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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.

© 2020 University of Maryland Global Campus

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

Key Points

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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

69

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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Tabrizi and Kabirnejat: eMarketing

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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Journal of Knowledge Globalization, Volume 8, Number 2, 2015

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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Tabrizi and Kabirnejat: eMarketing

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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Tabrizi and Kabirnejat: eMarketing

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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Journal of Knowledge Globalization, Volume 8, Number 2, 2015

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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Tabrizi and Kabirnejat: eMarketing

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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Journal of Knowledge Globalization, Volume 8, Number 2, 2015

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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Tabrizi and Kabirnejat: eMarketing

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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Approach: An Integrated Approach. Cengage Learning.

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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

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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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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)

© 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 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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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

Learning Topic

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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

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 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.

3/26/2020 Crafting a Digital Marketing Strategy

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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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Resources

Consumer Behavior: How People Make Buying Decisions

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Reading: Generation Effects and Consumer Behavior

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Analysis of Consumer Buying Behavior

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Social Networks and the Buying Behavior of the Consumer

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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.

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

Licenses and Attributions: Marketing/Introduction Text is available under the Creative Commons Attribution-ShareAlike License CC licensed content, Original Why It Matters: Production. Authored by: Steven Greenlaw and Lumen Learning. License: CC BY: Attribution

Boundless.com: Except where noted, content and user contributions on this site are licensed under CC BY-SA 4.0 with attribution required.

Direct Marