for example, an Izod versus a Polo label). Even so, marketers spend a
great deal of money and effort to try to get consumers to perceive these
products differently than their competitors'.
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Unsought Offerings
Unsought offerings are those that buyers do not generally want to have to shop
for until they need them. Towing services and funeral services are generally
considered unsought offerings. Marketing unsought items is difficult. Some
organizations try to presell the offering, such as preneed sales in the funeral
industry or towing insurance in the auto industry. Other companies, such as
insurance companies, try to create a strong awareness among consumers so that
when the need arises for these products, consumers think of their organizations
first.
Convenience offerings, shopping offerings, specialty offerings, and
unsought offerings are the major types of consumer offerings.
Convenience offerings often include life's necessities (bread, milk,
fuel, and so forth), for which there is little difference across
brands. Shopping goods vary, and many consumers develop strong
preferences for some brands versus others. Specialty goods are
even more exclusive. Unsought goods are a challenge for
marketers because customers do not want to have to shop for
them until they need them.
Types of Business-to-Business (B2B) Offerings
Just like there are different types of consumer offerings, there are different types
of business-to-business (B2B) offerings as well. But unlike consumer offerings,
which are categorized by how consumers shop, B2B offerings are categorized by
how they are used. The primary categories of B2B offerings are as follows:
capital equipment offerings
raw materials offerings
original equipment manufacturer (OEM) offerings
maintenance, repair, and operations (MRO) offerings
facilitating offerings
Capital Equipment Offerings
A capital equipment offering is any equipment purchased and used for more
than one year and depreciated over its useful life. Machinery used in a
manufacturing facility, for example, would be considered capital equipment.
Professionals who market capital equipment often have to direct their
communications to many people within the firms to which they are selling,
because the buying decisions related to the products can be rather complex and
involve many departments. From a marketing standpoint, deciding who should
get what messages and how to influence the sale can be very challenging.
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Raw materials offerings are materials firms offer other firms so they can make a
product or provide a service. Raw materials offerings are processed only to the
point required to economically distribute them. Lumber is generally considered a
raw material, as is iron, nickel, copper, and other ores. If iron is turned into sheets
of steel, it is called a manufactured material because it has been processed into a
finished good but is not a standalone product; it still has to be incorporated into
something else to be usable. Both raw and manufactured materials are then used
in the manufacture of other offerings.
Raw materials are often thought of as commodities, meaning that there is little
difference among them. Consequently, the competition to sell them is based on
price and availability. Natuzzi is an Italian company that makes leather furniture.
The wood Natuzzi buys to make its sofas is a commodity.
OEM Offerings or Components
An original equipment manufacturer (OEM) is a manufacturer or assembler of a
final product. An OEM purchases raw materials, manufactured materials, and
component parts and puts them together to make a final product. OEM offerings
or components, like an on-off switch, are components, or parts, sold by one
manufacturer to another that get built into a final product without further
modification. The metal feet of a Natuzzi couch are probably made by a
manufacturer other than Natuzzi, making the feet an OEM component. Dell's
hard drives installed in computer kiosks like the self-service kiosks in airports
that print your boarding passes are another example of an OEM component.
MRO Offerings
Maintenance, repair, and operations (MRO) offerings refer to products and
services used to keep a company functioning. Janitorial supplies are MRO
offerings, as is hardware used to repair any part of a building or equipment. MRO
items are often sold by distributors. However, you can buy many of the same
products at a retail store. For example, you can buy nuts and bolts at a hardware
store. A business buyer of nuts and bolts, however, will also need repair items
that you don't, such as very strong solder used to weld metal. For convenience
sake, the buyer would prefer to purchase multiple products from one vendor
rather than driving all over town to buy them. So, the distributor sends a
salesperson to see the buyer. Most distributors of MRO items sell thousands of
products, set up online purchasing websites for their customers, and provide a
number of other services to make life easier for them.
Facilitating Offerings
Facilitating offerings include products and services that support a company's
operations but are not part of the final product it sells. Marketing research
services, banking and transportation services, copiers and computers, and other
similar products and services fall into this category. Facilitating offerings might
not be central to the buyer's business, at least not the way component parts and
raw materials are. Yet to the person who is making the buying decision, these
offerings can be very important. If you are a marketing manager who is selecting
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a vendor for marketing research or choosing an advertising agency, your choice
could be critical to your personal success. For this reason, many companies that
supply facilitating offerings try to build strong relationships with their clients.
Business buyers purchase various types of offerings to make their
own offerings. Some of the types of products they use are raw
materials, manufactured materials, and component parts and
assemblies, all of which can become part of an offering. MRO
(maintenance, repair, and operations) offerings are those that keep
a company's depreciable assets in working order. Facilitating
offerings are products and services a company purchases to
support its operations but are not part of the firm's final product.
Managing the Offering
Managing a company's offerings presents a number of challenges. Depending on
the size of the company and the breadth of the company's offerings, several
positions may be needed.
A brand manager is one such position. A brand manager is the person
responsible for all business decisions regarding offerings within one brand. By
business decisions, we mean making decisions that affect profit and loss, which
include such decisions as which offerings to include in the brand, how to position
the brand in the market, pricing options, and so forth.
A brand manager is often charged with running the brand as if it were its own separate business.
A brand manager is much more likely to be found in consumer marketing
companies. Typically, B2B companies do not have multiple brands, so the
position is not common in the B2B environment. What you often find in a B2B
company is a product manager, someone with business responsibility for a
particular product or product line. Like the brand manager, the product manager
must make many business decisions, such as which offerings to include,
advertising selection, and so on. Companies with brand managers include
Microsoft, Procter & Gamble, SC Johnson, Kraft, Target, General Mills, and
ConAgra Foods. Product managers are found at Xerox, IBM, Konica-Minolta
Business Solutions, Rockwell International, and many others.
Most brand managers have an undergraduate degree in marketing, but it helps to
have a strong background in either finance or accounting because of the
profitability and volume decisions brand managers have to make.
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In some companies, a category manager has responsibility for business decisions
within a broad grouping of offerings. For example, a category manager at SC
Johnson may have all home cleaning products, which would mean that brands
such as Pledge, Vanish, Drano, Fantastik, Windex, Scrubbing Bubbles, and Shout
would be that person's responsibility. Each of those brands may be managed by a
brand manager who then reports directly to the category manager.
At the retail level, a category manager at each store is responsible for more than
just one manufacturer's products. The home cleaning category manager would
have responsibility for offerings from SC Johnson, as well as Procter & Gamble,
Colgate-Palmolive, and many other producers.
Another option is to create a market manager, who is responsible for business
decisions within a market. In this case, a market can be defined as a geographic
market or region, a market segment such as a type of business, or a channel of
distribution. For example, SC Johnson could have regional insect control
managers. Regional market managers would make sense for insect control
because weather has an influence on which bugs are a problem at any given
time. For example, a southern regional manager would want more inventory of
the repellent Off! in March because it is already warm and the mosquitoes are
already breeding and biting in the southern United States.
In B2B markets, a market manager is more likely to have responsibility for a
particular market segment, (e.g., hospital health care professionals or doctor's
offices). All customers like these (retail, wholesale, and so forth) in a particular
industry compose what's called a vertical market, and the managers of these
markets are called vertical market managers. B2B companies organize in this
way for the following reasons:
Buying needs and processes are likely to be similar within an industry.
Channels of communication are likely to be the same within an industry but
different across industries.
Because magazines, websites, and trade shows are organized to serve specific
industries or even specific positions within industries, B2B marketers find
vertical market structures for marketing departments to be more efficient than
organizing by geography.
Market managers sometimes report to brand managers or are a part of their
firms' sales organizations and report to sales executives. Market managers are
less likely to have as much flexibility in terms of pricing and product decisions
and have no control over the communication content of marketing campaigns or
marketing strategies. These managers are more likely to be tasked with
implementing a product or brand manager's strategy and be responsible for their
markets. Some companies have market managers but no brand managers.
Instead, marketing vice presidents or other executives are responsible for the
brands.
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Brand managers decide what products are to be marketed and
how. Other important positions include category managers,
market managers, and vertical market managers. Category
managers are found in consumer markets, usually in retail. Market
managers can be found in both consumer markets and B2B
markets. However, vertical market managers are found only in B2B
markets. Some companies have market managers but no brand
managers. Instead, a vice president of marketing or other
executive is responsible for the brands.
Licenses and Attributions
Chapter 6: Creating Offerings
(https://2012books.lardbucket.org/books/marketing-principles-v2.0/s09-
creating-offerings.html) from Marketing Principles is available under a
Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported
(https://creativecommons.org/licenses/by-nc-sa/3.0/) license without
attribution as requested by the site's original creator or licensee. UMUC has
modified this work and it is available under the original license.
© 2020 University of Maryland Global Campus
All links to external sites were verified at the time of publication. UMGC is not responsible for the validity or
integrity of information located at external sites.
Key Points
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Marketing
Definitions
One of the most important functional areas in business is marketing, as it deals
with customers more than any other function. Companies such as Google, Swiss
Bank, Deutsche Bank, Gucci, Airbus, Apple, McDonalds, and Toyota have a
passion for understanding their customers and satisfying their needs in "well-
defined target markets" (Kotler & Armstrong, 2014, p. 4). Basically, marketing is a
managerial and social function through which companies and consumers create
and exchange value.
The American Marketing Association (AMA) 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" (AMA, 2013, para. 1).
Kotler and Armstrong (2014) define marketing as the "process by which
companies create value for customers and build strong customer relationships in
order to capture value from customers in return" (p. 5).
On the other hand, Kotler and Keller (2015) define marketing management as
the science and art of selecting target markets, and the practice of acquiring,
maintaining, and growing customers through the creation, delivery, and
communication of superior customer value—all while maintaining profitability.
Remember, marketing is not selling; selling is just a component of marketing!
The Marketing Process
Selecting a product or a service to develop is a demanding process that requires
cross-functional teams to research, select, develop, and launch new products. In
addition, the company needs to evaluate the attractiveness of a new business.
Sometimes the company may seek external help to develop a new product, as it
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may lack the necessary technical expertise, market knowledge, or resources, or
may simply want to spread the financial risk involved (i.e., open innovation, or
innovation using strategic alliances.)
The marketing process involves five steps (Kotler & Armstrong, 2014, p. 5):
1. understanding the marketplace and consumer needs and wants
2. designing a consumer-driven marketing strategy
3. constructing an integrated marketing program that delivers superior value
4. building profitable relationships and creating consumer satisfaction
5. capturing value from customers to create profits and customer equity
To effectively engage in the marketing process, a business needs to understand
the following elements:
1. consumers
2. how to acquire market knowledge (primary and secondary research)
3. how to turn that knowledge into products that are needed and wanted by a
group of consumers
4. how to create market offerings that not only create value for the consumer
but profitability for the organization
5. how to accomplish these tasks while being socially responsible and engaging
in ethical behavior
Furthermore, there are five major customer value themes (Kotler & Armstrong,
2014, p. XVI):
1. creating value for the consumer in order to capture value from them in
return
2. creating and managing strong local and global value-creating brands
3. capitalizing on new marketing technologies, such social media (i.e., digital
marketing)
4. assessing and managing return on marketing investment
5. sustainable global marketing
References
AMA. (2013). Marketing definition. Retrieved from www.ama.org
Kotler, P. & Armstrong, G. (2014). Principles of marketing (15th ed.). Upper
Saddle River, NJ: Pearson.
Kotler, P., & Keller, K. (2015). Marketing management (15th ed.). Upper Saddle
River, NJ: Pearson.
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Resources
What Is Marketing? (/content/umuc/tgs/mba/mba640/2202/learning-
resourcelist/what-is-marketing.html?ou=447146)
Crafting a Digital Marketing Strategy
(/content/umuc/tgs/mba/mba640/2202/learning-resourcelist/crafting-
a-digitalmarketingstrategy.html?ou=447146)
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Consumer Behavior: How People Make Buying Decisions
Consumer behavior considers the many reasons—personal, situational,
psychological, and social—that people shop for products, buy and use them,
sometimes become loyal customers, and then dispose of them.
Companies spend billions of dollars annually studying what propels consumer
decisions. Google, AOL, and Yahoo! monitor your web patterns and browser
history. The companies that pay for search advertising, or ads that appear on the
web pages you pull up after doing an online search, want to find out what
interests you. Doing so allows these companies to send you pop-up ads and
coupons you might actually be interested in instead of ads and coupons for
things that don't appeal to you.
Massachusetts Institute of Technology (MIT), in conjunction with a large retail
center, has tracked consumers in retail establishments to see when and where
they tended "dwell," or stop to look at merchandise. By tracking the position of
the consumers' mobile phones as the phones automatically transmitted signals to
cellular towers, MIT found that when people's "dwell times" increased, sales
increased, too.
Researchers have even looked at people's brains by having them lie in scanners
and asking them questions about different products. What people say about the
products is then compared to what their brains scans show—that is, what they
are really thinking. Scanning people's brains for marketing purposes might sound
nutty, but maybe not when you consider that 8 out of 10 new consumer
products fail, even when they are test marketed. Could it be possible that what
people say about potential new products and what they think about them are
different? Marketing professionals want to find out ("The Way the Brain Buys,"
2008).
Studying people's buying habits isn't just for big companies. Small businesses and
entrepreneurs can study the behavior of their customers with great success. By
figuring out what zip codes their customers live in, a business might determine
where to locate an additional store. Small businesses such as restaurants often
use coupon codes. For example, coupons sent out in newspapers are given one
code. Those sent out via the internet are given another. When the coupons are
redeemed, the restaurants can tell which marketing avenues are having the
biggest effect on their sales.
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Some businesses, including a growing number of start-ups, are using blogs and
social networking websites to gather information about their customers at a low
cost. For example, Proper Cloth, a company based in New York, has a site on
Facebook. Whenever the company posts a new bulletin or photos of its clothes,
all its Facebook followers automatically receive the information on their own
Facebook pages. "We want to hear what our customers have to say," says Joseph
Skerritt, the young MBA graduate who founded Proper Cloth. "It's useful to us
and lets our customers feel connected to Proper Cloth" (Knight, 2009). Skerritt
also writes a blog for the company. Podcasts that can be downloaded from
iTunes and Twitter are two other ways companies are amplifying the reach of
information about their products.
Environmental factors (such as the economy and technology) and marketing
actions taken to create, communicate about, and deliver products and services
(such as sale prices, coupons, internet sites, and new product features) may
affect consumers' behavior. However, a consumer's situation, personal factors,
and culture also influence what, when, and how he or she buys things.
Factors That Influence Consumers' Buying Behavior
You've been a consumer with purchasing power for much longer than you
probably realize—since the first time you were asked which cereal or toy you
wanted. Over the years, you've developed rules or mental shortcuts providing a
systematic way to choose among alternatives, even if you aren't aware of it.
Other consumers follow a similar process, but different people, no matter how
similar they are, make different purchasing decisions. You might be very
interested in purchasing a smart car, but your best friend might want to buy a
Ford F-150 truck. What factors influenced your decision, and what factors
influenced your friend's decision?
Consumer behavior is influenced by many things, including environmental and
marketing factors, the situation, personal and psychological factors, family, and
culture. Businesses try to identify trends so they can reach the people most likely
to buy their products in the most cost-effective way possible. Businesses often
try to influence a consumer's behavior with things they can control, such as the
layout of a store, music, the grouping and availability of products, pricing, and
advertising. While some influences may be temporary and others are long lasting,
different factors can affect how buyers behave—whether they influence you to
make a purchase, buy additional products, or buy nothing at all. Let's now look at
some of the influences on consumer behavior in greater detail.
Situational Factors
Have you ever been in a department store and couldn't find your way out? No,
you aren't necessarily directionally challenged. Marketing professionals take
physical factors such as a store's design and layout into account when they are
designing their facilities. Presumably, the longer you wander around a facility, the
more you will spend. Grocery stores frequently place bread and milk products on
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the opposite ends of the stores because people often need both types of
products. To buy both, they have to walk around an entire store, which, of
course, is loaded with other items they might see and purchase.
Store locations also influence behavior. Starbucks has done a good job of
locating its stores. You can scarcely drive a few miles down the road without
passing a franchise location. You can also buy cups of Starbucks coffee at many
grocery stores and in airports—virtually any place there is foot traffic.
Physical factors that firms can control, such as the layout of a store, music played
at stores, the lighting, temperature, and even the smells you experience are
called atmospherics. Perhaps you've visited the office of an apartment complex
and noticed how great it looked and even smelled. It's no coincidence. The
managers of the complex were trying to get you to stay for a while and have a
look at their facilities. Research shows that "strategic fragrancing" results in
customers staying in stores longer, buying more, and leaving with a better
impressions of the quality of a store's services and products. Mirrors near hotel
elevators are another example of atmospherics. Hotel operators have found that
when people are busy looking at themselves in the mirrors, they don't feel like
they are waiting as long for their elevators (Moore, 2008).
Not all physical factors are under a company's control, however. Take weather,
for example. Rainy weather can be a boon to some companies, like umbrella
makers such as Totes, but a problem for others. Beach resorts, outdoor concert
venues, and golf courses suffer when it is raining heavily. Businesses like
automobile dealers also have fewer customers. Who wants to shop for a car in
the rain?
Firms often attempt to deal with adverse physical factors such as bad weather by
offering specials during unattractive times. For example, many resorts offer
consumers discounts on travel to beach locations during hurricane season.
Having an online presence is another way to cope with weather-related
problems. What could be more comfortable than shopping at home? If it's raining
too hard to drive to Gap, REI, or Abercrombie & Fitch, you can buy products
from these companies and many others online. You can shop online for cars, too,
and many restaurants take orders online and deliver.
Crowding is another situational factor. Have you ever left a store and not
purchased anything because it was just too crowded? Some studies have shown
that consumers feel better about retailers with uncrowded stores. However,
other studies have shown that to a certain extent, crowding can have a positive
impact on a person's buying experience. The phenomenon is often referred to as
herd behavior (Gaumer & Leif, 2005).
If people are lined up to buy something, you want to know why. Should you get
in line to buy it too? Herd behavior helped drive up the price of houses in the
mid-2000s before the prices for them rapidly fell.
Social Situation
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The social situation you're in can significantly affect your purchase behavior.
Perhaps you have seen Girl Scouts selling cookies outside grocery stores and
other retail establishments and purchased nothing from them, but what if your
neighbor's daughter is selling the cookies? Are you going to turn her down or be
a friendly neighbor and buy a box (or two)?
Companies like Pampered Chef that sell their products at parties understand that
the social situation makes a difference. When you're at a friend's Pampered Chef
party, you don't want to look cheap or disappoint your friend by not buying
anything. Certain social situations can also make you less willing to buy products.
Most people would not choose a fast food restaurant for a first date. Likewise, if
you have turned down a drink or dessert on a date because you were worried
about what the person you were with might have thought, your consumption
was affected by your social situation (Matilla & Wirtz, 2008).
Time
The time of day, time of year, and how much time consumers have to shop affect
what they buy. Researchers have even discovered that whether someone is a
morning person or evening person affects shopping patterns. Have you ever
gone to the grocery store when you are hungry or after payday when you have
cash in your pocket? When you are hungry or have cash, you may purchase more
than you would at other times. The company 7-Eleven Japan is extremely aware
of how time affects buyers. The company's point-of-sale systems at its checkout
counters monitor what is selling well and when, and stores are restocked with
those items immediately, sometimes via motorcycle deliveries that zip in and out
of traffic along Japan's crowded streets. The goal is to get the products on the
shelves when and where consumers want them. The company also knows that,
like Americans, its customers are busy. Shoppers can pay their utility bills, local
taxes, and insurance or pension premiums at 7-Eleven Japan stores, and even
make photocopies (Bird, 2002).
Companies worldwide are aware of people's lack of time and are finding ways to
accommodate them. Some doctors' offices offer drive-through shots for patients
who are in a hurry and for elderly patients who find it difficult to get out of their
cars. Tickets.com allows companies to sell tickets by sending them to customers'
mobile phones when they call in. The phones' displays are then read by barcode
scanners when the ticket purchasers arrive at the events they're attending.
Likewise, if you need customer service from Amazon, there's no need to wait on
the telephone. If you have an account with Amazon, you just click a button on
the company's website, and an Amazon representative calls you immediately.
Reason for the Purchase
The reason you are shopping also affects the amount of time you will spend
shopping. Are you making an emergency purchase? What if you need something
for an important dinner or a project and only have an hour to get everything? Are
you shopping for a gift or for a special occasion? Are you buying something to
complete a task and need it quickly?
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Purchasing a gift might not be an emergency situation, but you may not want to
spend much time shopping for it either. Gift certificates have been popular for
years. You can purchase gift cards for numerous merchants at your local grocery
store or online. In contrast, suppose you need to buy an engagement ring. Sure,
you could buy one online in a jiffy, but you probably wouldn't do that. What if
the diamond were fake? What if your significant other turned you down and you
had to return the ring? How hard would it be to get back online and return it?
(Hornik & Miniero, 2009).
Mood
Have you ever felt like going on a shopping spree? At other times, wild horses
couldn't drag you to a mall. Moods can temporarily affect consumers' spending
patterns. Some people enjoy shopping, and there are even compulsive spenders
who get a temporary high from the activity.
A sour mood can spoil a consumer's desire to shop. The crash of the US stock
market in 2008 left many people feeling poorer, leading to a dramatic downturn
in consumer spending. Penny-pinching became common, and conspicuous
spending became more infrequent. Costco and Walmart experienced heightened
sales of their low-cost Kirkland Signature and Great Value brands as consumers
scrimped (Birchall, 2009b). Saks Fifth Avenue wasn't so lucky. Its annual release
of spring fashions usually leads to a feeding frenzy among shoppers, but spring
2009 was different. "We've definitely seen a drop-off of this idea of shopping for
entertainment," says Kimberly Grabel, Saks Fifth Avenue's senior vice president
of marketing (Rosenbloom, 2009). To get buyers in the shopping mood,
companies resorted novel measures. The upscale retailer Neiman Marcus began
introducing mid-priced brands. By studying customer's loyalty cards, the French
hypermarket Carrefour hoped to find ways to get its customers to purchase
nonfood items that have higher profit margins.
The glum mood wasn't bad for all businesses though. Discounters like Half Price
Books saw their sales surge. So did seed sellers, as people began planting their
own gardens. Finally, what about those products you see being hawked on
television (e.g., Aqua Globes, Snuggies, and Ped Eggs)? Their sales were the best
ever. Apparently, consumers too broke to go on vacation or shop at Saks were
instead watching television and treating themselves to the products advertised
there (Ward, 2009).
Personal Factors
Personality and Self-Concept
Personality describes a person's disposition, helps show why people are
different, and encompasses a person's unique traits. The big five personality
traits that psychologists discuss frequently include openness, or how accepting
you are of new experiences; conscientiousness, or how diligent you are;
extraversion, or how outgoing or shy you are; agreeableness, or how easy you
are to get along with; and neuroticism, or how prone you are to negative mental
states.
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Do personality traits predict people's purchasing behavior? Can companies
successfully target certain products to people based on their personalities? How
do you find out what personalities consumers have? Are extraverts wild spenders
and introverts penny-pinchers?
The link between people's personalities and their buying behavior is somewhat
unclear. Some research studies have shown that sensation seekers, or people
who exhibit extremely high levels of openness, are more likely to respond well to
advertising that's violent and graphic. The problem for firms is figuring out which
consumers exhibit which personality traits.
Marketers have had better luck linking people's self-concepts to their buying
behavior. Your self-concept is how you see yourself—be it positive or negative.
Your ideal self is how you would like to see yourself—whether it's prettier, more
popular, or more eco-conscious. This formulation, along with others' self-
concept, or how you think others see you, also influences your purchase
behavior. Marketing researchers believe people buy products to enhance how
they feel about themselves—to get themselves closer to their ideal selves.
The slogan "Be All That You Can Be," which for years was used by the US Army
to recruit soldiers, is an attempt to appeal to the self-concept. Presumably, by
joining the US Army, you will become a better version of yourself, which will, in
turn, improve your life. Many beauty products and cosmetic procedures are
advertised in a way that's supposed to appeal to the ideal self that people seek.
All of us want products that improve our lives.
Gender, Age, and Stage of Life
Gender, age, and stage of life are all demographic variables that influence
purchase decisions. Men and women need and buy different products (Ward &
Thuhang, 2007). They also shop differently and in general have different
attitudes about shopping. You know the old stereotypes: men see what they
want and buy it, but women try on everything and shop until they drop. There's
some truth to the stereotypes. That's why you see so many advertisements
directed at one sex or the other—beer commercials that air on ESPN and
commercials for household products that air on Lifetime. Women influence two-
thirds of all household product purchases, whereas men buy about three-
quarters of all alcoholic beverages (Schmitt, 2008). The shopping differences
between men and women seem to be changing, though. Younger, well-educated
men are less likely to believe grocery shopping is a woman's job and are more
inclined to bargain shop and use coupons that are properly targeted at them (Hill
& Harmon, 2007). One survey found that approximately 45 percent of married
men actually like shopping and consider it relaxing.
A study by Resource Interactive, a technology research firm, found that when
shopping online, men prefer sites with lots of pictures of products, and women
prefer to see products online in a lifestyle context—say, a lamp in a living room.
Women are also twice as likely as men to use viewing tools such as the zoom and
rotate buttons and links that allow them to change the color of products.
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Many businesses today are taking greater pains to figure out what men want.
Face toners and bodywashes for men, such as the Axe brand, and hair salons, like
the Men's Zone and Weldon Barber, are a relatively new phenomenon. Some
advertising agencies specialize in advertising directed at men. There are also
many products such as kayaks and mountain bikes targeted toward women that
weren't in the past.
You have probably noticed that the things you buy have changed as you age.
Think about what you wanted and how you spent five dollars when you were a
child, a teenager, and an adult. When you were a child, the last thing you
probably wanted as a gift was clothing. As you became a teen, however, cool
clothes probably became a higher priority.
If you're single and working after graduation, you probably spend your money
differently than a recently married couple. How do you think spending patterns
change when someone has a young child, or a teenager, or a child in college?
Diapers and daycare, orthodontia, tuition, electronics—regardless of their age,
children affect the spending patterns of families. Once children graduate from
college and parents are empty nesters, spending patterns change again.
Empty nesters and baby boomers are a huge market that companies are trying to
tap. Ford and other car companies have created aging suits for young employees
to wear when they're designing automobiles ("Designing Cars for the Elderly,"
2008). The suit simulates the restricted mobility and vision people experience as
they get older. Car designers can then figure out how to configure the
automobiles to better meet the needs of these consumers.
Lisa Rudes Sandel, the founder of Not Your Daughter's Jeans (NYDJ), created a
multimillion-dollar business by designing jeans specifically for baby boomers.
NYDJ became the largest domestic manufacturer of women's jeans under $100.
"The truth is," Rudes Sandel said, "I've never forgotten the woman I've been
aiming for since day one" (Saffian, 2009).
Your chronological age, or actual age in years, is different from your cognitive
age, or how old you perceive yourself to be. A person's cognitive age affects his
or her activities and sparks interests consistent with his or her perceived age.
Cognitive age is a significant predictor of consumer behaviors, including a
person's proclivity for dining out, watching television, going to bars and dance
clubs, playing computer games, and shopping (Barak & Gould, 1985). Companies
have found that many consumers feel younger than their chronological age and
don't take kindly to products that feature "old folks," because they can't identify
with them.
Lifestyle
Despite people's similarities (e.g., being middle-class Americans who are married
with children), their lifestyles can differ radically. To better understand and
connect with consumers, companies interview people or ask them to complete
questionnaires about their lifestyles and their activities, interests, and opinions
(often referred to as AIO statements). Consumers are not only asked about
products they like, where they live, and their gender but also about what they do
—that is, how they spend their time and their priorities, values, opinions, and
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general outlooks on the world. Where do they go other than work? Who do they
like to talk to? What do they talk about? Researchers hired by Procter & Gamble
have gone so far as to follow women around for weeks as they shop, run errands,
and socialize with one another (Berner, 2006). Other companies have paid
people to keep a daily journal of their activities and routines.
A number of research organizations examine the lifestyle and psychographic
characteristics of consumers. Psychographics combines the lifestyle traits of
consumers and their personality styles with an analysis of their attitudes,
activities, and values, to determine groups of consumers with similar
characteristics. One of the most widely used systems to classify people based on
psychographics is the VALS (values, attitudes, and lifestyles) framework. Using
VALS to combine psychographics with demographic information such as marital
status, education level, and income provides a better understanding of
consumers.
Psychological Factors
Motivation
Motivation is the inward drive we have to get what we need. In the mid-1900s,
Abraham Maslow, an American psychologist, developed the hierarchy of needs.
Maslow theorized that people have to fulfill their basic needs—food, water, and
sleep—before they can begin fulfilling higher-level needs. Have you ever gone
shopping when you were tired or hungry? Even if you were shopping for
something that would make you the envy of your friends (maybe a new car) you
probably wanted to sleep or eat even more than shop.
The need for food is recurring. Other needs, such as shelter, clothing, and safety,
tend to be enduring. Still other needs arise at different points in a person's life.
For example, during grade school and high school, your social needs probably
rose to the forefront. You wanted to have friends and get a date. Perhaps this
prompted you to buy certain types of clothing or electronic devices. After high
school, you began thinking about how people would view you in your station in
life, so you decided to pay for college and get a professional degree, thereby
fulfilling your need for esteem. If you're lucky, at some point you will realize
Maslow's state of self-actualization. You will believe you have become the
person in life that you feel you were meant to be.
Following the economic crisis that began in 2008, the sales of new automobiles
dropped sharply virtually everywhere around the world—except the sales of
Hyundai vehicles. Hyundai understood that people needed to feel financially
secure and ran an ad campaign that assured car buyers they could return their
vehicles if they couldn't make the payments on them without damaging their
credit. Seeing Hyundai's success, other carmakers began offering similar
programs. Likewise, banks began offering "worry-free" mortgages to ease the
minds of would-be homebuyers. For a fee of about $500, First Mortgage Corp., a
Texas-based bank, offered to make a homeowner's mortgage payment for six
months if he or she got laid off (Jares, 2010).
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While achieving self-actualization may be a goal for many individuals in the
United States, consumers in Eastern cultures may focus more on belongingness
and group needs. Marketers look at cultural differences in addition to individual
needs. The importance of groups affects advertising (using groups versus
individuals) and product decisions.
Perception
Perception is how you interpret the world around you and make sense of it in
your mind. You do so via stimuli that affect your senses—sight, hearing, touch,
smell, and taste. How you combine these senses also makes a difference. For
example, in one study, consumers were blindfolded and asked to drink a new
brand of clear beer. Most of them said the product tasted like regular beer.
However, when the blindfolds came off and they drank the beer, many of them
described it as "watery" tasting (Ries, 2009).
Consumers are bombarded with messages on television, radio, magazines, the
internet, and even bathroom walls. The average consumer is exposed to about
three thousand advertisements per day (Lasn, 1999). Consumers are surfing the
internet, watching television, and checking their cell phones for text messages
simultaneously. Some, but not all, information makes it into our brains. This
phenomenon is called selective exposure.
Have you ever read or thought about something and then started noticing ads
and information about it popping up everywhere? Many people are more
perceptive to advertisements for products they need. Selective attention is the
process of filtering out information based on how relevant it is to you. It's been
described as a suit of armor that helps you filter out information you don't need.
At other times, people forget information, even if it's quite relevant to them,
which is called selective retention. Often the information contradicts the
person's belief. To be sure their advertising messages get through to you and you
remember them, companies use repetition. Were you tired of iPhone
commercials before they tapered off? How often do you see the same
commercial aired during a single television show?
Another potential problem that advertisers may experience is selective
distortion, or misinterpretation of the intended message. Promotions for weight-
loss products show models that look slim and trim after using their products, and
consumers may believe they will look like the model if they use the product.
They misinterpret other factors, such as how the model looked before or how
long it will take to achieve the results. Similarly, have you ever told someone a
story about a friend and that person told another person who told someone
else? By the time the story gets back to you, it is completely different. The same
thing can happen with many types of messages.
Using surprising stimuli, or shock advertising, is also a functional technique. One
study found that shocking content increased attention, benefited memory, and
positively influenced behavior among a group of university students (Dahl,
Frankenberger, & Manchanda, 2003).
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Subliminal advertising, the opposite of shock advertising, involves exposing
consumers to marketing stimuli, such as photos, ads, and messages, by stealthily
embedding them in movies, ads, and other media. For example, years ago the
words Drink Coca-Cola flashed for a millisecond on a movie screen. Although
there is no evidence that subliminal advertising works, consumers were thought
to perceive the information subconsciously and to be influenced to buy the
products shown. Many people considered the practice to be subversive, and in
1974, the Federal Communications Commission condemned it. Much of the
original research on subliminal advertising, conducted by a researcher trying to
drum up business for his market research firm, was fabricated (Crossen, 2007).
People are still fascinated by subliminal advertising, however. To create buzz
about the television show The Mole in 2008, ABC began hyping it by airing short
commercials composed of just a few frames. If you blinked, you missed it. Some
television stations actually called ABC to figure out what was going on. One-
second ads were later rolled out to movie theaters (Adalian, 2008).
Different consumers perceive information differently. A couple of frames about
The Mole might make you want to see the television show. However, your friend
might see the ad, find it stupid, and never tune in to watch the show. One man
sees Pledge as an outstanding furniture polish, while another sees a can of spray
no different from any other furniture polish. One woman sees a luxurious Gucci
purse, and the other sees an overpriced bag to hold keys and makeup (Chartrand,
2009).
Learning
Learning refers to the process by which consumers change their behavior after
they gain information or experience. It's the reason you don't buy a bad product
twice. Learning doesn't just affect what you buy, it affects how you shop. People
with limited experience about a product or brand generally seek out more
information than people who have used a product before.
Companies try to get consumers to learn about their products in different ways.
Car dealerships offer test drives. Pharmaceutical representatives leave samples
and brochures at doctor's offices. Other companies give consumers free samples.
To promote its new line of coffees, McDonald's offered customers free samples.
Have you ever eaten the food samples in a grocery store? While sampling is an
expensive strategy, it gets consumers to try the product and gets many
customers buy it, especially right after trying it in the store.
A kind of operant learning called instrumental conditioning occurs when
researchers are able to get a mouse to run through a maze for a piece of cheese
or a get a dog to salivate just by ringing a bell. In other words, learning occurs
through repetitive behavior that has positive or negative consequences.
Companies engage in operant conditioning by rewarding consumers, which
causes them to want to repeat their purchasing behaviors. Examples include the
prizes and toys that come in Cracker Jacks and McDonald's happy meals, free
tans offered with gym memberships, a free sandwich after a certain number of
purchases, and free car washes when you fill up your car's gas tank.
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Another learning process called classical conditioning occurs by associating a
conditioned stimulus (CS) with an unconditioned stimulus (US) to get a particular
response. The more frequently the CS is linked with the US, the faster the
learning occurs.
Attitude
Attitudes are mental positions or emotional feelings, favorable or unfavorable
evaluations, and action tendencies people have about products, services,
companies, ideas, issues, or institutions (Attitude, n.d.). Attitudes tend to be
enduring, and because they are based on people's values and beliefs, they are
hard to change. Companies want people to have positive feelings about their
offerings. A few years ago, KFC began running ads suggesting that fried chicken
was healthy, until the US Federal Trade Commission told the company to stop.
Wendy's slogan that its products are "way better than fast food" is another
example of a business trying to change customers' attitudes. Fast food has a
negative connotation, so Wendy's is trying to get consumers to think about its
offerings in a more positive light.
An example of a shift in consumers' attitudes occurred when the taxpayer-paid
government bailouts of big banks that began in 2008 provoked the wrath of
many Americans, creating an opportunity for small banks not involved in the
credit bailout and subprime mortgage mess. The Worthington National Bank, a
small bank in Fort Worth, Texas, ran billboards reading: "Did Your Bank Take a
Bailout? We didn't." Another read: "Just Say NO to Bailout Banks. Bank
Responsibly!" The Worthington Bank received tens of millions of dollars in new
deposits soon after running these campaigns (Mantone, 2009).
Societal Factors
Situational factors, personal factors, and psychological factors influence what
you buy, but only on a temporary basis. Societal factors are a bit different. They
are more outward and have broad influences on your beliefs and the way you do
things. They depend on the world around you and how it works.
Culture
Culture refers to the shared beliefs, customs, behaviors, and attitudes that
characterize a society. Culture is a handed-down way of life and is often
considered the broadest influence on a consumer's behavior. Your culture
prescribes the way in which you should live and has a huge effect on the things
you purchase. For example, in Beirut, Lebanon, women can often be seen
wearing miniskirts. If you're a woman in Afghanistan wearing a miniskirt,
however, you could face bodily harm or death. In Afghanistan women generally
wear burqas, which cover them completely from head to toe. Similarly, in Saudi
Arabia, women must wear an abaya, or long black garment. Interestingly, abayas
have become big business in recent years. They come in many styles, cuts, and
fabrics, and some are encrusted with jewels and cost thousands of dollars.
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Even cultures that share many of the same values as the United States can be
quite different. Following the meltdown of the financial markets in 2008,
countries around the world were pressed by the United States to engage in
deficit spending to stimulate the worldwide economy. The plan was a hard sell
both to German politicians and to the German people in general. Most Germans
don't own credit cards and running up a lot of debt is something people in that
culture generally don't do.
Subcultures
A subculture is a group of people within a culture who are different from the
dominant culture but have something in common with one another, such as
common interests, vocations or jobs, religions, ethnic backgrounds, and
geographic locations. The fastest-growing subculture in the United States
consists of people of Hispanic origin, followed by Asian Americans, and African
Americans. The purchasing power of US Hispanics continues to grow, exceeding
$1 trillion in 2010 ("Latino Purchasing Power," 2011). Home Depot has launched
a Spanish version of its website. Walmart is in the process of converting some of
its neighborhood markets into stores designed to appeal to Hispanics. The
Supermarcado de Walmart stores are located in Hispanic neighborhoods and
feature elements such as cafés that serve Latino pastries and coffee and full
meat and fish counters (Birchall, 2009a). Marketing products based on the
ethnicity of consumers is useful but may become harder to do in the future as
the boundaries between ethnic groups blur.
Other subcultures, can develop in response to people's interests, similarities, and
behaviors that allow marketing professionals to design specific products for
them. These can include the hip-hop subculture, people who in engage in
extreme types of sports, such as helicopter skiing, or people who play the
fantasy game Dungeons and Dragons.
Social Class
A social class is a group of people who have the same social, economic, or
educational status in society. While income helps define social class, the primary
variable determining social class is occupation. To some degree, consumers in the
same social class exhibit similar purchasing behavior. In many countries, people
are expected to marry within their own social class. When asked, people tend to
say they are middle class, which is not always correct. Have you ever been
surprised to find out that someone you knew who was wealthy drove a beat-up
old car or wore old clothes and shoes or that someone who isn't wealthy owns a
Mercedes or other upscale vehicle? While some products may appeal to people
in a social class, you can't assume a person is in a certain social class because
they either have or don't have certain products or brands.
In a recession when luxury buyers are harder to come by, the makers of upscale
brands may want their customer bases to be as large as possible. However,
companies don't want to risk cheapening their brands. That's why, for example,
Smart Cars, which are made by BMW, don't have the BMW label on them. For a
time, Tiffany's sold a cheaper line of silver jewelry to a lot of customers.
However, the company later worried that its reputation was being tarnished by
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the line. Keep in mind that a product's price is to some extent determined by
supply and demand. Luxury brands therefore try to keep the supply of their
products in check so their prices remain high.
Some companies, such as Johnnie Walker, have managed to capture market
share by introducing lower-echelon brands without damaging their luxury
brands. The company's whiskeys come in bottles with red, green, blue, black, and
gold labels. The blue label is the company's best product. Every blue-label bottle
has a serial number and is sold in a silk-lined box, accompanied by a certificate of
authenticity.
Reference Groups and Opinion Leaders
Reference groups are groups (social groups, work groups, family, or close friends)
a consumer identifies with and may want to join. They influence consumers'
attitudes and behavior. If you have ever dreamed of being a professional athlete,
you have an aspirational reference group. That's why, for example, Nike hires
celebrities such as Michael Jordan to pitch the company's products. There may
also be dissociative groups, or groups to which a consumer does not want to be
associated.
Opinion leaders are people with expertise in certain areas. Consumers respect
these people and often ask their opinions before they buy goods and services.
An information technology (IT) specialist with a great deal of knowledge about
computer brands is one example. These people's purchases often lie at the
forefront of leading trends. The IT specialist is probably a person who has the
latest and greatest tech products, and his opinion of them is likely to carry more
weight with you than any sort of advertisement.
Today's companies are using different techniques to reach opinion leaders,
including the use of special software for network analysis. Orgnet's software
doesn't mine sites like Facebook and LinkedIn but rather uses sophisticated
techniques similar to those that unearthed the links between al-Qaeda terrorists.
Valdis Krebs, the company's founder, explains, "Pharmaceutical firms want to
identify who the key opinion leaders are. They don't want to sell a new drug to
everyone. They want to sell to the 60 key oncologists" (Campbell, 2004).
Family
Most market researchers consider a person's family to be one of the most
important influences on their buying behavior. Like it or not, you are more like
your parents than you think, at least in terms of your consumption patterns.
Many of the things you buy and don't buy are a result of what your parents
bought when you were growing up. Products such as the brand of soap and
toothpaste your parents bought and used, and even the brand of politics they
leaned toward are examples of the products you may favor as an adult.
Companies are interested in which family members have the most influence over
certain purchases. Children have a great deal of influence over many household
purchases. For example, in 2003 nearly half (47 percent) of 9- to 17-year-olds
were asked by parents to go online to find out about products or services,
compared to 37 percent in 2001. IKEA used this knowledge to design their
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showrooms. The children's bedrooms feature fun beds with appealing comforters
so children will be prompted to identify and ask for what they want ("Teen
Market Profile," 2003).
Marketing to children has come under increasing scrutiny. Some critics accuse
companies of deliberately manipulating children to nag their parents for certain
products. For example, even though tickets for concerts featuring the Disney
character Hannah Montana ranged from hundreds to thousands of dollars, the
concerts often still sold out. However, as one writer put it, exploiting "pester
power" is not always ultimately in the long-term interests of advertisers if it
alienates parents (Waddell, 2009).
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Situational influences are temporary conditions that affect
how buyers behave. They include physical factors such as a
store's buying locations, layout, music, lighting, and even
scent. Companies try to make the physical factors in which
consumers shop as favorable as possible. If they can't, they
utilize other tactics, such as discounts. The consumer's social
situation, time factors, the reason for their purchases, and
their moods also affect their buying behavior.
Your personality describes your disposition as other people
see it. Market researchers believe people buy products to
enhance how they feel about themselves. Your gender also
affects what you buy and how you shop. However, there's
some evidence that this is changing. Younger men and women
are beginning to shop more alike. People's consumer
decisions are also affected by their ages and life stages. A
person's cognitive age is how old one feels oneself to be. To
further understand consumers and connect with them,
companies have begun looking more closely at their lifestyles
(what they do, how they spend their time, what their
priorities and values are, and how they see the world).
Psychologist Abraham Maslow theorized that people have to
fulfill their basic needs—like the need for food, water, and
sleep—before they can begin fulfilling higher-level needs.
Perception is how you interpret the world around you and
make sense of it in your brain. To be sure their advertising
messages get through to you, companies often resort to
repetition. Shocking advertisements and product placement
are two other methods. Learning is the process by which
consumers change their behavior after they gain information
about or experience with a product. Consumers' attitudes are
the mental positions people take based on their values and
beliefs. Attitudes tend to be enduring and are often difficult
for companies to change.
Culture prescribes the way in which you should live and
affects the things you purchase. A subculture is a group of
people within a culture who are different from the dominant
culture but have something in common with one another—
common interests, vocations or jobs, religions, ethnic
backgrounds, sexual orientations, and so forth. To some
degree, consumers in the same social class exhibit similar
purchasing behavior. Most market researchers consider a
person's family to be one of the biggest determinants of
buying behavior. Reference groups are groups that a
consumer identifies with and wants to join. Companies often
hire celebrities to endorse their products to appeal to
Key Points
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people's reference groups. Opinion leaders are people with
expertise in certain areas. Consumers respect these people
and often ask their opinions before they buy goods and
services.
Low-Involvement Versus High-Involvement Buying Decisions and the Consumer's Decision Making Process
As you have seen, many factors influence a consumer's behavior. Depending on a
consumer's experience and knowledge, some consumers may be able to make
quick purchase decisions and other consumers may need to get information and
be more involved in the decision making process before making a purchase. The
level of involvement reflects how interested you are in consuming a product and
how much information you need to make a decision. The level of involvement in
buying decisions may be considered a continuum from decisions that are fairly
routine to decisions that require extensive thought and a high level of
involvement. Whether a decision is low, high, or limited, involvement varies by
consumer, not by product, although some products, such as cars or houses,
typically require high involvement for all consumers. Consumers with no
experience purchasing a product may have more involvement than those who
are replacing a product.
You have probably thought about many products you want or need but never did
much more than that. At other times, you've probably looked at dozens of
products, compared them, and then decided not to purchase any of them. When
you run out of products that you buy on a regular basis, like milk or bread, you
may buy the product as soon as you recognize the need, because you do not
need to search for information or evaluate alternatives. Low-involvement
decisions, however, typically involve products that are relatively inexpensive and
pose a low risk to the buyer if she makes a mistake by purchasing them.
Consumers often engage in routine response behavior when they make low-
involvement decisions—that is, they make automatic purchase decisions based
on limited information or information they have gathered in the past. For
example, if you always order a Diet Coke at lunch, you're engaging in routine
response behavior. You may not even think about other drink options at lunch
because your routine is to order a Diet Coke, and you simply do it. Similarly, if
you run out of Diet Coke at home, you may buy more without seeking out any
new information.
Some low-involvement purchases are made with no planning or previous
thought. These buying decisions are called impulse buying. While you're waiting
to check out at the grocery store, perhaps you see a magazine with Angelina
Jolie and Brad Pitt on the cover and buy it on the spot simply because you want
it. You might see a roll of tape at a check-out stand and remember you need one,
or you might see a bag of chips and realize you're hungry. These are items that
are typically low-involvement decisions. Low-involvement decisions aren't
necessarily products purchased on impulse, although they can be.
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By contrast, high-involvement decisions carry a higher risk to buyers if they fail,
are complex, or have high price tags. A car, a house, and an insurance policy are
examples. These items are not purchased often but are important to the buyer.
Buyers don't engage in routine response behavior when purchasing high-
involvement products. Instead, consumers engage in what's called extended
problem solving, where they spend a lot of time comparing factors such as the
features of the products, prices, and warranties.
High-involvement decisions can cause buyers a great deal of postpurchase
dissonance, or anxiety, if they are unsure about their purchases, or if they had a
difficult time deciding between two alternatives. Companies that sell high-
involvement products are aware that postpurchase dissonance can be a problem.
Frequently, they try to offer consumers a lot of information about their products,
including why they are superior to competing brands and how they will meet
customer expectations. Salespeople may answer questions and be extra
attentive to customers.
Limited problem solving falls somewhere between low-involvement (routine) and
high-involvement (extended problem solving) decisions. Consumers engage in
limited problem solving when they already have some information about a
product or service but continue to search for a little more information. Assume
you need a new backpack for a hiking trip. While you are familiar with
backpacks, you know that new features and materials are available since you
purchased your last backpack. You're going to spend some time looking for one
that's decent because you don't want it to fall apart while you're traveling and
dump everything you've packed on a hiking trail. You might do a little research
online and come to a decision relatively quickly. You might consider the choices
available at your favorite retail outlet but not look at every backpack at every
outlet before making a decision. Or you might rely on the advice of a person you
know who's knowledgeable about backpacks. In some way you shorten or limit
your involvement and the decision-making process.
Products, such as chewing gum, which entail low-involvement decisions for most
consumers, often use advertising such as commercials and sales promotions like
coupons to reach many consumers at once. Companies also try to sell these
products in as many locations as possible. Many products that typically entail
high-involvement decisions, such as automobiles, may be sold with a higher
degree of personalization to answer consumers' specific questions. Brand names
can also be very important, regardless of the consumer's level of purchasing
involvement. Consider a low- versus high-involvement decision—say, purchasing
a tube of toothpaste versus a new car. You might routinely buy your favorite
brand of toothpaste, not thinking much about the purchase (engage in routine
response behavior), but not be willing to switch to another brand either. Having a
brand you like saves you search time and eliminates the evaluation period
because you know what you're getting.
When it comes to buying a car, you might engage in extensive problem solving
but, again, only be willing to consider a certain brand or brands. If it's a high-
involvement product you're purchasing, a good brand name is probably going to
be very important to you. That's why the manufacturers of products that
typically require high-involvement decisions can't become complacent about the
value of their brands.
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Stages in the Buying Process
At any given time, you're probably in a buying stage for some product or service.
You're thinking about the different types of things you want or need to
eventually buy, how you are going to find the best ones at the best price, and
where and how will you buy them. Meanwhile, there are other products you
have already purchased that you're evaluating. Will you discard them, and if so,
how? Then what will you buy? Where does that process start?
Stage 1. Need Recognition
You plan to travel around the country after you graduate and don't have a
particularly good backpack, so you realize that you must get a new one. You may
also be thinking about the job you've accepted after graduation and know that
you must get a vehicle to commute. Recognizing a need may involve something
as simple as running out of bread or milk or realizing that you must get a new
backpack or a car after you graduate. Marketers try to show consumers how
their products and services add value and help satisfy needs and wants. Do you
think it's a coincidence that Gatorade, Powerade, and other beverage makers
locate their machines in gymnasiums so you see them after a long, tiring
workout? Previews at movie theaters are another example. How many times
have you have heard about a movie and had no interest in it—until you saw the
preview? Afterward, you may have felt like you had to see it.
Stage 2. Search for Information
For products such as milk and bread, you may simply recognize the need to make
a purchase, go to the store, and buy more. However, if you are purchasing a car
for the first time or need a particular type of backpack, you may need to get
information on the many options. Maybe you have owned several backpacks and
know what you like and don't like about them. Or there might be a particular
brand that you've purchased in the past that you liked and want to purchase in
the future. This is a great position for the company that owns the brand to be in
—something firms strive for—because it often means you will limit your search
and simply buy their brand again.
If what you already know about backpacks doesn't provide you with enough
information, you'll probably continue to gather information from various sources.
Frequently people ask friends, family, and neighbors about their experiences
with products. Magazines such as Consumer Reports (considered an objective
source of information on many consumer products) or Backpacker Magazine
might also help you. Similar information sources are available for learning about
different makes and models of cars.
Internet shopping sites, such as Amazon, have become common sources of
consumer-generated reviews and information about products. People often
prefer independent sources like these when they are looking for product
information. However, they also often consult non-neutral sources of
information, such advertisements, brochures, company websites, and
salespeople.
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Stage 3. Product Evaluation
Obviously, there are hundreds of different backpacks and cars available. It's not
possible for you to examine all of them. In fact, good salespeople and marketing
professionals know that providing you with too many choices can be so
overwhelming that you might not buy anything. Consequently, you may use
choice heuristics or rules of thumb that provide mental shortcuts in the decision-
making process. You may also develop evaluative criteria to help you narrow
down your choices. Backpacks or cars that meet your initial criteria before any
deeper consideration will determine the set of brands you'll consider for
purchase.
Evaluative criteria are characteristics that are important to buyers, such as the
price of the backpack, the size, the number of compartments, and color. Some of
these characteristics are more important than others. For example, the size of
the backpack and the price might be more important to you than the color. You
must decide what criteria are most important and how well the different
alternatives meet that specification.
Companies want to convince you that the evaluative criteria you are considering
reflect the strengths of their products. For example, you might not have thought
about the weight or durability of the backpack you want to buy. However, a
backpack manufacturer like Osprey might remind you through magazine ads,
packaging information, and its website that you should pay attention to the
features that happen to be key selling points of its backpacks. Automobile
manufacturers may have similar models, so don't be afraid to add criteria to help
you evaluate cars.
Stage 4. Product Choice and Purchase
With low-involvement purchases, consumers may go from recognizing a need to
purchasing the product. However, for backpacks and cars, you decide which one
to purchase after you have evaluated different alternatives. In addition to
selecting a backpack or car, you are probably also making other decisions at this
stage, including where and how to purchase the product and on what terms.
Maybe the backpack was cheaper at one store than another, but the salesperson
there was rude. Or maybe you decide to order online because you're too busy to
go to the mall. Other decisions related to the purchase, particularly those related
to big-ticket items, are made at this point. For example, if you're buying a high-
definition television, you might look for a store that will offer you credit or a
warranty.
Stage 5. Postpurchase Use and Evaluation
At this point in the process you decide whether the backpack you purchased is
everything it was cracked up to be. Hopefully it is. If it's not, you're likely to
suffer what's called postpurchase dissonance, also known as buyer's remorse.
Typically, dissonance occurs when a product or service does not meet your
expectations. Consumers are more likely to experience dissonance with products
that are relatively expensive and that are purchased infrequently.
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You want to feel good about your purchase, but you don't. You begin to wonder
whether you should have waited to get a better price, purchased something else,
or gathered more information first. Consumers commonly feel this way, which is
a problem for sellers. If you don't feel good about what you've purchased from
them, you might return the item and never purchase anything from them again.
Or, worse yet, you might tell everyone you know how bad the product was.
For smaller items, companies may try to prevent buyer's remorse by offering a
money-back guarantee or encouraging their salespeople to tell you what a great
purchase you made. How many times have you heard a salesperson say, "That
outfit looks so great on you!" For larger items, companies might offer a warranty,
instruction booklets, or a toll-free troubleshooting line to call, or they might have
a salesperson call you to see if you need help with product. Automobile
companies may offer loaner cars when you bring your car in for service.
Companies, especially service-oriented businesses like restaurants. may also try
to set expectations in order to satisfy customers. Think about when the hostess
tells you that your table will be ready in 30 minutes. If they seat you in 15
minutes, you are much happier than if they told you that your table would be
ready in 15 minutes, but it took 30 minutes to seat you. Similarly, if a store tells
you that your pants will be altered in a week and they are ready in three days,
you'll be much more satisfied than if they said your pants would be ready in
three days, yet it took a week before they were ready.
Stage 6. Disposal of the Product
There was a time when neither manufacturers nor consumers thought much
about how products got disposed of, so long as people bought them. But that's
changed. The disposal of products is becoming extremely important to
consumers and society in general. Computers and batteries, which leech
chemicals into landfills, are a huge problem. Consumers don't want to degrade
the environment if they don't have to, and companies are becoming more aware
of this stance.
Take for example Crystal Light, a water-based beverage that's sold in grocery
stores. It is available in a bottle, but many people prefer to buy it in its
concentrated form, put it in reusable pitchers or bottles, and add water. That
way, they don't have to buy and dispose of many plastic bottles, damaging the
environment in the process. Windex has done something similar with its window
cleaner. Instead of buying new bottles of it all the time, you can purchase a
concentrate and add water. You have probably noticed that most grocery stores
now sell cloth bags consumers can reuse instead of continually using and
discarding new plastic or paper bags.
Other companies are less concerned about conservation than they are about
planned obsolescence. Planned obsolescence is a deliberate effort by companies
to make their products obsolete, or unusable, after a period of time. The goal is
to improve a company's sales by reducing the amount of time between the
repeat purchases consumers make of products. When a software developer
introduces a new version of product, it is usually designed to be incompatible
with older versions of it. For example, not all the formatting features are the
same in Microsoft Word 2007 and 2010. Sometimes documents do not translate
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properly when opened in the newer version. Consequently, you will be more
inclined to upgrade to the new version so you can open all Word documents you
receive.
Making products disposable is another way that firms have managed to reduce
the amount of time between purchases. Do you know anyone today that owns a
non-disposable lighter? Believe it or not, prior to the 1960s, scarcely anyone
could have imagined using a cheap disposable lighter. There are many more
disposable products today than there were in the past—including everything
from bottled water and individually wrapped snacks to single-use eye drops and
cell phones.
Consumer behavior looks at the many reasons that people
buy things and later dispose of them. Consumers go through
distinct buying phases when they purchase products: (1)
realizing the need or desire, (2) searching for information
about the item, (3) evaluating different products, (4) choosing
a product and purchasing it, (5) using and evaluating the
product after the purchase, and (6) disposing of the product.
A consumer's level of involvement corresponds with how
interested he or she is in buying and consuming a product.
Low-involvement products are usually inexpensive and pose a
low risk to the buyer if he or she makes a mistake by
purchasing them. High-involvement products carry a high risk
to the buyer if they fail, are complex, or are expensive.
Limited-involvement products fall somewhere in between..
References
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Key Points
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Bird, A. (2002). Retail Industry. In A. Bird (Ed.), Encyclopedia of Japanese business
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Gaumer, C. J., & Leif, W. C. (2005). Social facilitation: Affect and application in
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Ries, L. (2009). In the boardroom: Why left-brained management and right-brain
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Licenses and Attributions
Chapter 3: Consumer Behavior: How People Make Buying Decisions
(https://2012books.lardbucket.org/books/marketing-principles-v2.0/s06-
consumer-behavior-how-people-m.html) from Marketing Principles is
available under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0
Unported (https://creativecommons.org/licenses/by-nc-sa/3.0/) license
without attribution as requested by the site's original creator or licensee. UMUC
has modified this work and it is available under the original license.
© 2020 University of Maryland Global Campus
All links to external sites were verified at the time of publication. UMGC is not responsible for the validity or
integrity of information located at external sites.
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Evaluating Business Attractiveness
Markides (1997) suggested that when evaluating business attractiveness, an
organization should ask six questions:
What could the organization do better than any of its competitors in its
existing markets?
What are the strategic resources required to succeed in the new market?
Can the organization leapfrog or catch the competition?
Would diversification break up the organization's strategic assets that may
need to be kept together?
Will the organization be a winner in the new business or just another
player?
And finally, what can the organization learn by entering into the new
business, and will it be able to learn from it?
The economist and business strategist Michael Porter summarized the above
questions in the form of three tests that an organization should use when
entering into a new business (de Kluyver & Pearce II, 2012, p. 168):
the attractiveness test—Is the industry that the organization wants to enter
fundamentally attractive from a competitive, growth, and profitability
perspective, or can the organization make it favorable?
the cost of entry test—Are the costs of entry into the new business
reasonable? Is the time frame needed to achieve profitability acceptable?
Are the associated risks tolerable?
the better-off test—Does the new business improve the organization's
overall business portfolio performance and competitiveness?
References
de Kluyver, C. A., & Pearce II, J. A. (2012). Strategy: A view from the top (4th ed.).
Upper Saddle River, NJ: Prentice Hall–Pearson.
Markides, C. C. (1997). To diversify or not to diversify. Harvard Business Review,
75(6), 93–99. Retrieved from www.hbr.org
© 2020 University of Maryland Global Campus
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integrity of information located at external sites.
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Differences between a Product and a Service
Although a service may be viewed as a product and vice versa, the two are
distinguished by several characteristics. Services are characterized by the
following attributes (Johansson, 2009):
intangibility—You cannot easily touch a service. Services are difficult to
monitor at borders and hard to assess for customs duty.
heterogeneity—A service is not exactly the same each time, especially
personal services. Services are less standardized than products and quality
varies.
inseparability—Services are produced when they are consumed. Service
quality depends on situation and context.
perishability—You cannot store a service, unless the service is embodied in a
product (e.g., a DVD or an ATM).
The entry barriers in global markets for services are greater than for products,
but exit barriers are lower (Johansson, 2009):
Local regulations vary widely across countries.
Local service businesses are typically protected.
Cultural barriers tend to be higher.
Intangibility makes trade monitoring difficult.
Free-trade agreements are hard to complete and enforce.
Without trade agreements, governments have no incentive to make
regulations more homogeneous.
Quality can be hard to define when it comes to global services (Johansson,
2009):
Since services are intangible, service quality is difficult to quantify.
Different cultures have different habits and preferences, and therefore have
different definitions of service quality.
Culture strongly affects perceived service quality and customer satisfaction.
What is considered high service quality in one country may not necessarily
be perceived as high in another.
Learning Topic
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References
Johansson, J. (2009). Global marketing (5th ed.). New York, NY: McGraw-Hill.
© 2020 University of Maryland Global Campus
All links to external sites were verified at the time of publication. UMGC is not responsible for the validity or
integrity of information located at external sites.
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Digital Marketing
With advances in communication and the growth of internet services, digital
marketing has become an important component in the marketing effort of most
companies. Digital marketing involves the application of marketing strategies and
technologies using electronic media, such as computers and smartphones. Digital
marketers capitalize on digital technologies to differentiate their products and
services from competing offers (Gaikwad & Kate, 2016).
Online retail sales have exploded, as internet retailers, such as Amazon, provide
informative, convenient, and personalized experiences. By saving on overhead
costs associated with brick-and-mortar stores, inventory, and staff, these
retailers can offer competitive prices and can profitably sell low-volume
merchandise to their niche markets. While customers scan websites searching
for the lowest prices, online retailers compete to offer the customer a top-caliber
online experience, delivery, and handling of customer complaints and issues. E-
commerce allows customers to connect and interact with the brand of their
choice. Accordingly, customer service is crucial to the success of these retailers.
In addition, B2B commerce is increasingly being conducted online, profoundly
changing the supplier-customer relationship (Kotler & Keller, 2015).
Digital marketers provide their customers with an individualized buying
experience, a wide selection of products, and substantial information to help
them research and evaluate these products. However, it is easy for customers to
visit another website at any time with the click of a button. For this reason,
digital marketers aim to not only attract customers, but to encourage them to
stay on their websites, explore, and buy from them. A website's stickiness—the
amount of time that a potential customer spends on the site—can be used as an
evaluative measure (Marshall & Johnston, 2011).
Anderson (2006) states that innovations in e-commerce and search engine
technologies enhance the efficiency of online retail by encouraging the entry of
even more innovative products. This process creates a long tail of niches while
simultaneously decreasing the market share of blockbuster products. Anderson
argues that internet innovations reduce the marginal cost of products by allowing
online retailers to focus on previously ignored long-tail products. According to
Anderson, in a world of scarcity, the "curse of the traditional retail" is the
obligation to find local customers (p. 17). Traditional retailers typically carry only
products that generate profitable demand. They are constrained by their space
and retail areas and thus prioritize their stocked products according to demand.
By contrast, online retailers exist in a world of abundance, with infinite shelf
Learning Topic
3/26/2020 Digital Marketing
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space and cheap distribution costs. This advantage allows them to carry a
substantial number of niches, which collectively represent a large share of their
business and may rival their blockbuster products.
As examples, Anderson (2006) refers to the online book and music sales of
Amazon and other online retailers, where selection is virtually unlimited and
delivery is cheap. He adds that the market share of niches is increasing, and the
cost to customers is decreasing. These shifts are influenced by technological
innovations in search engines as well as recommendation and ranking tools,
which effectively drive "demand down the tail" (p. 53). Anderson also argues that
three forces underlie long-tail economics: democratization of production tools,
democratization of distribution tools, and connecting supply and demand.
Resources
Management, Strategies, Tools, and Practices in eMarketing
(http://ezproxy.umuc.edu/login?
url=http://search.ebscohost.com.ezproxy.umuc.edu/login.aspx?
direct=true&db=bth&AN=111382489&site=eds-live&scope=site)
E-Marketing: A Modern Approach of Business at the Door of Consumer
(http://ezproxy.umuc.edu/login?
url=http://search.ebscohost.com.ezproxy.umuc.edu/login.aspx?
direct=true&db=bth&AN=119728209&site=eds-live&scope=site)
References
Anderson, C. (2006). The long tail: Why the future of business is selling less of
more. New York, NY: Hyperion.
Gaikwad, J. M., & Kate, P. (2016, September). eMarketing: A modern approach of
business at the door of consumer. International Journal of Research in
Commerce & Management, 7(9), 56–61.
Kotler, P., & Keller, K. L. (2015). Marketing management (15th ed.). Upper Saddle
River, NJ: Pearson.
Marshall, G. W., & Johnston, M. W. (2011). Essentials of marketing management.
New York, NY: McGraw-Hill.
© 2020 University of Maryland Global Campus
All links to external sites were verified at the time of publication. UMGC is not responsible for the validity or
integrity of information located at external sites.
3/26/2020 Digital Marketing
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Digital Marketing
With advances in communication and the growth of internet services, digital
marketing has become an important component in the marketing effort of most
companies. Digital marketing involves the application of marketing strategies and
technologies using electronic media, such as computers and smartphones. Digital
marketers capitalize on digital technologies to differentiate their products and
services from competing offers (Gaikwad & Kate, 2016).
Online retail sales have exploded, as internet retailers, such as Amazon, provide
informative, convenient, and personalized experiences. By saving on overhead
costs associated with brick-and-mortar stores, inventory, and staff, these
retailers can offer competitive prices and can profitably sell low-volume
merchandise to their niche markets. While customers scan websites searching
for the lowest prices, online retailers compete to offer the customer a top-caliber
online experience, delivery, and handling of customer complaints and issues. E-
commerce allows customers to connect and interact with the brand of their
choice. Accordingly, customer service is crucial to the success of these retailers.
In addition, B2B commerce is increasingly being conducted online, profoundly
changing the supplier-customer relationship (Kotler & Keller, 2015).
Digital marketers provide their customers with an individualized buying
experience, a wide selection of products, and substantial information to help
them research and evaluate these products. However, it is easy for customers to
visit another website at any time with the click of a button. For this reason,
digital marketers aim to not only attract customers, but to encourage them to
stay on their websites, explore, and buy from them. A website's stickiness—the
amount of time that a potential customer spends on the site—can be used as an
evaluative measure (Marshall & Johnston, 2011).
Anderson (2006) states that innovations in e-commerce and search engine
technologies enhance the efficiency of online retail by encouraging the entry of
even more innovative products. This process creates a long tail of niches while
simultaneously decreasing the market share of blockbuster products. Anderson
argues that internet innovations reduce the marginal cost of products by allowing
online retailers to focus on previously ignored long-tail products. According to
Anderson, in a world of scarcity, the "curse of the traditional retail" is the
obligation to find local customers (p. 17). Traditional retailers typically carry only
products that generate profitable demand. They are constrained by their space
and retail areas and thus prioritize their stocked products according to demand.
By contrast, online retailers exist in a world of abundance, with infinite shelf
Learning Topic
3/26/2020 Digital Marketing
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space and cheap distribution costs. This advantage allows them to carry a
substantial number of niches, which collectively represent a large share of their
business and may rival their blockbuster products.
As examples, Anderson (2006) refers to the online book and music sales of
Amazon and other online retailers, where selection is virtually unlimited and
delivery is cheap. He adds that the market share of niches is increasing, and the
cost to customers is decreasing. These shifts are influenced by technological
innovations in search engines as well as recommendation and ranking tools,
which effectively drive "demand down the tail" (p. 53). Anderson also argues that
three forces underlie long-tail economics: democratization of production tools,
democratization of distribution tools, and connecting supply and demand.
Resources
Management, Strategies, Tools, and Practices in eMarketing
(http://ezproxy.umuc.edu/login?
url=http://search.ebscohost.com.ezproxy.umuc.edu/login.aspx?
direct=true&db=bth&AN=111382489&site=eds-live&scope=site)
E-Marketing: A Modern Approach of Business at the Door of Consumer
(http://ezproxy.umuc.edu/login?
url=http://search.ebscohost.com.ezproxy.umuc.edu/login.aspx?
direct=true&db=bth&AN=119728209&site=eds-live&scope=site)
References
Anderson, C. (2006). The long tail: Why the future of business is selling less of
more. New York, NY: Hyperion.
Gaikwad, J. M., & Kate, P. (2016, September). eMarketing: A modern approach of
business at the door of consumer. International Journal of Research in
Commerce & Management, 7(9), 56–61.
Kotler, P., & Keller, K. L. (2015). Marketing management (15th ed.). Upper Saddle
River, NJ: Pearson.
Marshall, G. W., & Johnston, M. W. (2011). Essentials of marketing management.
New York, NY: McGraw-Hill.
© 2020 University of Maryland Global Campus
All links to external sites were verified at the time of publication. UMGC is not responsible for the validity or
integrity of information located at external sites.
3/26/2020 Digital Marketing
https://leocontent.umgc.edu/content/umuc/tgs/mba/mba640/2202/learning-topic-list/digital-marketing.html?ou=447146 1/2
Digital Marketing
With advances in communication and the growth of internet services, digital
marketing has become an important component in the marketing effort of most
companies. Digital marketing involves the application of marketing strategies and
technologies using electronic media, such as computers and smartphones. Digital
marketers capitalize on digital technologies to differentiate their products and
services from competing offers (Gaikwad & Kate, 2016).
Online retail sales have exploded, as internet retailers, such as Amazon, provide
informative, convenient, and personalized experiences. By saving on overhead
costs associated with brick-and-mortar stores, inventory, and staff, these
retailers can offer competitive prices and can profitably sell low-volume
merchandise to their niche markets. While customers scan websites searching
for the lowest prices, online retailers compete to offer the customer a top-caliber
online experience, delivery, and handling of customer complaints and issues. E-
commerce allows customers to connect and interact with the brand of their
choice. Accordingly, customer service is crucial to the success of these retailers.
In addition, B2B commerce is increasingly being conducted online, profoundly
changing the supplier-customer relationship (Kotler & Keller, 2015).
Digital marketers provide their customers with an individualized buying
experience, a wide selection of products, and substantial information to help
them research and evaluate these products. However, it is easy for customers to
visit another website at any time with the click of a button. For this reason,
digital marketers aim to not only attract customers, but to encourage them to
stay on their websites, explore, and buy from them. A website's stickiness—the
amount of time that a potential customer spends on the site—can be used as an
evaluative measure (Marshall & Johnston, 2011).
Anderson (2006) states that innovations in e-commerce and search engine
technologies enhance the efficiency of online retail by encouraging the entry of
even more innovative products. This process creates a long tail of niches while
simultaneously decreasing the market share of blockbuster products. Anderson
argues that internet innovations reduce the marginal cost of products by allowing
online retailers to focus on previously ignored long-tail products. According to
Anderson, in a world of scarcity, the "curse of the traditional retail" is the
obligation to find local customers (p. 17). Traditional retailers typically carry only
products that generate profitable demand. They are constrained by their space
and retail areas and thus prioritize their stocked products according to demand.
By contrast, online retailers exist in a world of abundance, with infinite shelf
Learning Topic
3/26/2020 Digital Marketing
https://leocontent.umgc.edu/content/umuc/tgs/mba/mba640/2202/learning-topic-list/digital-marketing.html?ou=447146 2/2
space and cheap distribution costs. This advantage allows them to carry a
substantial number of niches, which collectively represent a large share of their
business and may rival their blockbuster products.
As examples, Anderson (2006) refers to the online book and music sales of
Amazon and other online retailers, where selection is virtually unlimited and
delivery is cheap. He adds that the market share of niches is increasing, and the
cost to customers is decreasing. These shifts are influenced by technological
innovations in search engines as well as recommendation and ranking tools,
which effectively drive "demand down the tail" (p. 53). Anderson also argues that
three forces underlie long-tail economics: democratization of production tools,
democratization of distribution tools, and connecting supply and demand.
Resources
Management, Strategies, Tools, and Practices in eMarketing
(http://ezproxy.umuc.edu/login?
url=http://search.ebscohost.com.ezproxy.umuc.edu/login.aspx?
direct=true&db=bth&AN=111382489&site=eds-live&scope=site)
E-Marketing: A Modern Approach of Business at the Door of Consumer
(http://ezproxy.umuc.edu/login?
url=http://search.ebscohost.com.ezproxy.umuc.edu/login.aspx?
direct=true&db=bth&AN=119728209&site=eds-live&scope=site)
References
Anderson, C. (2006). The long tail: Why the future of business is selling less of
more. New York, NY: Hyperion.
Gaikwad, J. M., & Kate, P. (2016, September). eMarketing: A modern approach of
business at the door of consumer. International Journal of Research in
Commerce & Management, 7(9), 56–61.
Kotler, P., & Keller, K. L. (2015). Marketing management (15th ed.). Upper Saddle
River, NJ: Pearson.
Marshall, G. W., & Johnston, M. W. (2011). Essentials of marketing management.
New York, NY: McGraw-Hill.
© 2020 University of Maryland Global Campus
All links to external sites were verified at the time of publication. UMGC is not responsible for the validity or
integrity of information located at external sites.
3/26/2020 Digital Marketing
https://leocontent.umgc.edu/content/umuc/tgs/mba/mba640/2202/learning-topic-list/digital-marketing.html?ou=447146 1/2
Digital Marketing
With advances in communication and the growth of internet services, digital
marketing has become an important component in the marketing effort of most
companies. Digital marketing involves the application of marketing strategies and
technologies using electronic media, such as computers and smartphones. Digital
marketers capitalize on digital technologies to differentiate their products and
services from competing offers (Gaikwad & Kate, 2016).
Online retail sales have exploded, as internet retailers, such as Amazon, provide
informative, convenient, and personalized experiences. By saving on overhead
costs associated with brick-and-mortar stores, inventory, and staff, these
retailers can offer competitive prices and can profitably sell low-volume
merchandise to their niche markets. While customers scan websites searching
for the lowest prices, online retailers compete to offer the customer a top-caliber
online experience, delivery, and handling of customer complaints and issues. E-
commerce allows customers to connect and interact with the brand of their
choice. Accordingly, customer service is crucial to the success of these retailers.
In addition, B2B commerce is increasingly being conducted online, profoundly
changing the supplier-customer relationship (Kotler & Keller, 2015).
Digital marketers provide their customers with an individualized buying
experience, a wide selection of products, and substantial information to help
them research and evaluate these products. However, it is easy for customers to
visit another website at any time with the click of a button. For this reason,
digital marketers aim to not only attract customers, but to encourage them to
stay on their websites, explore, and buy from them. A website's stickiness—the
amount of time that a potential customer spends on the site—can be used as an
evaluative measure (Marshall & Johnston, 2011).
Anderson (2006) states that innovations in e-commerce and search engine
technologies enhance the efficiency of online retail by encouraging the entry of
even more innovative products. This process creates a long tail of niches while
simultaneously decreasing the market share of blockbuster products. Anderson
argues that internet innovations reduce the marginal cost of products by allowing
online retailers to focus on previously ignored long-tail products. According to
Anderson, in a world of scarcity, the "curse of the traditional retail" is the
obligation to find local customers (p. 17). Traditional retailers typically carry only
products that generate profitable demand. They are constrained by their space
and retail areas and thus prioritize their stocked products according to demand.
By contrast, online retailers exist in a world of abundance, with infinite shelf
Learning Topic
3/26/2020 Digital Marketing
https://leocontent.umgc.edu/content/umuc/tgs/mba/mba640/2202/learning-topic-list/digital-marketing.html?ou=447146 2/2
space and cheap distribution costs. This advantage allows them to carry a
substantial number of niches, which collectively represent a large share of their
business and may rival their blockbuster products.
As examples, Anderson (2006) refers to the online book and music sales of
Amazon and other online retailers, where selection is virtually unlimited and
delivery is cheap. He adds that the market share of niches is increasing, and the
cost to customers is decreasing. These shifts are influenced by technological
innovations in search engines as well as recommendation and ranking tools,
which effectively drive "demand down the tail" (p. 53). Anderson also argues that
three forces underlie long-tail economics: democratization of production tools,
democratization of distribution tools, and connecting supply and demand.
Resources
Management, Strategies, Tools, and Practices in eMarketing
(http://ezproxy.umuc.edu/login?
url=http://search.ebscohost.com.ezproxy.umuc.edu/login.aspx?
direct=true&db=bth&AN=111382489&site=eds-live&scope=site)
E-Marketing: A Modern Approach of Business at the Door of Consumer
(http://ezproxy.umuc.edu/login?
url=http://search.ebscohost.com.ezproxy.umuc.edu/login.aspx?
direct=true&db=bth&AN=119728209&site=eds-live&scope=site)
References
Anderson, C. (2006). The long tail: Why the future of business is selling less of
more. New York, NY: Hyperion.
Gaikwad, J. M., & Kate, P. (2016, September). eMarketing: A modern approach of
business at the door of consumer. International Journal of Research in
Commerce & Management, 7(9), 56–61.
Kotler, P., & Keller, K. L. (2015). Marketing management (15th ed.). Upper Saddle
River, NJ: Pearson.
Marshall, G. W., & Johnston, M. W. (2011). Essentials of marketing management.
New York, NY: McGraw-Hill.
© 2020 University of Maryland Global Campus
All links to external sites were verified at the time of publication. UMGC is not responsible for the validity or
integrity of information located at external sites.
3/26/2020 Digital Marketing
https://leocontent.umgc.edu/content/umuc/tgs/mba/mba640/2202/learning-topic-list/digital-marketing.html?ou=447146 1/2
Digital Marketing
With advances in communication and the growth of internet services, digital
marketing has become an important component in the marketing effort of most
companies. Digital marketing involves the application of marketing strategies and
technologies using electronic media, such as computers and smartphones. Digital
marketers capitalize on digital technologies to differentiate their products and
services from competing offers (Gaikwad & Kate, 2016).
Online retail sales have exploded, as internet retailers, such as Amazon, provide
informative, convenient, and personalized experiences. By saving on overhead
costs associated with brick-and-mortar stores, inventory, and staff, these
retailers can offer competitive prices and can profitably sell low-volume
merchandise to their niche markets. While customers scan websites searching
for the lowest prices, online retailers compete to offer the customer a top-caliber
online experience, delivery, and handling of customer complaints and issues. E-
commerce allows customers to connect and interact with the brand of their
choice. Accordingly, customer service is crucial to the success of these retailers.
In addition, B2B commerce is increasingly being conducted online, profoundly
changing the supplier-customer relationship (Kotler & Keller, 2015).
Digital marketers provide their customers with an individualized buying
experience, a wide selection of products, and substantial information to help
them research and evaluate these products. However, it is easy for customers to
visit another website at any time with the click of a button. For this reason,
digital marketers aim to not only attract customers, but to encourage them to
stay on their websites, explore, and buy from them. A website's stickiness—the
amount of time that a potential customer spends on the site—can be used as an
evaluative measure (Marshall & Johnston, 2011).
Anderson (2006) states that innovations in e-commerce and search engine
technologies enhance the efficiency of online retail by encouraging the entry of
even more innovative products. This process creates a long tail of niches while
simultaneously decreasing the market share of blockbuster products. Anderson
argues that internet innovations reduce the marginal cost of products by allowing
online retailers to focus on previously ignored long-tail products. According to
Anderson, in a world of scarcity, the "curse of the traditional retail" is the
obligation to find local customers (p. 17). Traditional retailers typically carry only
products that generate profitable demand. They are constrained by their space
and retail areas and thus prioritize their stocked products according to demand.
By contrast, online retailers exist in a world of abundance, with infinite shelf
Learning Topic
3/26/2020 Digital Marketing
https://leocontent.umgc.edu/content/umuc/tgs/mba/mba640/2202/learning-topic-list/digital-marketing.html?ou=447146 2/2
space and cheap distribution costs. This advantage allows them to carry a
substantial number of niches, which collectively represent a large share of their
business and may rival their blockbuster products.
As examples, Anderson (2006) refers to the online book and music sales of
Amazon and other online retailers, where selection is virtually unlimited and
delivery is cheap. He adds that the market share of niches is increasing, and the
cost to customers is decreasing. These shifts are influenced by technological
innovations in search engines as well as recommendation and ranking tools,
which effectively drive "demand down the tail" (p. 53). Anderson also argues that
three forces underlie long-tail economics: democratization of production tools,
democratization of distribution tools, and connecting supply and demand.
Resources
Management, Strategies, Tools, and Practices in eMarketing
(http://ezproxy.umuc.edu/login?
url=http://search.ebscohost.com.ezproxy.umuc.edu/login.aspx?
direct=true&db=bth&AN=111382489&site=eds-live&scope=site)
E-Marketing: A Modern Approach of Business at the Door of Consumer
(http://ezproxy.umuc.edu/login?
url=http://search.ebscohost.com.ezproxy.umuc.edu/login.aspx?
direct=true&db=bth&AN=119728209&site=eds-live&scope=site)
References
Anderson, C. (2006). The long tail: Why the future of business is selling less of
more. New York, NY: Hyperion.
Gaikwad, J. M., & Kate, P. (2016, September). eMarketing: A modern approach of
business at the door of consumer. International Journal of Research in
Commerce & Management, 7(9), 56–61.
Kotler, P., & Keller, K. L. (2015). Marketing management (15th ed.). Upper Saddle
River, NJ: Pearson.
Marshall, G. W., & Johnston, M. W. (2011). Essentials of marketing management.
New York, NY: McGraw-Hill.
© 2020 University of Maryland Global Campus
All links to external sites were verified at the time of publication. UMGC is not responsible for the validity or
integrity of information located at external sites.
3/26/2020 Digital Marketing
https://leocontent.umgc.edu/content/umuc/tgs/mba/mba640/2202/learning-topic-list/digital-marketing.html?ou=447146 1/2
Digital Marketing
With advances in communication and the growth of internet services, digital
marketing has become an important component in the marketing effort of most
companies. Digital marketing involves the application of marketing strategies and
technologies using electronic media, such as computers and smartphones. Digital
marketers capitalize on digital technologies to differentiate their products and
services from competing offers (Gaikwad & Kate, 2016).
Online retail sales have exploded, as internet retailers, such as Amazon, provide
informative, convenient, and personalized experiences. By saving on overhead
costs associated with brick-and-mortar stores, inventory, and staff, these
retailers can offer competitive prices and can profitably sell low-volume
merchandise to their niche markets. While customers scan websites searching
for the lowest prices, online retailers compete to offer the customer a top-caliber
online experience, delivery, and handling of customer complaints and issues. E-
commerce allows customers to connect and interact with the brand of their
choice. Accordingly, customer service is crucial to the success of these retailers.
In addition, B2B commerce is increasingly being conducted online, profoundly
changing the supplier-customer relationship (Kotler & Keller, 2015).
Digital marketers provide their customers with an individualized buying
experience, a wide selection of products, and substantial information to help
them research and evaluate these products. However, it is easy for customers to
visit another website at any time with the click of a button. For this reason,
digital marketers aim to not only attract customers, but to encourage them to
stay on their websites, explore, and buy from them. A website's stickiness—the
amount of time that a potential customer spends on the site—can be used as an
evaluative measure (Marshall & Johnston, 2011).
Anderson (2006) states that innovations in e-commerce and search engine
technologies enhance the efficiency of online retail by encouraging the entry of
even more innovative products. This process creates a long tail of niches while
simultaneously decreasing the market share of blockbuster products. Anderson
argues that internet innovations reduce the marginal cost of products by allowing
online retailers to focus on previously ignored long-tail products. According to
Anderson, in a world of scarcity, the "curse of the traditional retail" is the
obligation to find local customers (p. 17). Traditional retailers typically carry only
products that generate profitable demand. They are constrained by their space
and retail areas and thus prioritize their stocked products according to demand.
By contrast, online retailers exist in a world of abundance, with infinite shelf
Learning Topic
3/26/2020 Digital Marketing
https://leocontent.umgc.edu/content/umuc/tgs/mba/mba640/2202/learning-topic-list/digital-marketing.html?ou=447146 2/2
space and cheap distribution costs. This advantage allows them to carry a
substantial number of niches, which collectively represent a large share of their
business and may rival their blockbuster products.
As examples, Anderson (2006) refers to the online book and music sales of
Amazon and other online retailers, where selection is virtually unlimited and
delivery is cheap. He adds that the market share of niches is increasing, and the
cost to customers is decreasing. These shifts are influenced by technological
innovations in search engines as well as recommendation and ranking tools,
which effectively drive "demand down the tail" (p. 53). Anderson also argues that
three forces underlie long-tail economics: democratization of production tools,
democratization of distribution tools, and connecting supply and demand.
Resources
Management, Strategies, Tools, and Practices in eMarketing
(http://ezproxy.umuc.edu/login?
url=http://search.ebscohost.com.ezproxy.umuc.edu/login.aspx?
direct=true&db=bth&AN=111382489&site=eds-live&scope=site)
E-Marketing: A Modern Approach of Business at the Door of Consumer
(http://ezproxy.umuc.edu/login?
url=http://search.ebscohost.com.ezproxy.umuc.edu/login.aspx?
direct=true&db=bth&AN=119728209&site=eds-live&scope=site)
References
Anderson, C. (2006). The long tail: Why the future of business is selling less of
more. New York, NY: Hyperion.
Gaikwad, J. M., & Kate, P. (2016, September). eMarketing: A modern approach of
business at the door of consumer. International Journal of Research in
Commerce & Management, 7(9), 56–61.
Kotler, P., & Keller, K. L. (2015). Marketing management (15th ed.). Upper Saddle
River, NJ: Pearson.
Marshall, G. W., & Johnston, M. W. (2011). Essentials of marketing management.
New York, NY: McGraw-Hill.
© 2020 University of Maryland Global Campus
All links to external sites were verified at the time of publication. UMGC is not responsible for the validity or
integrity of information located at external sites.
3/26/2020 Crafting a Digital Marketing Strategy
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Crafting a Digital Marketing Strategy
Any activity with an end goal (whether it’s winning a war, building a city, or
selling a product) should have a blueprint in place for every person in the
organization to follow. In digital marketing, however, there is no single definitive
approach—each business must create its own roadmap. However, there are
questions you can use to guide the process.
A strategy needs to cover who you are, what you are offering and to whom, and
why and how you are doing so. The steps and questions below cover what an
organization should be aware of when creating and implementing a strategy that
will meet its marketing objectives and solve its challenges.
Step 1: Examine the Context
The first step in crafting a successful strategy is to examine the context of the
organization and the various stakeholders:
What is the context in which you are operating (PESTLE factors) and how is
this likely to change in the future?
Who are you, why does your brand matter, and what makes your brand
useful and valuable?
Who are your customers, and what needs, wants, and desires do they have?
Who are your competitors? These may extend beyond organizations that
compete with you on the basis of price and product and could also be
competition in the form of abstracts such as time and mindshare.
Thorough market research will reveal the answers to these questions.
Step 2: Examine Your Value Exchange
Once you have examined the market situation, the second step is an examination
of your value proposition or promise. In other words, what unique value can your
organization add to that market? It is important to identify the supporting value-
adds to the brand promise that are unique to the digital landscape. What extras,
beyond the basic product or service, do you offer to customers?
The internet offers many channels for value creation. However, the value
depends largely on the target audience, so it is crucial to research your users and
gather insights into what they want and need.
Content marketing is the process of conceptualizing and creating this sort of
content. Examples of value-based content include a DIY gardening video for a
hardware brand, a research paper for a business analyst, or a funny infographic
for a marketing company.
Step 3: Establish Digital Marketing Goals
Learning Resource
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When setting your digital marketing goals, there are three key aspects to
consider: objectives, key performance indicators (KPIs), and targets. Let’s look at
each one in turn.
Objectives
Objectives are essential to any marketing endeavor. Without them, your strategy
would have no direction and no end goal or win conditions. It’s important to be
able to take a step back and ask several questions:
What are you trying to achieve?
How will you know if you are successful?
Objectives need to be SMART:
specific—The objective must be clear and detailed, rather than vague and
general.
measurable—The objective must be measurable so that you can gauge
whether you are attaining the desired outcome.
attainable—The objective must be something that is possible for your brand
to achieve, based on available resources.
realistic—The objective must also be sensible and based on data and trends;
don’t exaggerate or overestimate what can be achieved.
time-bound—Finally, the objective must be linked to a specific timeframe.
Key Performance Indicators
Key performance indicators (KPIs) are the specific metrics or pieces of data that
you will look at to determine whether your tactics are performing well and
meeting your objectives. For example, a gardener may look at the growth rate,
color, and general appearance of a plant to evaluate whether it is healthy. In the
same way, a marketer will look at a range of data points to determine whether a
chosen tactic is delivering. KPIs are determined per tactic, with an eye on the
overall objective.
Targets
Finally, targets are the specific values that are set for your KPIs to reach within a
specific time period. If you meet or exceed a target, you are succeeding; if you
don’t reach it, you’re falling behind on your objectives and you need to
reconsider your approach (or your target).
3/26/2020 Crafting a Digital Marketing Strategy
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Example of Digital Marketing Goals
SMART objective: Increase sales through the eCommerce platform by 10
percent within the next six months.
KPIs:
Search advertising—number of search referrals; cost per click on the
ads
Facebook brand page—number of comments and shares on campaign;
specific posts
Targets:
Search advertising—one thousand search referrals after the first month,
with a 10 percent month-on-month increase after that
Facebook brand page—50 comments and 10 shares on campaign-
specific posts per week
Step 4: Establish Tactics and Evaluation
Tactics are the specific tools or approaches you will use to meet your objectives,
for example, a retention-based email newsletter, a Facebook page, or a CRM
implementation. As a strategy becomes more complex, you may have multiple
tactics working together to try to achieve the same objective. Tactics may
change (and often should), but the objective should remain your focus.
Many digital tools and tactics are available once you have defined your digital
marketing objectives. Each tactic has its strengths. For example, acquisition
(gaining new customers) may best be driven by search advertising, while email is
one of the most effective tools for selling more products to existing customers.
The table below expands on some of the most popular tactics available to digital
marketers and their possible outcomes.
Common Tactics and Their Outcomes
Tactic Outcome
SEO—This is the practice of optimizing a website to rank higher on the search engine results pages for relevant search terms. SEO involves creating relevant, fresh and user-friendly content that search engines index and serve when people enter a search term that is relevant to your product or service.
Customer retention and acquisition—SEO has a key role to play in acquisition, as it ensures your organization’s offering will appear in the search results, allowing you to reach potential customers. A site that is optimized for search engines is also a site that is clear, relevant and well designed. These elements ensure a great user experience, meaning that SEO also plays a role in retention.
3/26/2020 Crafting a Digital Marketing Strategy
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Tactic Outcome
Search advertising—In pay-per- click or search advertising, the advertiser pays only when someone clicks on their ad. The ads appear on search engine results pages.
Sales, customer retention, and acquisition—The beauty of search advertising is that it is keyword based. This means an ad will come up in response to the search terms entered by the consumer. It therefore plays a role in sales, acquisition and retention. It allows the advertiser to reach people who are already in the buying cycle or are expressing interest in what they have to offer.
Online advertising—Online advertising covers advertising in all areas of the Internet – ads in emails, ads on social networks and mobile devices, and display ads on normal websites.
Branding and acquisition—The main objective of display advertising is to raise brand awareness online. It can also be more interactive and therefore less disruptive than traditional or static online advertising, as users can choose to engage with the ad or not. Online advertising can be targeted to physical locations, subject areas, past user behaviors, and much more.
Affiliate marketing—Affiliate marketing is a system of reward whereby referrers are given a finder’s fee for every referral they give.
Sales and branding—Online affiliate marketing is widely used to promote eCommerce websites, with the referrers being rewarded for every visitor, subscriber or customer provided through their efforts. It is a useful tactic for brand building and acquisition.
Video marketing—Video marketing involves creating video content. This can either be outright video advertising, or can be valuable, useful, content marketing.
Branding, customer retention, and value creation— Since it is so interactive and engaging, video marketing is excellent for capturing and retaining customer attention. Done correctly, it provides tangible value— in the form of information, entertainment or inspiration—and boosts a brand’s image in the eyes of the public.
Social media—Social media, also known as consumer-generated media, is media (in the form of text, visuals and audio) created to be shared. It has changed the face of marketing by allowing collaboration and connection in a way that no other channel has been able to offer.
Branding, value creation, and participation—From a strategic perspective, social media is useful for brand building, raising awareness of the brand story and allowing the consumer to become involved in the story through collaboration. Social media platforms also play a role in building awareness, due to their shareable, viral nature. They can also provide crowdsourced feedback and allow brands to share valuable content directly with their fans.
Email marketing—Email marketing is a form of direct marketing that delivers commercial and content-based messages to an audience. It is extremely cost effective, highly targeted, customizable on a mass scale and completely measurable —all of which make it one of the most powerful digital marketing tactics.
Customer retention and value creation—Email marketing is a tool for building relationships with potential and existing customers through valuable content and promotional messages. It should maximize the retention and value of these customers, ultimately leading to greater profitability for the organization as a whole. A targeted, segmented email database means that a brand can direct messages at certain sectors of their customer base in order to achieve the best results.
Once the objectives and tactics have been set, these should be cross-checked
and re-evaluated against the needs and resources of your organization to make
sure your strategy is on the right track and no opportunities are being
overlooked.
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Step 5: Ongoing Optimization
It is increasingly important for brands to be dynamic, flexible, and agile when
marketing online. New tactics and platforms emerge every week, customer
behaviors change over time, and people’s needs and wants from brands evolve as
their relationships grow. The challenge is to break through the online clutter to
connect with customers in an original and meaningful way.
This process of constant change should be considered in the early stages of
strategy formulation, allowing tactics and strategies to be modified and
optimized as you go. After all, developing a digital marketing strategy should be
iterative, innovative, and open to evolution.
Understanding user experience and the user journey is vital to building
successful brands. A budget should be set aside upfront for analyzing user data
and optimizing conversion paths.
Social thinking and socially informed innovation are also valuable and uniquely
suited to the online space. Socially powered insight can be used to inform
strategic decisions in the organization, from product roadmaps to service plans.
Brands have moved from a mere presence in social media to active use, aligning
it with actionable objectives and their corresponding metrics. This is critical in
demonstrating return on investment (ROI) and understating the opportunities
and threats in the market.
Managing the learning loop (the knowledge gained from reviewing the
performance of your tactics, which can then be fed back into the strategy) can be
difficult. This is because brand cycles often move more slowly than the real-time
results you will see online. It is therefore important to find a way to work agility
into the strategy, allowing you to be quick, creative, and proactive, as opposed to
slow, predictable, and reactive.
Licenses and Attributions
2.7 Crafting a Digital Marketing Strategy
(https://www.redandyellow.co.za/content/uploads/woocommerce_uploads/2017/10/emarketing_textbook_downlo
from eMarketing: The Essential Guide to Marketing in a Digital World, 5th
Edition by Rob Stokes and the Minds of Quirk is available under a Creative
Commons Attribution-NonCommercial-ShareAlike 3.0 Unported
(https://creativecommons.org/licenses/by-nc-sa/3.0/) license. © 2008, 2009,
2010, 2011, 2013 Quirk Education Pty (Ltd). UMUC has modified this work and
it is available under the original license.
© 2020 University of Maryland Global Campus
All links to external sites were verified at the time of publication. UMGC is not responsible for the validity or
integrity of information located at external sites.
56
Big Data
57
Everyone is Talking about Big Data /// “Big data” is a megatrend, although not everyone means the same thing when they talk about it. Generally speaking, it involves enormous amounts of data, which are generated almost automatically with the help of the latest technological devel- opments, and examines how this data can be converted into useful information. Big data has raised big expectations, but the profitable monetization of data usually turns out to be much more complex than anticipated. That new technological developments are no guarantee for a start-to-finish victory is nothing new, though. Over time, many conform to a typi- cal pattern which was first described by the consulting firm Gartner in 1995 and has since been referenced in numerous publications as the “hype cycle” (Figure 1).
At this time, big data has probably passed the “peak of inflated expectations” and is still yet to cross the “trough of disillusionment” before reaching the “plateau of productiv- ity”. But what are realistic expectations for big data? And what does big data mean for the market research industry?
Big Data Conquers Market Research /// Big data will change market research at its core in the long term. While other trends such as neuromarketing have not been able to gain a substantial foothold, big data business models will assume a central role in the value chain. The consumption of products and media can be logged electronically more and more, making it measurable on a large scale. In some areas of market research, big data is already established today, with social media analytics and the use of cookie data to measure internet coverage being two prominent examples. The use of panels for the passive measurement of media consumption through the internet, television, and radio also falls under
key words
Big Data, Market Research, Information, Representativeness,
Data Integration, Data Imputation
•
the author
Volker Bosch, Head of Marketing & Data Sciences,
Gf K SE, Nuremberg, Germany; volker.bosch@gf k.com
Big Data in Market Research: Why More Data Does Not Automatically
Mean Better Information Volker Bosch
GfK Research / Vol. 8, No. 2, 2016 / GfK MIR OPEN
— doi 10.1515 / gfkmir-2016-0017
58
big data. But what additional benefits does big data provide compared to traditional market research data?
Big Data = Passive Measurement /// The 4V definition describes the core characteristics of big data: volume, veloc- ity, variability (of the data structure) and (questionable) veracity. However, 4V doesn’t tell the whole story, because the origin of the data is especially decisive. New sensor technologies and processing architectures enable entirely new possibilities for gathering and processing information. We are dealing with a fundamental paradigm shift – in tradi- tional market research, data is collected actively, e.g. through human interaction or interviews. With big data, by contrast, the information no longer needs to be processed by slow, limited-capacity, mistake-prone and emotional human brains
figure 1:
Hype cycle according to Gartner
for a dataset to be created. As a result, passive measurement is the actual driver of the efficiency of big data in market research. It creates economies of scale that were formerly the stuff of dreams.
GfK MIR / Vol. 8, No. 2, 2016 / GfK Research
»
Passive measurement is the actual driver of
the efficiency of big data in market research.
It creates economies of scale that were
formerly the stuff of dreams.
«
TIME
VISIBILITY
TECHNOLOGY TRIGGER
TROUGH OF DISILLUSIONMENT
SLOPE OF ENLIGHTENMENT
PLATEAU OF PRODUCTIVITY
PEAK OF INFLATED EXPECTATIONS
59
In 1936, the leading news magazine in the 1930s, the Literary Digest, delivered a very clear prediction for the outcome of the presidential elections. It was based on an extensive mail and telephone survey using sources available at the time, the telephone book and a list of car own- ers. 2.4 million citizens participated and a clear victory for Alf Landon, the challenger to the incumbent F.D. Roosevelt, was predicted. For the standards of the day, that was certainly big data, even though there were no methods for passive measurement in 1936. But based on a much smaller sample of about 50,000 persons, George Gallup predicted the exact opposite. After analyzing the non-representative sub- samples of telephone and car owners, he pre- dicted that the Literary Digest forecast would be wrong. He was vindicated, and shortly after this glaringly wrong prediction, the Literary Digest had to cease publication.
MORE DATA ≠ BE T TER DATA: THE LITER ARY DIGEST FARCE
•
Defining big data based as passive measurement does not necessarily mean massive amounts of data. Equipping just a few measured units with sensors can already create data- sets that are hard to manage. Examples include the soft- ware-based measurement of internet behavior in a panel or equipping shopping carts with RFID technology to transmit the precise location and purchase history of a customer in a supermarket. Perhaps it would be more appropriate to speak of “new data” than “big data.”
Is Twice as Much Data Worth Twice as Much? /// The size of a typical big data dataset leads to the false assumption that it provides a correspondingly large amount of informa- tion. From an organizational perspective that is absolutely correct, but from a statistical perspective, it is wrong, because “information” in statistical analysis is defined as the reduc- tion of uncertainty. But twice the data does not mean twice the accuracy, only an improvement by a factor of 1.4, as measured by the confidence interval of a sample. Marginal utility declines significantly as data amounts increase. Ignor- ing declining marginal utility will almost certainly result in overestimating the value of big data for market research and overlooking its actual benefits.
In visual terms, a larger amount of data results in greater statistical resolution, enabling structures of finer granularity to be described with statistical validity. Examples are smaller target groups, websites in the “long tail” of the internet, or rare events. Big data can be used like a microscope to see structures that would appear blurred with conventional
GfK Research / Vol. 8, No. 2, 2016 / GfK MIR
»
Big data can be used like a microscope
to see structures that would appear blurred
with conventional market research or even
be entirely unrecognizable.
«
TIME
{ Box 1 }
60
market research or even be entirely unrecognizable. In other words, the declining marginal utility is mitigated by the fact that with big data, structures of the finest granularity can be defined in the midst of the statistical noise.
Big Data Must Be Scientifically Evaluated in Market Research /// In direct marketing, with CRM systems, or in intelligence agencies, it mainly comes down to describing indi- vidual characteristics. In market research, by contrast, the aim is to find valid, generalizable statements based on scientific standards. When analyzing the use of products and media by populations and their segments, it must also be possible to describe statistical errors. This has a decisive impact on the applied algorithms and processes. Statistical methods, data integration, weighting, variable transformations, and issues of data protection present much larger challenges than was previously the case with conventional datasets. In particular, the three following challenges must be overcome.
> Challenge 1: Big Data is (Almost Always) not Representa- tive /// Massive amounts of data do not necessarily result in good data and more does not automatically mean better. Big data can easily tempt us to fall into the same “more is better” trap that the Literary Digest fell into back in 1936 (see box 1). It is a truism of market research that sample bias cannot be reduced by more of the same and that the representativeness problem remains. Consequently, tra- ditional topics of sampling theory like stratification and weighting are highly topical in the age of big data, and must be reinterpreted. Rarely is it possible to measure all units of interest and avoid bias. For example, the scope of interpretation for social media analysis is restricted because the silent majority usually cannot be observed. This may explain why social media data often behaves unexpectedly in predictive models. By using smart algorithms, however, it is possible to achieve astounding precision with non-repre- sentative digital approaches, as for example in the elections in the United States in 2012 and in Great Britain in 2015.
> Challenge 2: Big Data is (Almost Always) Flawed /// The passive measurement of behavior along with its proxies and the high level of technology being used may lead to
GfK MIR / Vol. 8, No. 2, 2016 / GfK Research
the false assumption that practically no measurement error exists and that data can be further processed without hesi- tation. But that is very rarely the case. Such technologies are highly complex and often not designed for use in mar- ket research. Big data must be processed with very complex and therefore error-prone software and many measure- ment errors arise. In addition, the internet ecosystem is subject to constant updates (in the best case) or to changes in technology (in the worst case): Internet Explorer yields to Edge, HTML5 replaces the old HTML4, http pages turn into https, or Flash is no longer supported. In measuring internet behavior in the GfK Cross-Media-Link panel, we observed how browser updates, technological upgrades, changes in website behavior, and end-of-life systems can lead to a measurement failure. If updates occur unannounced and unexpectedly, emerging measurement gaps might even be noticed (too) late.
Things become even more difficult with systems that were originally constructed for another purpose, for example, if mobile internet use is measured by a mobile network operator and not by the market researcher directly. This is referred to as network-centric measurement, in contrast to user-centric measurement in a panel or site-centric mea- surement using cookies. Data processing capacities in such systems primarily serve to maintain telephone or internet service and for billing. Market research requirements were not even a factor in the original design at all. Therefore, so-called “probes” must be laboriously installed in order to retrieve the relevant information. Control over data qual- ity is limited. Undetected data blackouts frequently occur because the primary tasks of the system take priority and no error routines have been installed for other require- ments. GfK discovered this the hard way in its “Mobile Insights” project.
> Challenge 3: Big Data (Almost Always) Lacks Important Variables /// The biggest market research challenge from a methodological point of view is the limited data depth of big data. Despite the sometimes overwhelming amount of data in terms of observed units, the number of measured variables is low or critical variables are missing. By contrast,
61GfK Research / Vol. 8, No. 2, 2016 / GfK MIR
In a traditional data matrix, the columns represent variables and the rows represent observation units like people or households. Variables observed in the cen- sus are available for all units, while other variables, for example sociodemographic characteristics, can only be collected in a subset, e.g. the panel. In image data, gray values represent the measured val- ues of a variable (Figure 2). In the example, 75% of the data or image points are missing. Only a few randomly selected rows (panel members=donors) and columns (census data=common variables) are fully observed. In order to ensure that an algorithm cannot use pure image information (the physical proximity of image points), rows and columns are randomly sorted. As a result, the image behaves like a market research data- set and the data can be processed accordingly. The missing values are filled in by imputation. Many algorithms exist and all work with different assump- tions regarding the statistical properties of data. As
a common feature they learn from donors how the common variables relate to the specific variables to be transferred and they fill the data gap for the recipients using this knowledge. In the big data context, imputa- tion is particularly difficult because large quantities of data must be processed and finding the optimal model is usually too costly. In addition, the data rarely follows a multivariate normal distribution or other well-defined distributions. This is why the Marketing & Data Sciences department at GfK developed the “linear imputation” process. It requires a minimum of theoretical assumptions and delivers good results, even for highly non-linear data structures (as in the image) by using local regression models. In the image example, the quality of the imputation can be judged immediately if the matrix is sorted back to its original order (Figure 3, middle picture).
DATA IMPUTATION
•
figure 2:
Data imputation using an image file with random sorting of rows and columns
MISSING
Common X Specific Y
D on
or s
Re ci
pi en
ts
IMPUTED
{ Box 2 }
62
However, imputation is not a tool that lets information be gathered by magic. Statistics do not create information, only observation does. Statistics makes structures visible. There- fore, imputation is an instrument to “transport information” and the higher the observed data correlates with the data to be imputed, the better it works.
More Value through More Data: Also in Market Research /// Big data poses special challenges for market research. It is by no means sufficient to master the technologies for processing large amounts of data, or to engage in pure “data science”. It is also necessary to develop in-house market research algorithms, which can be applied to the new data and successfully address the three challenges of representa- tiveness, measurement errors, and statistical data integra-
GfK MIR / Vol. 8, No. 2, 2016 / GfK Research
figure 3:
The original sequence of rows and columns was restored following imputation
IMPUTED ORIGINAL75% DELETED
in traditional opinion research the relevant variables are optimized for a specific subject and can be very extensive. Internet coverage research based on cookies or network-cen- tric data illustrates this. Even if almost the whole population is reached, like in a census, critical information is missing, such as sociodemographic data. Therefore the value of the collected data is limited and important evaluations such as target group or segment-specific analyses cannot be con- ducted. The missing information can only be filled in using statistical data imputation. This requires an additional data source with the additional variables, for example a panel. The source must also contain the variables of the big data data- set. Imputation is a statistical procedure that is anything but trivial. Box 2 describes the underlying logic using an image dataset, which is handled like market research data.
63
FURTHER READING
»
Despite the sometimes overwhelming
amount of data in terms of observed units,
the number of measured variables is low
or critical variables are missing.
«
GfK Research / Vol. 8, No. 2, 2016 / GfK MIR
tion. Therefore, the young discipline of “data science” must be fused with the classic field of “marketing science” to help market research expand its core business successfully.
And at least as far as applications in market research are con- cerned, big data is well on its way to the plateau of productiv- ity in the hype cycle of new technologies.
/.
Fenn, Jackie (1995): The Microsoft System Software Hype Cycle Strikes Again
Gaffert P., Bosch V., Meinfelder, F. (2016): “Interactions and squares. Don’t transform, just impute!,”
Conference Paper, Joint Statistical Meetings, Chicago
http://www.ibmbigdatahub.com/infographic/ four-vs-big-data
http://fivethirtyeight.blogs.nytimes.com/ 2012/11/10/which-polls-fared-best-and-worst-in-
the-2012-presidential-race/?_r=0
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Consumer Buying Behavior
Marketers should have a thorough understanding of how their "consumers think,
feel, and act" and must offer a clear value to each target consumer (Kotler &
Keller, 2015, p. 157). Consumer buying behavior is the "the study of the process
involved when individuals or groups select, purchase, use, or dispose of products,
services, ideas, or experiences to satisfy needs and desires" (Solomon, 2017, p.
6). Consumer buying behavior is strongly influenced by personal, cultural, and
social factors. Of these, cultural factors have the most profound influence.
Accordingly, marketers pay close attention to the cultural values of consumers in
their markets to promote sales of their current products and identify
opportunities for the future (Kotler & Keller, 2015).
Marketers should understand how their consumers make buying decisions and
who is involved in such decisions. Consumer buying behavior is a five-step
process that involves problem recognition, information search, evaluating
alternatives, purchase decision, and post-purchase behavior. Each step must be
fully understood by the marketer. The five-step process does not necessarily
occur in this sequence, and consumers may skip or reverse stages as they
alternate between buying offline and online (Kotler & Keller, 2015). Brands play
an important role in consumer buying behavior, conveying information about the
product and reassuring the consumer's buying decision (Marshall & Johnston,
2011).
The marketplace has been dramatically changing in the past decade thanks to
advanced and cheaper communications technologies, which enable consumers to
make better choices and share their buying experiences with others worldwide.
The newly acquired consumer capabilities include the following (Kotler & Keller,
2015, pp. 16–17):
1. Consumers are increasingly dependent on the internet to acquire
information and make informed decisions when buying.
2. Consumers search, communicate, and buy on the move.
3. Consumers tap into social media to exchange opinions and express loyalty.
4. Consumers are increasingly interacting with companies.
5. Consumers may reject marketing efforts if they find them inappropriate.
6. Consumers can easily shift brands if they believe that they have not been
treated fairly by a certain company.
Learning Topic
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Consumer behavior is also characterized by the actions that individuals take in
buying and using products or services, including the "mental and social processes
that come before and after these actions" (Kerin & Hartley, 2017, p. 123). A
study of consumer buying behavior is important in helping companies plan and
execute better business strategies (Khaniwale, 2015). Social norms and
situational factors often influence a buyer's final decision. Where group
pressures to comply are strong, influence from social norms is expected to
override multi-attributed evaluation. The force of social norms involves two
aspects: (1) social forces, or pressures and normative suggestions, and (2)
motivation to comply, or the willingness to listen to others (Johansson, 2009).
The country-of-origin effect also plays a role in the buying decision. This term
refers to the impact a branded product or service's perceived country of origin
has on customers (for example, "made in" labels). Products or services from
countries with a positive image tend to be favorably evaluated, while those from
countries of lesser status tend to be downgraded. For example, the entry of
Japanese cars into the United States in the 1970s was more a product of positive
associations with Japan rather than with specific firms. American drivers sought
to buy a Japanese car, and not necessarily a Datsun (now Nissan) or a Toyota.
Evidence suggests that this effect, which influences sales, does not stop over
time (Johansson, 2009).
The growth of multinational production has changed the importance consumers
ascribe to "made in" labels. The perception of Sony is unlikely to change,
regardless of where its product is produced. The influence of the country-of-
origin effect also depends on whether or not the country in question produces at
widely different quality levels. For example, Germany, Japan, Sweden, and
Switzerland have very high quality standards in general, which help to guarantee
the quality of their products, and Korea seem to be working on joining this
group. However, products from the United States, Italy, and China have widely
varying quality levels, which can make it harder to judge quality based on the
"made in" label alone (Johansson, 2009).
References
Johansson, J. (2009). Global marketing (5th ed.). New York, NY: McGraw-Hill.
Kerin, R., & Hartley, S. (2017). Marketing (13th ed.). New York, NY: McGraw Hill.
Khaniwale, M. (2015). Consumer buying behavior. International Journal of
Innovation and Scientific Research, 14(2), 278–286.
Kotler, P., & Keller, K. L. (2015). Marketing management (15th ed.). Upper Saddle
River, NJ: Pearson.
Marshall, G. W., & Johnston, M. W. (2011). Essentials of marketing management.
New York, NY: McGraw-Hill.
Solomon, M. (2017). Consumer behavior: Buying, having, and being (12th ed.).
Upper Saddle River, NJ: Pearson.
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Conducting Online Market Research
Introduction
The internet is built for research. Whether it's a consumer shopping around for
prices, a researcher exploring a topic, or a fan looking up their favorite band, the
internet makes finding and analyzing information easier than ever before. That's
because everything people do online leaves a data footprint.
Consumers are able to research companies and products easily, gathering
information to compare prices and services with a few clicks of the mouse.
Consumers are also able to share likes and dislikes easily, whether that
information is shared with companies or with friends.
This process can also work in reverse: brands can study who their customers are,
what they are interested in, how they feel about the brand, and the best times
and places to engage with them. This is what online market research is all about.
In this resource, you will learn the following:
why online market research is crucial to any marketing endeavor
the most important concepts you need to know in order to start conducting
research
several methods for conducting online research, including surveys, online
focus groups and online monitoring
what problems and pitfalls to avoid when researching online
The Importance of Market Research
The modern world is unpredictable, and things change very quickly in the digital
age. It is becoming increasingly difficult to keep up with trends, customer needs,
popular opinions, and competitors—and at the same time, staying at the
forefront of the market is vital to success.
So, how can you keep your brand current and ensure you are meeting your
customers' needs?
The answer is to conduct market research. Market research helps you make
informed business decisions. It involves systematically gathering, recording, and
analyzing data about customers, competitors and the market, and turning this
data into insight that can drive marketing strategies and campaigns.
Online market research is the process of using digital tools, data, and
connections to glean valuable insights about a brand's target audience. In other
words, it's the process of learning about your audience by engaging and
observing them online. Technology plays a key role in gathering data and
connecting with research participants, and makes the whole process quicker and
easier to manage than traditional offline research methods.
Learning Resource
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Traditional and online market research have the same goals and underlying
principles, but online market research has the benefit of using digital technology,
which provides a range of benefits:
The internet is always on, meaning that data are readily available at any
time.
Many of the processes for finding, gathering and storing data can be
automated. For example, you can get an automatic email alert if someone
mentions your brand, or you can set up self-administered digital surveys.
You have access to a large number of participants around the world at the
click of a button.
A lot of the information you will use is already being automatically collected
(such as web analytics and social media data). All you need to do is access it.
People are often happy to share their own research, insights, and
methodologies online, so you can access this trove of resources to inform
your own research.
Online market research can be much more cost effective and quick to set up
than traditional research techniques.
There are many reasons to conduct regular market research:
gain insights into your consumers
what customers want and need from your brand
what customers like and dislike about the brand
why customers buy the brand's products or services
why potential customers might choose your brand over another one
why (or why not) customers make repeat purchases
understand the changes in your industry and business
discover new market trends on which you can capitalize
find new potential sales avenues, customers, products, and more
find and engage new audiences
allow customers to help steer your business
If you are able to understand your customers and the greater business context,
you will be able to market more effectively to them, meet their needs better, and
drive positive sentiment of your brand. All of this adds up to happier customers
and, ultimately, a healthier bottom line.
Key Concepts in Market Research
While the research field can be full of complex terminology, there are four key
concepts you should understand before conducting your own research:
research methodology
qualitative and quantitative data
primary and secondary research
sampling
Research Methodology
A research methodology is the process you should follow in order to conduct
accurate and valuable research. Research should involve the following steps:
1. Establish the goals of the project.
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2. Determine your sample.
3. Choose a data collection method.
4. Collect data.
5. Analyze the results.
6. Formulate conclusions and actionable insights (for example, producing
reports).
Most often, market research is focused around specific issues unique to a
business or brand. It is therefore not always possible to get hold of comparable
information to aid decision making. This is why it can be useful to start from a
specific research problem or hypothesis.
Your research question should guide your entire process and will determine your
choice of data collection method.
Primary and Secondary Research
Research can be based on primary data or secondary data. Primary research is
conducted when new data is gathered for a particular product or hypothesis.
This is where information does not exist already or is not accessible, and
therefore needs to be specifically collected from consumers or businesses.
Surveys, focus groups, research panels and research communities can all be used
when conducting primary market research.
Secondary research uses existing, published data as a source of information. It
can be more cost effective than conducting primary research. The internet opens
up a wealth of resources for conducting this research. The data would, however,
originally have been collected for solving problems other than the one at hand,
so they may not be sufficiently specific. Secondary research can be useful in
identifying problems to be investigated through primary research.
The internet is a useful tool when conducting both primary and secondary
research. Not only are there a number of free tools available for calculating data
like sample size and confidence levels (see the section Tools of the Trade for
examples), but it is also an ideal medium to reach large numbers of people at a
relatively low cost.
The Internet and Secondary Research
Research based on secondary data should precede primary data research. It
should be used in establishing the context and parameters for primary research
in the following ways:
The data can provide enough information to solve the problem at hand,
thereby negating the need for further research.
Secondary data can provide sources for hypotheses that can be explored
through primary research.
Sifting through secondary data is a necessary precursor for primary
research, as it can provide information relevant to sample sizes and
audience, for example.
The data can be used as a reference base to measure the accuracy of
primary research.
Companies with online properties have access to a wealth of web analytics data
that are recorded digitally. These data can then be mined for insights. It's worth
remembering, though, that it's usually impossible for you to access the web
analytics data of competitors, so this method will give you information only
about your own customers.
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Customer communications are also a source of data that can be used—
particularly communications with the customer service department. Committed
customers who complain, comment, or compliment are providing information
that can form the foundation for researching customer satisfaction.
Social networks, blogs, and other forms of social media have emerged as forums
where consumers discuss their likes and dislikes, and can be particularly vocal
about companies and products. These data can, and should, be tracked and
monitored to establish consumer sentiment. If a community is established for
research purposes, these should be considered primary data, but using social
media to research existing sentiments is considered secondary research.
The internet is an ideal starting point for conducting secondary research based
on published data and findings. But with so much information out there, it can be
a daunting task to find reliable resources.
The first point of call for research online is usually a search engine, such as
www.google.com or www.yahoo.com. Search engines usually have an array of
advanced features, which can aid online research. For example, Google offers the
following:
advanced search (http://www.google.co.za/advanced_search?hl=en)
Google Scholar (http://scholar.google.co.za/schhp?hl=en)
Google Book Search (http://www.google.co.za/books?hl=en)
Google News Archive (http://news.google.com/newspapers)
Many research publications are available online, some for free and some at a
cost. Many of the top research companies feature analyst blogs, which provide
some industry data and analysis free of charge. Some notable resources include
Experian, Pew Internet, Nielsen, and World Wide Worx.
The Internet and Primary Research
Primary research involves gathering data for a specific research task. It is based
on data that has not been gathered beforehand. Primary research can be either
qualitative or quantitative.
Primary research can be used to explore a market and can help to develop the
hypotheses or research questions that must be answered by further research.
Generally, qualitative data is gathered at this stage. For example, online research
communities can be used to identify consumer needs that are not being met and
to brainstorm possible solutions. Further quantitative research can investigate
what proportion of consumers share these problems and which potential
solutions best meet those needs.
Quantitative and Qualitative Data
Data can be classified as qualitative or quantitative. Qualitative research is
exploratory and seeks to find out what potential consumers think and feel about
a given subject. Qualitative research aids in identifying potential hypotheses,
whereas quantitative research puts hard numbers behind these hypotheses.
Quantitative research relies on numerical data to demonstrate statistically
significant outcomes.
The internet can be used to gather both qualitative and quantitative data. In fact,
the communities on the web can be viewed as large focus groups, regularly and
willingly sharing their opinions on products, markets, and companies.
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When both qualitative and quantitative research are used, qualitative research
usually takes place first to get an idea of the issues to be aware of, and then
quantitative research tests the theories put forward.
The main differences between quantitative and qualitative research are
represented in the following table.
Quantitative vs. Qualitative Research
Quantitative Qualitative
Data gathered
Numbers, figures, statistics, objective data
Opinions, feelings, motivations, subjective data
Question answered
What? Why?
Group size Large Small
Data sources
Surveys, web analytics data Focus groups, social media
Purpose Tests known issues or hypotheses
Seeks consensus
Generalises data
Generates ideas and concepts; leads to issues or hypotheses to be tested
Seeks complexity
Puts data in context
Advantages Statistically reliable results to determine if one option is better than the alternatives.
Looks at the context of issues and aims to
understand perspectives.
Challenges Issues can be measured only if they are known prior to starting. Sample size must be sufficient for predicting the population
Shouldn't be used to evaluate pre-existing ideas. Results are not predictors of the population.
Both quantitative and qualitative research can be conducted online.
Web analytics packages are a prime source of data. Using data such as search
terms, referral URLs, and internal search data can lead to qualitative information
about the consumers visiting a website. However, data that is measurable and
specific, such as impressions and click rates, lead to quantitative research.
Sampling
Qualitative research is usually conducted with a small number of respondents in
order to explore and generate ideas and concepts. Quantitative research is
conducted with far larger numbers, enough to be able to predict how the total
population would respond.
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Sample size is an important factor in conducting research and should be
representative of the population you are targeting as a whole. If your business
transacts both online and offline, be aware that using only online channels for
market research might not represent your true target market. However, if your
business transacts only online, offline channels for your market research are less
necessary.
Because quantitative research aims to produce predictors for the total
population, sample size is very important. The sample size needs to be sufficient
in order to make statistically accurate observations about the population.
For example, if you have 4,000 registered users of your website, you don't need
to survey all of them in order to understand how the entire population behaves.
You need to survey only 351 users to get a sample size that gives you a 95
percent confidence level with a ± 5 percent confidence interval. This means that
you can be 95 percent sure your results are accurate within ±5 percent.
There are several sample size calculators mentioned in the section Tools of the
Trade, below.
Online Research Methodologies
There are many online market research methodologies. This chapter touches on
three of the most popular and useful ones: surveys, online focus groups, and
social media monitoring.
Which methodology should you choose? That all depends on a variety of factors,
from your research question and purpose to your budget and time. Here are
some general pointers:
surveys—Ideal for collecting large amounts of quantitative data (and some
qualitative data, too). They are quick and easy to set up and can run
automatically.
online focus groups—Ideal for engaging consumers and collecting qualitative
data such as opinions, ideas, and feelings about the brand. They require a
larger time investment and a willing group of participants.
online monitoring—Ideal for collecting qualitative data on brand sentiment,
and can also provide some quantitative data around volume of interest in
the brand/ These data can be collected passively, and there are several tools
for automation.
Surveys
Surveys are questionnaires that contain a series of questions around a specific
topic. Their purpose is to gather large volumes of quantitative data easily, though
they can also collect qualitative data.
Conducting surveys online allows for data to be captured immediately, and data
analysis can be performed easily and quickly. By using email or the internet for
conducting surveys, geographical limitations for collecting data can be overcome
cost effectively.
Technology allows you to compile sophisticated and user-friendly surveys. For
example, as opposed to indicating impressions on a sliding scale, respondents
can indicate emotional response. Or the survey can be tailored depending on
previous answers (such as questions being skipped if they are not relevant to the
respondent).
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You can run ongoing online surveys at minimal cost. Simple polls can be used in
forums and on blogs to generate regular feedback. Website satisfaction surveys
are also an easy way to determine the effectiveness of a website or marketing
campaign.
A growing survey trend is getting instant feedback on questions or ideas from an
existing community (such as a trusted group of thought leaders, your brand's
social media fans, or an established research community). Examples include the
many Facebook polling apps and real-time mobile survey platforms such as
InstantAfrica (www.instantafrica.com).
Designing Surveys
How you design a survey and its questions will directly impact on your success.
A survey can include any number and type of questions, and more complicated
questions should appear only once users are comfortable with the survey.
Be careful that you do not introduce bias when creating questions by asking
leading questions.
Example
Incorrect: We have recently introduced new features on the website to
become a first-class web destination.
What are your thoughts on the new site?
Replace with: What are your thoughts on the changes to the website?
In general, you will also find that you get more accurate answers when phrasing
questions in the past tense than in the continuous tense.
Example
Incorrect: How many times a week do you buy take-away food?
Replace with: In the past month, how many times did you buy take-away
food?
Questions in the survey should be brief, easy to understand, and easy to answer.
Types of Survey Questions
The four types of survey questions are described below.
Title of the Tab Navigation
Open ended
Open-ended questions allow respondents to
answer in their own words. This usually results in
qualitative data.
Example: What features would you like to see on
the website for the digital marketing textbook?
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Focus Groups
Closed
These questions give respondents specific
responses from which to choose. These are
typically multiple-choice questions with either
one or multiple possible answers. This results in
quantitative data.
Examples:
Do you use the digital marketing textbook
website?
Yes
No
What features of the digital marketing
textbook website do you use? Tick all that
apply.
Blog
Case studies Free downloads
Additional resources
Ranked or ordinal
These questions ask respondents to rank items
in order of preference or relevance. Respondents
are given a numeric scale to indicate order. This
results in quantitative data.
Example: Rate the features of the digital
marketing textbook website, where 1 is the most
useful and 4 is the least useful.
Blog
Case studies
Free download
Additional resources
Matrix and rating
These types of questions can be used to quantify
qualitative data. Respondents are asked to rank
behavior or attitude.
Example: Rate the features of the digital
marketing textbook website according to the
following scale: 1 = love it, 2 = like it, 3 = no
opinion, 4 = dislike it.
Blog
Case studies
Free downloads
Additional resources
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Online focus groups involve respondents gathering online and reacting to a
particular topic. Respondents can be sourced from all over the world and react in
real time, arguably being freer with their responses since they can be anonymous
in an electronic environment.
Online focus groups are ideal for having frank, detailed conversations with
people who have an interest in your brand. This means they result in primary,
qualitative data. This information can then be used to create quantitative
research questions.
Online focus groups can be conducted by using a range of technologies. The
simplest is to use a text-based messaging program or online forum; there are
many options available. More sophisticated tools allow for voice or video
conferencing, and can make it easier for the researcher to pick up clues from the
respondent's voice and facial expressions. Some tools allow the researcher to
share their desktop screen with respondents in order to illustrate a concept or
question.
Good options for conducting online focus groups include the following: Google
Hangouts, Skype, and GoToMeeting. Usually running for between one and two
hours, focus groups are used to get consumer views on the following:
new products or marketing campaigns
existing products and campaigns, and how they can be improved
sentiment around the brand
views on a brand's new direction or visual style
ideas for how the brand could improve its position or branding.
Online focus groups are excellent for collecting a lot of qualitative data quickly.
When setting up the group, try to include enough participants to keep the
conversation alive, but not too many so that some get drowned out by others—
eight to ten is a good range. Also consider that you may run into technical
troubles if people are connecting from different locations and internet
connections—be prepared to do some basic troubleshooting if this happens.
There are a number of ways you can recruit participants for an online focus
group. This could include inviting people from your existing customer database,
going through a traditional market research recruiting agent, or putting a call out
on your website or social media communities. It is common practice to offer a
small incentive to people who participate in a focus group, as it is a fairly time-
intensive activity.
Online Monitoring
Finding out if people are talking about you is quite difficult in the offline world,
but almost effortless online. Rather than having to conduct real-world surveys
and interviews, in the digital world you can simply "listen" to the conversation
happening about you.
Keywords—the foundation to categorizing and indexing the web—make it simple
to track conversations taking place online. Customers don't always use channels
designated by a company to talk about that organization, but the good news is
that the internet makes it easy for a company to identify and use the channels
that customers have selected.
Online tools allow a company to track mentions of itself, its staff, its products, its
industry, and its competitors—anything else that is relevant. This is called online
monitoring or online listening; you are simply using digital tools to find and tap in
to existing conversations. The tool then gathers and collates all the mentions it
finds, so that you can analyze the data for insights.
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Typically, searches include the following main focus areas:
company
brand name
key products
key personnel (names, job titles, etc.)
key campaigns and activities
industry
conferences
patents
news
competitors
brand names
product launches
website updates
job vacancies
key people
There are four different types of searches you can perform to track relevant
brand keywords. Each modifies the specific type of data collected and aims to
improve the quality and depth of the data you gather.
The four operators are as follows:
broad match—e.g. Apple Computers. This is when any of or all words must
be found in the mention.
direct match—e.g. "Apple Computers." This is denoted by quotation marks
and dictates that the tool should find mentions only where the phrase
appears complete and in order in the content.
inclusive match—e.g. Apple + computers. This is denoted by a plus sign
directly before a word or phrase. This will direct the tool to search for any
mention that contains both Apple and computers, although not necessarily
in that order.
exclusive match—e.g. Apple – fruit. This is denoted by a minus sign directly
before a word or phrase. This will instruct the tool to include only mentions
that contain the first word or phrase but not when the second word is also
in the same mention.
Combinations of these four types of searches (operators) can be used to improve
accuracy. For example: "Apple Computers" + "steve jobs" – fruit.
Applying this theory to the groupings above, some keywords used for Apple
might be:
Company
"Apple computers"
"www.apple.com"
Apple + Macbook, "iPod nano", "Macbook Air", "iTunes" + music – radio
"Steve Jobs"
Industry
"Consumer Electronics Show" + "Las Vegas"
"CEBIT"
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Competitors
Microsoft
www.microsoft.com
It is also important to track common misspellings, all related companies and all
related websites. Tracking the names of people key to a company can highlight
potential brand attacks, or can demonstrate new areas of outreach for a
company.
Brand names, employee names, product names and even competitor names are
not unique. To save yourself from monitoring too much, identify keywords that
will indicate that a post has nothing to do with your company, and exclude those
in your searches.
For example, apple could refer to a consumer electronics company, or it could
appear in a post about the health benefits of fruit. Finding keywords that will
indicate context can help to save time. So, you could exclusive-match words such
as fruit, tasty and Granny Smith.
Tools for Online Monitoring
Thankfully, online listening does not entail hourly searches on your favourite
search engine to see what conversations are taking place online. There are many
different tools that monitor the web, and supply the results via email alerts or
RSS feeds or a web dashboard.
Google has several bespoke search services and periodically adds more to the
list. With the services below, an RSS feed is available for the search (Google
Alerts sends weekly or daily emails with updates), so that all updates can be
available through a feed reader:
Google Alerts will send an email when the keyword is used in either a
credible news item or a blog post.
Google News searches all news items for mentions of a keyword.
Google Blog Search searches all blog posts for mentions of a keyword.
Google Patent Search allows you to keep track of all filings related to an
industry, and searches can be done to see if there are patent filings which
might infringe on other patents.
Google Video Search relies on the data that have been added to describe a
video, and will return results based on keyword matches.
There are several search engines that focus solely on tracking blogs, news, and
other social media, and can provide trends for searches. In addition to providing
regular updates of new postings, these search engines can also provide an
overview over a certain period of time.
Technorati tracks blogs and tagged social media.
Socialbakers provides a series of social media listening options.
On Flickr, RSS updates for searches on a particular keyword will reveal when
a brand name has been used in tagging a photo.
With Delicious, an RSS feed can be created for URLs tagged with keywords,
or for new bookmarking of a URL.
In addition to these mostly free tools, there are also a number of premium paid
tools available to make the process easier and more robust. See the section Tools
of the Trade below for more suggestions.
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Listening is the first step to getting involved in the conversation surrounding a
company. Using search tools and RSS feeds means that information can be
accessed quickly and in one place, without the need to visit hundreds of
websites. Social media engagement is often the next step in keeping these
customers engaged.
Other Avenues for Online Research
Personal Interviews
There are various tools available to the online researcher for conducting personal
interviews, such as private chat rooms or video calling. The internet can connect
a researcher with many people around the world and make it possible to conduct
interviews with more anonymity, should respondents require it.
Observation/Online Ethnography
Taking its cue from offline ethnography, online ethnography requires researchers
to immerse themselves in a particular environment. In this way insights can be
gathered that might not have been attainable from a direct interview. However,
they do depend more heavily on the ethnographer's interpretation and are
therefore subjective.
Online Research Communities
Although online communities are a valuable resource for secondary research,
communities can also provide primary data. General Motors' Fast Lane blog is an
example of an online research community that helps gather research data. The
blog can be used as a means to elicit feedback to a particular research problem.
This is qualitative data that can aid the company in exploring their research
problem further. In many cases, social media can be used to gather insight about
a brand or customer experience. It is important to remember, however, that a
representative sample is necessary for making solid conclusions.
Listening Labs
When developing websites and online applications, usability testing is a vital
process that will ensure the website or application is able to meet consumers'
needs. Listening labs involve setting up a testing environment where a consumer
is observed using a website or application.
Conversion Optimization
Conversion optimisation aims to determine the factors of an advert, website or
web page that can be improved in order to convert customers more effectively.
From search adverts to email subject lines and shopping cart design, tests can be
set up to determine what variables are affecting the conversion rate.
How to Get Responses: Incentives and Assurances
As the researcher, you know what's in it for you when sending out a survey: you
will receive valuable insights that will aid in making business decisions. But what
is in it for the respondents?
According to Survey Monkey, the ways in which the surveys are administered
play a role in response rates, and these can be relative (University of Texas,
2011):
mail—50 percent adequate; 60 to 70 percent good to very good
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phone—80 percent good
email—40 percent average; 50 to 60 percent good to very good;
online—30 percent average
classroom pager—50+ percent good
face to face—80 to 85 percent good
Response rates can be improved by offering respondents an incentive for
participating in the research, such as a chance to win a grand prize, a discount or
special offer for every respondent, or even the knowledge that they are
improving a product or service that they care about.
Some researchers feel that monetary incentives are not always a good thing.
Some respondents may feel that they need to give "good" or "correct" answers
that may bias your results. Alternatively, you may attract respondents who are in
it just for the reward. One approach could be to run the survey with no incentive,
with the option of offering one if responses are limited.
Designing the survey to assure respondents of the minimal time commitment and
their privacy can also help to increase responses.
Room for Error
With all research, there is a given amount of error to deal with. Bias may arise
during surveys and focus groups (e.g.,interviewers leading the respondents) or be
present in the design and wording of the questions themselves. There could be
sample errors or respondent errors. Using the internet to administer surveys
removes the bias that may arise from an interviewer. However, with no
interviewer to explain questions, there is potential for greater respondent error.
This is why survey design is so important, and why it is crucial to test and run
pilots of the survey before going live.
Respondent errors also arise when respondents become too familiar with the
survey process. The general industry standard is to limit respondents to being
interviewed once every six months.
Sample error is a fact of market research. Some people are just not interested,
nor will they ever be interested, in taking part in research. Are these people
fundamentally different from those who do? Is there a way of finding out? To
some extent, web analytics, which track the behavior of all visitors to your
website, can be useful in this determination.
When conducting online research, it is crucial to understand who is in the target
market and what the best way to reach that target market is. Web surveys can
exclude groups of people due to access or ability. It is vital to determine if is this
is acceptable to the survey, and to use other means of capturing data if not.
Justifying the Cost of Research
Regular research is an important part of any business's growth strategy, but it
can be tough to justify the budget necessary for research without knowing the
benefit. Conducting research can cost little more than an employee's work hours,
depending on his or her skills, or it can be an expensive exercise involving
external experts. Deciding where your business needs are on the investment
scale depends on the depth of the research required and the expected growth
the business. When embarking on a research initiative, the cost to benefit ratio
should be determined.
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Testing should be an ongoing feature of any digital marketing activity. Tracking is
a characteristic of most digital marketing, which allows for constant testing of
the most basic hypothesis: is this campaign successful in reaching the goals of
the business?
Tools of the Trade
The following market research can be helpful for those in the industry. The list
below is divided according to the tool’s function:
Creating and managing online surveys
SurveyMonkey
Wufoo:
Kwik Surveys:
Google Forms: accessed through Google Drive
Qualaroo Insights (unique real-time offering):
Split test calculator—User Effect, LLC
Sample size calculator—Rogerwimmer.com
Internet Usage World Stats—Internetworldstats.com
Google Think
Silverback usability testing software
Mobile-based survey tools
Pondering Panda
Instant Africa
Ideo Method Cards app (ideas for qualitative research)
Premium Online Monitoring Tools
BrandsEye
SalesForce Marketing Cloud
Advantages and Challenges
Market researchers are increasingly turning to online tools in their research
processes. The internet allows for research at a far lower cost; it can also more
easily cross geographic boundaries and can speed up the research process.
This is not to say there are not downsides. While the internet makes it possible
to reach a far larger group of people without the cost of facilitators, this does
come with some challenges. For example, you cannot control the environments
in which information is being gathered. For an online sample, it's important to
focus on getting the correct number of people to make your study statistically
viable. If your questions are not carefully drafted, confusing questions could lead
to answers that are flawed or not relevant. Additionally, online incentives could
lead to answers that are not truthful, meaning that the value of the data could be
questionable.
The value of internet research should by no means be discounted, but it is
important to consider the nature of the study carefully, and interrogate the
validity and legitimacy of the data as a valid representation. Data is meaningful
only if it is representative, so make sure to establish goals and realistic
expectations for your research.
Case Study: Rocking the Daisies, 2011 and 2012
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One-line Summary
The Rocking the Daisies music festival used online monitoring to measure return
on investment (ROI) for sponsors and unearthed accurate insights to create a
better festival experience.
The Problem
Rocking the Daisies is a South African music festival that takes place every
October in Darling in the Western Cape. For festival organizers, measuring the
success of the event is crucial to the planning process for the next one. They ask
questions such as, How do we prove that the event is increasing in popularity?
and How do we prove that this year's festival is more successful than last year's?
The problem is that measurement of sponsored events is challenging, as
attendees are often unwilling to interrupt their experience to respond to
research questionnaires, and research conducted after the experience loses its
impetus and accuracy.
The Solution
Enter BrandsEye, an online monitoring tool that captures organic conversations
in real time across multiple online platforms, offered insight for both organizers
and sponsors. BrandsEye also offered a range of metrics used to track festival
performance.
For two consecutive years, event organizers used BrandsEye to track online
conversation before, during and after the festival. As a result, they could
understand the festival audience's needs and preferences, garner insights in
order to answer the most pressing questions around the festival's success,
identify new commercial opportunities, and assist in assessing ROI for sponsors.
For a festival this large, online conversation across social media, blogs, forums,
press, and various other platforms begins six months (or more) before the event.
For the 2012 festival, BrandsEye began its tracking around May, and slowly
watched the volumes of online conversation increase as the festival approached.
All data collected during the period was processed and displayed on BrandsEye's
customized measurement dashboards, which automatically updated in real time.
Additionally, users could apply filters to explore the data and mine them for
insights.
The Results
This table outlines some of the metrics used to measure the Rocking the Daisies
festival.
Rocking the Daisies Market Research
2011 2012
Metric
Volume of conversation 7,748 14,979
* The amount which would be spent on online advertising for the same exposure.
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2011 2012
Opportunities to see 8,412,530 14,602,550
Advert value equivalent* 1,949,024 3,397,916
Sentiment
Positive 25.7% 20.6%
Negative 9.8% 0.5%
Neutral 64.5% 79.2%
* The amount which would be spent on online advertising for the same exposure.
The Bigger Picture
Understanding your market is the foundation of every marketing activity, online
or off. If you don't know who you're speaking to, or what your audience cares
about, it's unlikely that your message will resonate with them.
Market research will define the content you create in your content marketing
strategy, which naturally affects channels like email marketing, web writing, SEO
and online advertising. It helps you find your audiences on social channels by
indicating where they spend most of their time, and how they like interacting
with your brand. It also helps you meet their needs by defining the touchpoints
they expect from your brand, especially when it comes to creating web and
mobile channels.
The more data you can gather about your audience, the better you will be able to
optimize and improve your marketing efforts: market research is an excellent
supplement to the quantitative data you can gather through data analytics.
Summary
Market research means gathering and analyzing data in order to gain consumer
insights, understand a market and make business decisions. Information can be
gathered about customers, competitors and the market.
Research can be conducted based on secondary data, which refers to
information or data that is already published, or based on primary data, which is
data gathered specifically for a particular research problem.
Research can also be qualitative or quantitative. The internet provides the tools
for gathering qualitative data, while online tools such as surveys and web
analytics packages are ideal for gathering quantitative data.
References
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University of Texas at Austin. (2011). Assess teaching: Response rates. Retrieved
from
http://www.utexas.edu/academic/ctl/assessment/iar/teaching/gather/method/survey-
Response.php
Licenses and Attributions
Chapter 3: Market Research
(https://www.redandyellow.co.za/content/uploads/woocommerce_uploads/2017/10/emarketing_textbook_downlo
from eMarketing: The Essential Guide to Marketing in a Digital World, 5th
Edition by Rob Stokes and the Minds of Quirk is available under a Creative
Commons Attribution-NonCommercial-ShareAlike 3.0 Unported
(https://creativecommons.org/licenses/by-nc-sa/3.0/) license. © 2008, 2009,
2010, 2011, 2013 Quirk Education Pty (Ltd). UMUC has modified this work and
it is available under the original license.
© 2020 University of Maryland Global Campus
All links to external sites were verified at the time of publication. UMGC is not responsible for the validity or
integrity of information located at external sites.
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Consumer Buying Behavior
Marketers should have a thorough understanding of how their "consumers think,
feel, and act" and must offer a clear value to each target consumer (Kotler &
Keller, 2015, p. 157). Consumer buying behavior is the "the study of the process
involved when individuals or groups select, purchase, use, or dispose of products,
services, ideas, or experiences to satisfy needs and desires" (Solomon, 2017, p.
6). Consumer buying behavior is strongly influenced by personal, cultural, and
social factors. Of these, cultural factors have the most profound influence.
Accordingly, marketers pay close attention to the cultural values of consumers in
their markets to promote sales of their current products and identify
opportunities for the future (Kotler & Keller, 2015).
Marketers should understand how their consumers make buying decisions and
who is involved in such decisions. Consumer buying behavior is a five-step
process that involves problem recognition, information search, evaluating
alternatives, purchase decision, and post-purchase behavior. Each step must be
fully understood by the marketer. The five-step process does not necessarily
occur in this sequence, and consumers may skip or reverse stages as they
alternate between buying offline and online (Kotler & Keller, 2015). Brands play
an important role in consumer buying behavior, conveying information about the
product and reassuring the consumer's buying decision (Marshall & Johnston,
2011).
The marketplace has been dramatically changing in the past decade thanks to
advanced and cheaper communications technologies, which enable consumers to
make better choices and share their buying experiences with others worldwide.
The newly acquired consumer capabilities include the following (Kotler & Keller,
2015, pp. 16–17):
1. Consumers are increasingly dependent on the internet to acquire
information and make informed decisions when buying.
2. Consumers search, communicate, and buy on the move.
3. Consumers tap into social media to exchange opinions and express loyalty.
4. Consumers are increasingly interacting with companies.
5. Consumers may reject marketing efforts if they find them inappropriate.
6. Consumers can easily shift brands if they believe that they have not been
treated fairly by a certain company.
Learning Topic
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Consumer behavior is also characterized by the actions that individuals take in
buying and using products or services, including the "mental and social processes
that come before and after these actions" (Kerin & Hartley, 2017, p. 123). A
study of consumer buying behavior is important in helping companies plan and
execute better business strategies (Khaniwale, 2015). Social norms and
situational factors often influence a buyer's final decision. Where group
pressures to comply are strong, influence from social norms is expected to
override multi-attributed evaluation. The force of social norms involves two
aspects: (1) social forces, or pressures and normative suggestions, and (2)
motivation to comply, or the willingness to listen to others (Johansson, 2009).
The country-of-origin effect also plays a role in the buying decision. This term
refers to the impact a branded product or service's perceived country of origin
has on customers (for example, "made in" labels). Products or services from
countries with a positive image tend to be favorably evaluated, while those from
countries of lesser status tend to be downgraded. For example, the entry of
Japanese cars into the United States in the 1970s was more a product of positive
associations with Japan rather than with specific firms. American drivers sought
to buy a Japanese car, and not necessarily a Datsun (now Nissan) or a Toyota.
Evidence suggests that this effect, which influences sales, does not stop over
time (Johansson, 2009).
The growth of multinational production has changed the importance consumers
ascribe to "made in" labels. The perception of Sony is unlikely to change,
regardless of where its product is produced. The influence of the country-of-
origin effect also depends on whether or not the country in question produces at
widely different quality levels. For example, Germany, Japan, Sweden, and
Switzerland have very high quality standards in general, which help to guarantee
the quality of their products, and Korea seem to be working on joining this
group. However, products from the United States, Italy, and China have widely
varying quality levels, which can make it harder to judge quality based on the
"made in" label alone (Johansson, 2009).
References
Johansson, J. (2009). Global marketing (5th ed.). New York, NY: McGraw-Hill.
Kerin, R., & Hartley, S. (2017). Marketing (13th ed.). New York, NY: McGraw Hill.
Khaniwale, M. (2015). Consumer buying behavior. International Journal of
Innovation and Scientific Research, 14(2), 278–286.
Kotler, P., & Keller, K. L. (2015). Marketing management (15th ed.). Upper Saddle
River, NJ: Pearson.
Marshall, G. W., & Johnston, M. W. (2011). Essentials of marketing management.
New York, NY: McGraw-Hill.
Solomon, M. (2017). Consumer behavior: Buying, having, and being (12th ed.).
Upper Saddle River, NJ: Pearson.
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Conducting Online Market Research
Introduction
The internet is built for research. Whether it's a consumer shopping around for
prices, a researcher exploring a topic, or a fan looking up their favorite band, the
internet makes finding and analyzing information easier than ever before. That's
because everything people do online leaves a data footprint.
Consumers are able to research companies and products easily, gathering
information to compare prices and services with a few clicks of the mouse.
Consumers are also able to share likes and dislikes easily, whether that
information is shared with companies or with friends.
This process can also work in reverse: brands can study who their customers are,
what they are interested in, how they feel about the brand, and the best times
and places to engage with them. This is what online market research is all about.
In this resource, you will learn the following:
why online market research is crucial to any marketing endeavor
the most important concepts you need to know in order to start conducting
research
several methods for conducting online research, including surveys, online
focus groups and online monitoring
what problems and pitfalls to avoid when researching online
The Importance of Market Research
The modern world is unpredictable, and things change very quickly in the digital
age. It is becoming increasingly difficult to keep up with trends, customer needs,
popular opinions, and competitors—and at the same time, staying at the
forefront of the market is vital to success.
So, how can you keep your brand current and ensure you are meeting your
customers' needs?
The answer is to conduct market research. Market research helps you make
informed business decisions. It involves systematically gathering, recording, and
analyzing data about customers, competitors and the market, and turning this
data into insight that can drive marketing strategies and campaigns.
Online market research is the process of using digital tools, data, and
connections to glean valuable insights about a brand's target audience. In other
words, it's the process of learning about your audience by engaging and
observing them online. Technology plays a key role in gathering data and
connecting with research participants, and makes the whole process quicker and
easier to manage than traditional offline research methods.
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Traditional and online market research have the same goals and underlying
principles, but online market research has the benefit of using digital technology,
which provides a range of benefits:
The internet is always on, meaning that data are readily available at any
time.
Many of the processes for finding, gathering and storing data can be
automated. For example, you can get an automatic email alert if someone
mentions your brand, or you can set up self-administered digital surveys.
You have access to a large number of participants around the world at the
click of a button.
A lot of the information you will use is already being automatically collected
(such as web analytics and social media data). All you need to do is access it.
People are often happy to share their own research, insights, and
methodologies online, so you can access this trove of resources to inform
your own research.
Online market research can be much more cost effective and quick to set up
than traditional research techniques.
There are many reasons to conduct regular market research:
gain insights into your consumers
what customers want and need from your brand
what customers like and dislike about the brand
why customers buy the brand's products or services
why potential customers might choose your brand over another one
why (or why not) customers make repeat purchases
understand the changes in your industry and business
discover new market trends on which you can capitalize
find new potential sales avenues, customers, products, and more
find and engage new audiences
allow customers to help steer your business
If you are able to understand your customers and the greater business context,
you will be able to market more effectively to them, meet their needs better, and
drive positive sentiment of your brand. All of this adds up to happier customers
and, ultimately, a healthier bottom line.
Key Concepts in Market Research
While the research field can be full of complex terminology, there are four key
concepts you should understand before conducting your own research:
research methodology
qualitative and quantitative data
primary and secondary research
sampling
Research Methodology
A research methodology is the process you should follow in order to conduct
accurate and valuable research. Research should involve the following steps:
1. Establish the goals of the project.
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2. Determine your sample.
3. Choose a data collection method.
4. Collect data.
5. Analyze the results.
6. Formulate conclusions and actionable insights (for example, producing
reports).
Most often, market research is focused around specific issues unique to a
business or brand. It is therefore not always possible to get hold of comparable
information to aid decision making. This is why it can be useful to start from a
specific research problem or hypothesis.
Your research question should guide your entire process and will determine your
choice of data collection method.
Primary and Secondary Research
Research can be based on primary data or secondary data. Primary research is
conducted when new data is gathered for a particular product or hypothesis.
This is where information does not exist already or is not accessible, and
therefore needs to be specifically collected from consumers or businesses.
Surveys, focus groups, research panels and research communities can all be used
when conducting primary market research.
Secondary research uses existing, published data as a source of information. It
can be more cost effective than conducting primary research. The internet opens
up a wealth of resources for conducting this research. The data would, however,
originally have been collected for solving problems other than the one at hand,
so they may not be sufficiently specific. Secondary research can be useful in
identifying problems to be investigated through primary research.
The internet is a useful tool when conducting both primary and secondary
research. Not only are there a number of free tools available for calculating data
like sample size and confidence levels (see the section Tools of the Trade for
examples), but it is also an ideal medium to reach large numbers of people at a
relatively low cost.
The Internet and Secondary Research
Research based on secondary data should precede primary data research. It
should be used in establishing the context and parameters for primary research
in the following ways:
The data can provide enough information to solve the problem at hand,
thereby negating the need for further research.
Secondary data can provide sources for hypotheses that can be explored
through primary research.
Sifting through secondary data is a necessary precursor for primary
research, as it can provide information relevant to sample sizes and
audience, for example.
The data can be used as a reference base to measure the accuracy of
primary research.
Companies with online properties have access to a wealth of web analytics data
that are recorded digitally. These data can then be mined for insights. It's worth
remembering, though, that it's usually impossible for you to access the web
analytics data of competitors, so this method will give you information only
about your own customers.
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Customer communications are also a source of data that can be used—
particularly communications with the customer service department. Committed
customers who complain, comment, or compliment are providing information
that can form the foundation for researching customer satisfaction.
Social networks, blogs, and other forms of social media have emerged as forums
where consumers discuss their likes and dislikes, and can be particularly vocal
about companies and products. These data can, and should, be tracked and
monitored to establish consumer sentiment. If a community is established for
research purposes, these should be considered primary data, but using social
media to research existing sentiments is considered secondary research.
The internet is an ideal starting point for conducting secondary research based
on published data and findings. But with so much information out there, it can be
a daunting task to find reliable resources.
The first point of call for research online is usually a search engine, such as
www.google.com or www.yahoo.com. Search engines usually have an array of
advanced features, which can aid online research. For example, Google offers the
following:
advanced search (http://www.google.co.za/advanced_search?hl=en)
Google Scholar (http://scholar.google.co.za/schhp?hl=en)
Google Book Search (http://www.google.co.za/books?hl=en)
Google News Archive (http://news.google.com/newspapers)
Many research publications are available online, some for free and some at a
cost. Many of the top research companies feature analyst blogs, which provide
some industry data and analysis free of charge. Some notable resources include
Experian, Pew Internet, Nielsen, and World Wide Worx.
The Internet and Primary Research
Primary research involves gathering data for a specific research task. It is based
on data that has not been gathered beforehand. Primary research can be either
qualitative or quantitative.
Primary research can be used to explore a market and can help to develop the
hypotheses or research questions that must be answered by further research.
Generally, qualitative data is gathered at this stage. For example, online research
communities can be used to identify consumer needs that are not being met and
to brainstorm possible solutions. Further quantitative research can investigate
what proportion of consumers share these problems and which potential
solutions best meet those needs.
Quantitative and Qualitative Data
Data can be classified as qualitative or quantitative. Qualitative research is
exploratory and seeks to find out what potential consumers think and feel about
a given subject. Qualitative research aids in identifying potential hypotheses,
whereas quantitative research puts hard numbers behind these hypotheses.
Quantitative research relies on numerical data to demonstrate statistically
significant outcomes.
The internet can be used to gather both qualitative and quantitative data. In fact,
the communities on the web can be viewed as large focus groups, regularly and
willingly sharing their opinions on products, markets, and companies.
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When both qualitative and quantitative research are used, qualitative research
usually takes place first to get an idea of the issues to be aware of, and then
quantitative research tests the theories put forward.
The main differences between quantitative and qualitative research are
represented in the following table.
Quantitative vs. Qualitative Research
Quantitative Qualitative
Data gathered
Numbers, figures, statistics, objective data
Opinions, feelings, motivations, subjective data
Question answered
What? Why?
Group size Large Small
Data sources
Surveys, web analytics data Focus groups, social media
Purpose Tests known issues or hypotheses
Seeks consensus
Generalises data
Generates ideas and concepts; leads to issues or hypotheses to be tested
Seeks complexity
Puts data in context
Advantages Statistically reliable results to determine if one option is better than the alternatives.
Looks at the context of issues and aims to
understand perspectives.
Challenges Issues can be measured only if they are known prior to starting. Sample size must be sufficient for predicting the population
Shouldn't be used to evaluate pre-existing ideas. Results are not predictors of the population.
Both quantitative and qualitative research can be conducted online.
Web analytics packages are a prime source of data. Using data such as search
terms, referral URLs, and internal search data can lead to qualitative information
about the consumers visiting a website. However, data that is measurable and
specific, such as impressions and click rates, lead to quantitative research.
Sampling
Qualitative research is usually conducted with a small number of respondents in
order to explore and generate ideas and concepts. Quantitative research is
conducted with far larger numbers, enough to be able to predict how the total
population would respond.
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Sample size is an important factor in conducting research and should be
representative of the population you are targeting as a whole. If your business
transacts both online and offline, be aware that using only online channels for
market research might not represent your true target market. However, if your
business transacts only online, offline channels for your market research are less
necessary.
Because quantitative research aims to produce predictors for the total
population, sample size is very important. The sample size needs to be sufficient
in order to make statistically accurate observations about the population.
For example, if you have 4,000 registered users of your website, you don't need
to survey all of them in order to understand how the entire population behaves.
You need to survey only 351 users to get a sample size that gives you a 95
percent confidence level with a ± 5 percent confidence interval. This means that
you can be 95 percent sure your results are accurate within ±5 percent.
There are several sample size calculators mentioned in the section Tools of the
Trade, below.
Online Research Methodologies
There are many online market research methodologies. This chapter touches on
three of the most popular and useful ones: surveys, online focus groups, and
social media monitoring.
Which methodology should you choose? That all depends on a variety of factors,
from your research question and purpose to your budget and time. Here are
some general pointers:
surveys—Ideal for collecting large amounts of quantitative data (and some
qualitative data, too). They are quick and easy to set up and can run
automatically.
online focus groups—Ideal for engaging consumers and collecting qualitative
data such as opinions, ideas, and feelings about the brand. They require a
larger time investment and a willing group of participants.
online monitoring—Ideal for collecting qualitative data on brand sentiment,
and can also provide some quantitative data around volume of interest in
the brand/ These data can be collected passively, and there are several tools
for automation.
Surveys
Surveys are questionnaires that contain a series of questions around a specific
topic. Their purpose is to gather large volumes of quantitative data easily, though
they can also collect qualitative data.
Conducting surveys online allows for data to be captured immediately, and data
analysis can be performed easily and quickly. By using email or the internet for
conducting surveys, geographical limitations for collecting data can be overcome
cost effectively.
Technology allows you to compile sophisticated and user-friendly surveys. For
example, as opposed to indicating impressions on a sliding scale, respondents
can indicate emotional response. Or the survey can be tailored depending on
previous answers (such as questions being skipped if they are not relevant to the
respondent).
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You can run ongoing online surveys at minimal cost. Simple polls can be used in
forums and on blogs to generate regular feedback. Website satisfaction surveys
are also an easy way to determine the effectiveness of a website or marketing
campaign.
A growing survey trend is getting instant feedback on questions or ideas from an
existing community (such as a trusted group of thought leaders, your brand's
social media fans, or an established research community). Examples include the
many Facebook polling apps and real-time mobile survey platforms such as
InstantAfrica (www.instantafrica.com).
Designing Surveys
How you design a survey and its questions will directly impact on your success.
A survey can include any number and type of questions, and more complicated
questions should appear only once users are comfortable with the survey.
Be careful that you do not introduce bias when creating questions by asking
leading questions.
Example
Incorrect: We have recently introduced new features on the website to
become a first-class web destination.
What are your thoughts on the new site?
Replace with: What are your thoughts on the changes to the website?
In general, you will also find that you get more accurate answers when phrasing
questions in the past tense than in the continuous tense.
Example
Incorrect: How many times a week do you buy take-away food?
Replace with: In the past month, how many times did you buy take-away
food?
Questions in the survey should be brief, easy to understand, and easy to answer.
Types of Survey Questions
The four types of survey questions are described below.
Title of the Tab Navigation
Open ended
Open-ended questions allow respondents to
answer in their own words. This usually results in
qualitative data.
Example: What features would you like to see on
the website for the digital marketing textbook?
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Focus Groups
Closed
These questions give respondents specific
responses from which to choose. These are
typically multiple-choice questions with either
one or multiple possible answers. This results in
quantitative data.
Examples:
Do you use the digital marketing textbook
website?
Yes
No
What features of the digital marketing
textbook website do you use? Tick all that
apply.
Blog
Case studies Free downloads
Additional resources
Ranked or ordinal
These questions ask respondents to rank items
in order of preference or relevance. Respondents
are given a numeric scale to indicate order. This
results in quantitative data.
Example: Rate the features of the digital
marketing textbook website, where 1 is the most
useful and 4 is the least useful.
Blog
Case studies
Free download
Additional resources
Matrix and rating
These types of questions can be used to quantify
qualitative data. Respondents are asked to rank
behavior or attitude.
Example: Rate the features of the digital
marketing textbook website according to the
following scale: 1 = love it, 2 = like it, 3 = no
opinion, 4 = dislike it.
Blog
Case studies
Free downloads
Additional resources
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Online focus groups involve respondents gathering online and reacting to a
particular topic. Respondents can be sourced from all over the world and react in
real time, arguably being freer with their responses since they can be anonymous
in an electronic environment.
Online focus groups are ideal for having frank, detailed conversations with
people who have an interest in your brand. This means they result in primary,
qualitative data. This information can then be used to create quantitative
research questions.
Online focus groups can be conducted by using a range of technologies. The
simplest is to use a text-based messaging program or online forum; there are
many options available. More sophisticated tools allow for voice or video
conferencing, and can make it easier for the researcher to pick up clues from the
respondent's voice and facial expressions. Some tools allow the researcher to
share their desktop screen with respondents in order to illustrate a concept or
question.
Good options for conducting online focus groups include the following: Google
Hangouts, Skype, and GoToMeeting. Usually running for between one and two
hours, focus groups are used to get consumer views on the following:
new products or marketing campaigns
existing products and campaigns, and how they can be improved
sentiment around the brand
views on a brand's new direction or visual style
ideas for how the brand could improve its position or branding.
Online focus groups are excellent for collecting a lot of qualitative data quickly.
When setting up the group, try to include enough participants to keep the
conversation alive, but not too many so that some get drowned out by others—
eight to ten is a good range. Also consider that you may run into technical
troubles if people are connecting from different locations and internet
connections—be prepared to do some basic troubleshooting if this happens.
There are a number of ways you can recruit participants for an online focus
group. This could include inviting people from your existing customer database,
going through a traditional market research recruiting agent, or putting a call out
on your website or social media communities. It is common practice to offer a
small incentive to people who participate in a focus group, as it is a fairly time-
intensive activity.
Online Monitoring
Finding out if people are talking about you is quite difficult in the offline world,
but almost effortless online. Rather than having to conduct real-world surveys
and interviews, in the digital world you can simply "listen" to the conversation
happening about you.
Keywords—the foundation to categorizing and indexing the web—make it simple
to track conversations taking place online. Customers don't always use channels
designated by a company to talk about that organization, but the good news is
that the internet makes it easy for a company to identify and use the channels
that customers have selected.
Online tools allow a company to track mentions of itself, its staff, its products, its
industry, and its competitors—anything else that is relevant. This is called online
monitoring or online listening; you are simply using digital tools to find and tap in
to existing conversations. The tool then gathers and collates all the mentions it
finds, so that you can analyze the data for insights.
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Typically, searches include the following main focus areas:
company
brand name
key products
key personnel (names, job titles, etc.)
key campaigns and activities
industry
conferences
patents
news
competitors
brand names
product launches
website updates
job vacancies
key people
There are four different types of searches you can perform to track relevant
brand keywords. Each modifies the specific type of data collected and aims to
improve the quality and depth of the data you gather.
The four operators are as follows:
broad match—e.g. Apple Computers. This is when any of or all words must
be found in the mention.
direct match—e.g. "Apple Computers." This is denoted by quotation marks
and dictates that the tool should find mentions only where the phrase
appears complete and in order in the content.
inclusive match—e.g. Apple + computers. This is denoted by a plus sign
directly before a word or phrase. This will direct the tool to search for any
mention that contains both Apple and computers, although not necessarily
in that order.
exclusive match—e.g. Apple – fruit. This is denoted by a minus sign directly
before a word or phrase. This will instruct the tool to include only mentions
that contain the first word or phrase but not when the second word is also
in the same mention.
Combinations of these four types of searches (operators) can be used to improve
accuracy. For example: "Apple Computers" + "steve jobs" – fruit.
Applying this theory to the groupings above, some keywords used for Apple
might be:
Company
"Apple computers"
"www.apple.com"
Apple + Macbook, "iPod nano", "Macbook Air", "iTunes" + music – radio
"Steve Jobs"
Industry
"Consumer Electronics Show" + "Las Vegas"
"CEBIT"
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Competitors
Microsoft
www.microsoft.com
It is also important to track common misspellings, all related companies and all
related websites. Tracking the names of people key to a company can highlight
potential brand attacks, or can demonstrate new areas of outreach for a
company.
Brand names, employee names, product names and even competitor names are
not unique. To save yourself from monitoring too much, identify keywords that
will indicate that a post has nothing to do with your company, and exclude those
in your searches.
For example, apple could refer to a consumer electronics company, or it could
appear in a post about the health benefits of fruit. Finding keywords that will
indicate context can help to save time. So, you could exclusive-match words such
as fruit, tasty and Granny Smith.
Tools for Online Monitoring
Thankfully, online listening does not entail hourly searches on your favourite
search engine to see what conversations are taking place online. There are many
different tools that monitor the web, and supply the results via email alerts or
RSS feeds or a web dashboard.
Google has several bespoke search services and periodically adds more to the
list. With the services below, an RSS feed is available for the search (Google
Alerts sends weekly or daily emails with updates), so that all updates can be
available through a feed reader:
Google Alerts will send an email when the keyword is used in either a
credible news item or a blog post.
Google News searches all news items for mentions of a keyword.
Google Blog Search searches all blog posts for mentions of a keyword.
Google Patent Search allows you to keep track of all filings related to an
industry, and searches can be done to see if there are patent filings which
might infringe on other patents.
Google Video Search relies on the data that have been added to describe a
video, and will return results based on keyword matches.
There are several search engines that focus solely on tracking blogs, news, and
other social media, and can provide trends for searches. In addition to providing
regular updates of new postings, these search engines can also provide an
overview over a certain period of time.
Technorati tracks blogs and tagged social media.
Socialbakers provides a series of social media listening options.
On Flickr, RSS updates for searches on a particular keyword will reveal when
a brand name has been used in tagging a photo.
With Delicious, an RSS feed can be created for URLs tagged with keywords,
or for new bookmarking of a URL.
In addition to these mostly free tools, there are also a number of premium paid
tools available to make the process easier and more robust. See the section Tools
of the Trade below for more suggestions.
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Listening is the first step to getting involved in the conversation surrounding a
company. Using search tools and RSS feeds means that information can be
accessed quickly and in one place, without the need to visit hundreds of
websites. Social media engagement is often the next step in keeping these
customers engaged.
Other Avenues for Online Research
Personal Interviews
There are various tools available to the online researcher for conducting personal
interviews, such as private chat rooms or video calling. The internet can connect
a researcher with many people around the world and make it possible to conduct
interviews with more anonymity, should respondents require it.
Observation/Online Ethnography
Taking its cue from offline ethnography, online ethnography requires researchers
to immerse themselves in a particular environment. In this way insights can be
gathered that might not have been attainable from a direct interview. However,
they do depend more heavily on the ethnographer's interpretation and are
therefore subjective.
Online Research Communities
Although online communities are a valuable resource for secondary research,
communities can also provide primary data. General Motors' Fast Lane blog is an
example of an online research community that helps gather research data. The
blog can be used as a means to elicit feedback to a particular research problem.
This is qualitative data that can aid the company in exploring their research
problem further. In many cases, social media can be used to gather insight about
a brand or customer experience. It is important to remember, however, that a
representative sample is necessary for making solid conclusions.
Listening Labs
When developing websites and online applications, usability testing is a vital
process that will ensure the website or application is able to meet consumers'
needs. Listening labs involve setting up a testing environment where a consumer
is observed using a website or application.
Conversion Optimization
Conversion optimisation aims to determine the factors of an advert, website or
web page that can be improved in order to convert customers more effectively.
From search adverts to email subject lines and shopping cart design, tests can be
set up to determine what variables are affecting the conversion rate.
How to Get Responses: Incentives and Assurances
As the researcher, you know what's in it for you when sending out a survey: you
will receive valuable insights that will aid in making business decisions. But what
is in it for the respondents?
According to Survey Monkey, the ways in which the surveys are administered
play a role in response rates, and these can be relative (University of Texas,
2011):
mail—50 percent adequate; 60 to 70 percent good to very good
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phone—80 percent good
email—40 percent average; 50 to 60 percent good to very good;
online—30 percent average
classroom pager—50+ percent good
face to face—80 to 85 percent good
Response rates can be improved by offering respondents an incentive for
participating in the research, such as a chance to win a grand prize, a discount or
special offer for every respondent, or even the knowledge that they are
improving a product or service that they care about.
Some researchers feel that monetary incentives are not always a good thing.
Some respondents may feel that they need to give "good" or "correct" answers
that may bias your results. Alternatively, you may attract respondents who are in
it just for the reward. One approach could be to run the survey with no incentive,
with the option of offering one if responses are limited.
Designing the survey to assure respondents of the minimal time commitment and
their privacy can also help to increase responses.
Room for Error
With all research, there is a given amount of error to deal with. Bias may arise
during surveys and focus groups (e.g.,interviewers leading the respondents) or be
present in the design and wording of the questions themselves. There could be
sample errors or respondent errors. Using the internet to administer surveys
removes the bias that may arise from an interviewer. However, with no
interviewer to explain questions, there is potential for greater respondent error.
This is why survey design is so important, and why it is crucial to test and run
pilots of the survey before going live.
Respondent errors also arise when respondents become too familiar with the
survey process. The general industry standard is to limit respondents to being
interviewed once every six months.
Sample error is a fact of market research. Some people are just not interested,
nor will they ever be interested, in taking part in research. Are these people
fundamentally different from those who do? Is there a way of finding out? To
some extent, web analytics, which track the behavior of all visitors to your
website, can be useful in this determination.
When conducting online research, it is crucial to understand who is in the target
market and what the best way to reach that target market is. Web surveys can
exclude groups of people due to access or ability. It is vital to determine if is this
is acceptable to the survey, and to use other means of capturing data if not.
Justifying the Cost of Research
Regular research is an important part of any business's growth strategy, but it
can be tough to justify the budget necessary for research without knowing the
benefit. Conducting research can cost little more than an employee's work hours,
depending on his or her skills, or it can be an expensive exercise involving
external experts. Deciding where your business needs are on the investment
scale depends on the depth of the research required and the expected growth
the business. When embarking on a research initiative, the cost to benefit ratio
should be determined.
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Testing should be an ongoing feature of any digital marketing activity. Tracking is
a characteristic of most digital marketing, which allows for constant testing of
the most basic hypothesis: is this campaign successful in reaching the goals of
the business?
Tools of the Trade
The following market research can be helpful for those in the industry. The list
below is divided according to the tool’s function:
Creating and managing online surveys
SurveyMonkey
Wufoo:
Kwik Surveys:
Google Forms: accessed through Google Drive
Qualaroo Insights (unique real-time offering):
Split test calculator—User Effect, LLC
Sample size calculator—Rogerwimmer.com
Internet Usage World Stats—Internetworldstats.com
Google Think
Silverback usability testing software
Mobile-based survey tools
Pondering Panda
Instant Africa
Ideo Method Cards app (ideas for qualitative research)
Premium Online Monitoring Tools
BrandsEye
SalesForce Marketing Cloud
Advantages and Challenges
Market researchers are increasingly turning to online tools in their research
processes. The internet allows for research at a far lower cost; it can also more
easily cross geographic boundaries and can speed up the research process.
This is not to say there are not downsides. While the internet makes it possible
to reach a far larger group of people without the cost of facilitators, this does
come with some challenges. For example, you cannot control the environments
in which information is being gathered. For an online sample, it's important to
focus on getting the correct number of people to make your study statistically
viable. If your questions are not carefully drafted, confusing questions could lead
to answers that are flawed or not relevant. Additionally, online incentives could
lead to answers that are not truthful, meaning that the value of the data could be
questionable.
The value of internet research should by no means be discounted, but it is
important to consider the nature of the study carefully, and interrogate the
validity and legitimacy of the data as a valid representation. Data is meaningful
only if it is representative, so make sure to establish goals and realistic
expectations for your research.
Case Study: Rocking the Daisies, 2011 and 2012
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One-line Summary
The Rocking the Daisies music festival used online monitoring to measure return
on investment (ROI) for sponsors and unearthed accurate insights to create a
better festival experience.
The Problem
Rocking the Daisies is a South African music festival that takes place every
October in Darling in the Western Cape. For festival organizers, measuring the
success of the event is crucial to the planning process for the next one. They ask
questions such as, How do we prove that the event is increasing in popularity?
and How do we prove that this year's festival is more successful than last year's?
The problem is that measurement of sponsored events is challenging, as
attendees are often unwilling to interrupt their experience to respond to
research questionnaires, and research conducted after the experience loses its
impetus and accuracy.
The Solution
Enter BrandsEye, an online monitoring tool that captures organic conversations
in real time across multiple online platforms, offered insight for both organizers
and sponsors. BrandsEye also offered a range of metrics used to track festival
performance.
For two consecutive years, event organizers used BrandsEye to track online
conversation before, during and after the festival. As a result, they could
understand the festival audience's needs and preferences, garner insights in
order to answer the most pressing questions around the festival's success,
identify new commercial opportunities, and assist in assessing ROI for sponsors.
For a festival this large, online conversation across social media, blogs, forums,
press, and various other platforms begins six months (or more) before the event.
For the 2012 festival, BrandsEye began its tracking around May, and slowly
watched the volumes of online conversation increase as the festival approached.
All data collected during the period was processed and displayed on BrandsEye's
customized measurement dashboards, which automatically updated in real time.
Additionally, users could apply filters to explore the data and mine them for
insights.
The Results
This table outlines some of the metrics used to measure the Rocking the Daisies
festival.
Rocking the Daisies Market Research
2011 2012
Metric
Volume of conversation 7,748 14,979
* The amount which would be spent on online advertising for the same exposure.
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2011 2012
Opportunities to see 8,412,530 14,602,550
Advert value equivalent* 1,949,024 3,397,916
Sentiment
Positive 25.7% 20.6%
Negative 9.8% 0.5%
Neutral 64.5% 79.2%
* The amount which would be spent on online advertising for the same exposure.
The Bigger Picture
Understanding your market is the foundation of every marketing activity, online
or off. If you don't know who you're speaking to, or what your audience cares
about, it's unlikely that your message will resonate with them.
Market research will define the content you create in your content marketing
strategy, which naturally affects channels like email marketing, web writing, SEO
and online advertising. It helps you find your audiences on social channels by
indicating where they spend most of their time, and how they like interacting
with your brand. It also helps you meet their needs by defining the touchpoints
they expect from your brand, especially when it comes to creating web and
mobile channels.
The more data you can gather about your audience, the better you will be able to
optimize and improve your marketing efforts: market research is an excellent
supplement to the quantitative data you can gather through data analytics.
Summary
Market research means gathering and analyzing data in order to gain consumer
insights, understand a market and make business decisions. Information can be
gathered about customers, competitors and the market.
Research can be conducted based on secondary data, which refers to
information or data that is already published, or based on primary data, which is
data gathered specifically for a particular research problem.
Research can also be qualitative or quantitative. The internet provides the tools
for gathering qualitative data, while online tools such as surveys and web
analytics packages are ideal for gathering quantitative data.
References
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University of Texas at Austin. (2011). Assess teaching: Response rates. Retrieved
from
http://www.utexas.edu/academic/ctl/assessment/iar/teaching/gather/method/survey-
Response.php
Licenses and Attributions
Chapter 3: Market Research
(https://www.redandyellow.co.za/content/uploads/woocommerce_uploads/2017/10/emarketing_textbook_downlo
from eMarketing: The Essential Guide to Marketing in a Digital World, 5th
Edition by Rob Stokes and the Minds of Quirk is available under a Creative
Commons Attribution-NonCommercial-ShareAlike 3.0 Unported
(https://creativecommons.org/licenses/by-nc-sa/3.0/) license. © 2008, 2009,
2010, 2011, 2013 Quirk Education Pty (Ltd). UMUC has modified this work and
it is available under the original license.
© 2020 University of Maryland Global Campus
All links to external sites were verified at the time of publication. UMGC is not responsible for the validity or
integrity of information located at external sites.
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ACME Meeting
Client Name: ACME
Industry: Appliances
Product Line: Automatic washing machines
Customers: Automatic washing machine buyers in the United States, United
Kingdom, and Germany
Competitors: 1. Whirlpool (including Maytag, KitchenAid, Jenn-Air, Amana,
Indesit, Bauknecht, Ignis; among others). Whirlpool is the
leading producer of home appliances worldwide.
2. Electrolux (including Frigidaire, Gibson, Philco, Kelvinator,
Zanussi,
AEG, White Westinghouse; among many others) Electrolux is
the second leading producer of home appliances worldwide.
3. Haier (including GE Appliances, Fischer, Aqua; among others).
"Thank you for meeting with us today," Tarek says. "Market intelligence has
shown that our major competitors—Whirlpool, Electrolux, and Haier—are all
developing new efficient automatic washing machines. These new machines
have attractive designs, use less electricity and water, are durable, and are
available in different colors. In addition, these washing machines are
competitively priced for the features that they have."
Tarek looks to you: "As ACME is debating whether to enter this market, we need
you to participate in a new cross-functional product development team that will
research the buying habits of automatic washing machine customers in our three
main markets: the United States, Germany, and the United Kingdom. We also
need to know if there's an unmet demand for such efficient washing machines in
those markets," he says. Erik Knops, ACME's CEO, nods his head in agreement.
Tarek continues, "We need to take into consideration the different needs and
preferences of automatic washing machine buyers in those markets; as well as
the demographics of those buyers such age and gender. The customer
requirements for each of those markets are quite different. For example, washing
Course Resource
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machines in Europe are usually 5 kg capacity front loaders that heat their own
water, while Americans prefer larger top loaders that take hot water from the
home's water heater."
Finally, Tarek remarks, "In addition, we need to know where those customers buy
their automatic washing machines from and if there is any seasonal variation in
sales."
Erik nods his head again, smiles, and adds, "Tarek and I want you to research the
automatic washing machine buyers' needs and preferences for those three
markets, and provide us with a customer buying behavior report in two weeks.
Remember, the report should focus on the customers, and not on the
companies!"
You know that to give Erik and Tarek the most in-depth report, you will need to
conduct an analysis of the automatic washing machine buyers in those markets.
Each market has to be discussed and analyzed separately under its own headings
and subheadings (three different discussions and analyses). In addition, you have
to create a value proposition for ACME's proposed product. The value
proposition should be clear and specific to ACME's proposed new product. What
value do customers see in the proposed product and what would compel them to
buy it?
© 2020 University of Maryland Global Campus
All links to external sites were verified at the time of publication. UMGC is not responsible for the validity or
integrity of information located at external sites.
Project 1: Researching Consumer Buying Behavior Step 1: Complete Your Skills Gap Analysis
INBOX: 1 New Message
From: Denna Chartreuse, HR Specialist, MCS
To: You
Greetings,
We are asking all MCS employees to complete a skills gap analysis.
Use this skills gap analysis instrument to self-evaluate your knowledge and skills before beginning your assignment. Select the Project 1 worksheet in the bottom left of the file to complete this step.
When you have completed your self-evaluation, use the text box at the bottom of the worksheet to write a reflection of 400–500 words describing two to three gaps you will work to reduce, why you selected them, and the activities you will pursue to develop your selected competencies.
Thank you for your attention to this request,
Denna
Submit your preliminary skills gap analysis to the submission dropbox located in the final step of this project. In the next step, you will start to review the basics of marketing and consumer buying behavior.
Project 1: Researching Consumer Buying Behavior Step 2: Attend Meeting with ACME
Monday morning, you meet with Jillian in her office. "We are so glad that you have come back to help us grow at Maryland Creative Solutions," Jillian says. "As you know, with shifting markets, I have decided to reposition the company to focus more on clients with branding and digital strategy consulting needs. I feel that your long-term knowledge of our company and global mindset are perfect for leading the way on some of our new projects.
"To get you started, we have just signed on with ACME. I would like you to meet with their leadership: Tarek Fahmy, the company's head of new-product innovation, and ACME's CEO, Erik Knops, to finalize the details of their request. Again, it is a pleasure to be working with you. I am really looking forward to seeing your creative approaches in our partnerships."
Calendar Invite: Startup Meeting with ACME
Client Name:
Meeting Organizer: Jillian Best
Attendees: You, Erik Knops, Tarek Fahmy
Click to attend the ACME meeting
After the meeting, proceed to Step 3 to enhance your knowledge about concepts relevant to ACME's request.
Project 1: Researching Consumer Buying Behavior Step 3: Review Marketing Information on Consumer Buying Behavior
As you read through the following materials, begin to think about how this information will apply to the report you will prepare for Erik and Tarek. To successfully complete the report, you'll need an understanding of marketing. You’ll also benefit from a keen understanding of digital marketing, consumer buying behavior, and evaluating business attractiveness.
As you conduct your analysis of ACME's consumer environment, remember that there are two types of market research: primary and secondary research. Both types of research are required in real-life, and each of them has its pros and cons. However, for this Project, only secondary research is required.
Finally, to fully understand ACME's position, read about offerings—what a company provides its customers, be it a product, a service, or a mix of both. Also consider the differences between a product and a service. You know that a product can be more than just a physical good, it can be a service attached to a physical product, a "pure" service, an idea, a place, an organization, or even a person.
After you have read these materials, proceed to the next step, where you will begin your analysis of the specified consumer markets
Project 1: Researching Consumer Buying Behavior Step 4: Conduct a Consumer Buying Behavior Study
INBOX: 1 New Message
From: Tarek Fahmy, Head of New Product Innovation, ACME
To: You
How are things going?
As previously mentioned, I would like you to conduct an analysis of the consumers in our main markets. Your analysis should consider both current and potential product users and should address the following questions:
1. What needs are being met by the product purchase? What are the benefits to the consumers? Make sure that you differentiate between features and benefits; go beyond manifest motives and consider latent motives.
2. Who is involved in the purchase process? Who are the influencers? Who are the buyers? Who are the end users?
3. Where are the products sold, and what are the distribution channels?
4. How often are the products purchased? Is there seasonality to sales?
Deliverable: By the end of Week 1, I need you to produce a six-page preliminary consumer buying behavior report (excluding cover page, reference list, tables, graphs, and exhibits) explaining your findings on consumer needs, wants, and preferences in these markets. Make sure that your report is specific to consumers of ACME’s potential product and not to consumers in general.
Support your work with the course readings and at least two scholarly sources and eight reliable nonscholarly sources, such as Reuters, Bloomberg, Yahoo! Finance, Barrons.com, Morningstar.com, Money, Forbes, Fortune, the Financial Times, the Wall Street Journal, and the Harvard Business Review, as well as the UMUC Library databases, such as Hoover's and ABI/INFORM. All sources need to be cited using APA formatting, both within the text and in the reference list. The report should be organized using headings and subheadings to improve its readability.
Expecting your best efforts on this,
Tarek
Submit your report to the dropbox located in the final step of this project. Then proceed to the next step, where you will create a value proposition.
Project 1: Researching Consumer Buying Behavior Step 5: Complete Your Value Proposition
Early in Week 2, submit a one-page value proposition to Erik.
INBOX: 1 New Message
From: Erik Knops, CEO, ACME
To: You
Just a quick note,
I wanted to clarify that a customer-focused value proposition explains the reason why a customer purchases a product or uses a service (i.e., the value that a company delivers to its customers).
Deliverable: Based on your research of consumer needs in our main markets, describe your value proposition, or the benefits that ACME and its potential new product would provide to customers. Remember, a value proposition is essentially the promise that is made to the customer. Also provide a half-page recommendation to ACME on whether or not to manufacture that product.
Support your work with the course readings, scholarly sources, and reliable nonscholarly sources, such as Reuters, Bloomberg, Yahoo! Finance, Barrons.com, Morningstar.com, Money, Forbes, Fortune, the Financial Times, the Wall Street Journal, and the Harvard Business Review, as well as the UMUC Library databases, such as Hoover’s. All sources need to be cited using APA formatting, both within the text and in the reference list. The value proposition should be organized using headings and subheadings to improve its readability.
I know these are tight turnarounds, but I have no doubt you'll knock this out,
Erik
Submit your report to the dropbox located in the final step of this project. In the next step you will finalize your consumer buying behavior report and write an executive summary.
Project 1: Researching Consumer Buying Behavior Step 6: Complete Your Final Consumer Buying Behavior Report
Deliverable: By the end of Week 2, combine the first two deliverables into a single report after making any necessary corrections and edit them to ensure that there is clear flow of ideas from one section to the other. In addition, prepare a one-page executive summary (following the cover page) that highlights the most important findings of the report. APA style should be applied to in-text citations and in the reference list.
Your final report to Erik should be eight to nine pages, excluding cover page, executive summary, the reference list, and appendices. Any graphs, tables, and figures should be included as appendices. Your report should have one-inch margins and be double spaced in 12-point Times New Roman font. The report should be organized using headings and subheadings to improve its readability.
Submit your report to the dropbox located in the final step of this project.
Project 1: Researching Consumer Buying Behavior Step 7: Submit Your Work
By the end of Week 2, submit your final consumer buying behavior report to the dropbox below. Take note of the recommended delivery dates and file-naming protocols in the table below:
Recommended Project Delivery |
|||
Step |
Submission Week |
Deliverable |
File-naming protocol/Submission instructions |
Step 1 |
Week 1 |
Skills gap analysis |
lastname_MBA640Week1SkillsGap_date.docx |
Step 4 |
Week 1 |
Preliminary consumer buying behavior report |
lastname_PrelimBuyingBehavior_date.docx |
Step 5 |
Week 2 |
Value proposition and recommendation |
lastname_ValueProposition _date.docx |
Step 6 |
Week 2 |
Final consumer buying behavior report |
lastname_FinalBuyingBehavior_date.docx |
Check Your Evaluation Criteria
Before you submit your assignment, review the competencies below, which your instructor will use to evaluate your work. A good practice would be to use each competency as a self-check to confirm you have incorporated all of them. To view the complete grading rubric, click My Tools, select Assignments from the drop-down menu, and then click the project title.
· 1.1: Organize document or presentation clearly in a manner that promotes understanding and meets the requirements of the assignment.
· 1.3: Provide sufficient, correctly cited support that substantiates the writer's ideas.
· 1.6: Follow conventions of Standard Written English.
· 2.1: Identify and clearly explain the issue, question, or problem under critical consideration.
· 2.5: Develop well-reasoned ideas, conclusions or decisions, checking them against relevant criteria and benchmarks.
· 6.1: Identify the general (external) environment in which an organization operates and discuss the implications for enterprise success.
· 6.2: Evaluate strategic implications for domestic and international markets of an organization's industry.
· 6.4: Develop and recommend strategies for an organization's sustainable competitive advantage.
· 12.2: Analyze marketing information.
Critical Definitions in Marketing
Market and Industry There are words we use in everyday language, and then there are the same words we use in a marketing context. We need to be much more precise as marketers than we do when we are talking to friends and family. So let’s take a look at these in our business context. Here’s the first few we need to think about: What is a market? We use this word often. We might think of the local store as a market. Often, even in many professional publications, the use of the word market is used to define the dollar size (or should I say “total revenue”) of what is sold in a given classification of goods, such as computers, automobiles, office furniture, or defense spending. However, this is not correct. Here is a good definition of a
market: “The market consists of all prospective customers for a given product, service, or idea. Customers can be purchasers who intend to resell the product or end users who intend to use or consume the product. The market can be categorized into separate groups called segments. When a producer appeals to a market or market segment, the producer must take into account the distinction
between the end user or consumer and the purchaser or decision maker(s). This is especially true in B2B models. The market may be individuals or organizations who are able to purchase the organization’s product. Each entity in the delivery chain will have different needs, so a complete market needs analysis must include all potential segments and all entities within each segment.” (Principles of Marketing, n.d.) Notice that this definition includes the word “customers.” That is the key word here. A market is simply, and only, those you sell to. So what do we call it when we are talking about that other market, the one where we talk about total revenue for a category of goods? Well, it isn’t a market after all. It is an industry. An industry is made up of all the competitors and the suppliers. Stated another way, “industries are broad groups of businesses or organizations with similar activities, products, or services” (O*Net, n.d., p.1). So, for instance, in furniture manufacturing, you might think of Steelcase, Ashley Furniture, and Masterbrand Cabinets. These companies, and more, are all part of the furniture manufacturing industry.
Cost and Price Many of us use the words “cost” and “price” interchangeably. But we cannot do that when we are in business, because each has a specific meaning. Let’s review what each is and why the definitions matter.
We can actually clear this up really quickly with a quote from a microeconomics text: “From the firm’s perspective, cost is what they pay for the inputs necessary to produce the product. Price is what the firm receives for selling the product. Thus, cost is a negative and price is positive; they are not the same thing” (Microeconomics, n.d., italics added).
Consumer and Business Customer Since we were able to clear that one up so quickly, let’s move on to two other bugaboos. That is the difference between a consumer and a business customer. You know that consumer behavior and business buying behavior tend to be different. But did you know that a business customer cannot be called a consumer? You’ll say, of course, that a business customer consumes. And of course, he or she does. However, in business, a consumer is always an individual that purchases a product or service for individual use. Thus, only those who are purchasing for themselves or their families can be called a consumer. We generally call businesses “customers” or “clients.” Here is some interesting information from Boundless.com. It shows why we may get confused by the root of the word by highlighting the word consume and consumer in italics.
• Consumer goods marketers sell to individuals who consume the finished product. • Business-to-business marketers sell to other businesses or institutions that consume the product
in turn as part of operating the business, or use the product in the assembly of the final product they sell to consumers.
• In addition, consumer goods marketers might employ emotional appeals and are faced with the constant battle of getting their product into retail outlets. Emotional appeals typically do not work with businesses.
That also means that buying behaviors are different between the two, and so are the segmentation methods. You can read more about those in traditional texts and additional readings generally available.
Personal Selling and Direct Marketing Personal selling is true one-on-one interactions between a salesperson and a customer.
Personal selling uses in-person interaction to sell products and services. This type of communication is carried out by sales representatives, who are the personal connection between a buyer and a company or a company’s products or services. Salespeople not only inform potential customers about a company’s product or
services, they also use their power of persuasion and remind customers of product characteristics, service agreements, prices, deals, and much more. In addition to enhancing customer relationships, this type of marketing communications tool can be a powerful source of customer feedback, as well.
Effective personal selling addresses the buyer’s needs and preferences without making him or her feel pressured. Good salespeople offer advice, information, and recommendations, and they can help buyers save money and time during the decision process.
Common Personal Selling Techniques
Common personal selling tools and techniques include the following:
• Sales presentations: in-person or virtual presentations to inform prospective customers about a product, service, or organization
• Conversations: relationship-building dialogue with prospective buyers for the purposes of influencing or making sales
• Demonstrations: demonstrating how a product or service works and the benefits it offers, highlighting advantageous features and how the offering solves problems the customer encounters
• Addressing objections: identifying and addressing the concerns of prospective customers, to remove any perceived obstacles to making a purchase
• Field selling: sales calls by a sales representative to connect with target customers in person or via phone
• Retail selling: in-store assistance from a sales clerk to help customers find, select, and purchase products that meet their needs
• Door-to-door selling: offering products for sale by going door-to-door in a neighborhood • Consultative selling: consultation with a prospective customer, where a sales representative (or
consultant) learns about the problems the customer wants to solve and recommends solutions to the customer’s particular problem
• Reference selling: using satisfied customers and their positive experiences to convince target customers to purchase a product or service
Personal selling minimizes wasted effort, promotes sales, and boosts word-of-mouth marketing. Also, personal selling measures marketing return on investment (ROI) better than most tools, and it can give insight into customers’ habits and their responses to a particular marketing campaign or product offer.
Direct Marketing
Direct marketing activities bypass any intermediaries and communicate directly with the individual consumer. Direct mail is personalized to the individual consumer, based on whatever a company knows about that person’s needs, interests, behaviors, and preferences. Traditional direct marketing activities include mail, catalogs, and telemarketing. The thousands of “junk mail” offers from credit card companies, bankers, and charitable organizations that flood mailboxes every year are artifacts of direct marketing. Telemarketing contacts prospective customers via the telephone to pitch offers and collect
information. Today, direct marketing overlaps heavily with digital marketing, as marketers rely on email and, increasingly, mobile communications to reach and interact with consumers.
The Purpose and Uses of Direct Marketing
The purpose of direct marketing is to reach and appeal directly to individual consumers and to use information about them to offer products, services and offers that are most relevant to them and their needs. Direct marketing can be designed to support any stage of the AIDA model, from building awareness to generating interest, desire, and action. Direct marketing, particularly email, also plays a strong role in post-purchase interaction. Email is commonly used to confirm orders, send receipts or warrantees, solicit feedback through surveys, ask customers to post a social media recommendation, and propose new offers.
Direct marketing is an optimal method for marketing communication in the following situations:
• A company’s primary distribution channel is to sell products or services directly to customers • A company’s primary distribution method is through the mail or other shipping services to send
directly to the customer • A company relies heavily on sales promotions or discounts, and it is important to spread the
word about these offers to consumers • An advertisement cannot sufficiently convey the many benefits of a company’s product or
service, and so a longer marketing piece is required to express the value proposition effectively • A company finds that standard advertising is not reaching its target segments, and so better-
targeted marketing communications are required to reach the right individuals; for example, using direct mail to reach wealthier people according to their affluent zip code
• A company sells expensive products that require more information and interaction to make the sale
• A company has a known “universe” of potential customers and access to contact information and other data about these customers
• A company is heavily dependent on customer retention, reorders and/or repurchasing, making it worthwhile to maintain “permissioned” marketing interaction with known customers
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CC licensed content, Shared previously
• Personal Selling, From Boundless Marketing. Provided by: Boundless. Located at: https://www.boundless.com/marketing/textbooks/boundless-marketing-textbook/personal- selling-and-sales-promotion-14/personal-selling-90/value-of-personal-selling-449-4027/. License: CC BY-SA: Attribution-ShareAlike
• Phone call. Provided by: CWCS Managed Hosting. Located at: https://www.flickr.com/photos/122969584@N07/13780153345/. License: CC BY: Attribution
• Communicating to Mass Markets, from Introducing Marketing. Authored by: John Burnett. Project: Global Text. License: CC BY: Attribution
• Email Marketing. Authored by: RaHuL Rodriguez. Located at: https://www.flickr.com/photos/rahulrodriguez/9162677329/. License: CC BY-SA: Attribution- ShareAlike
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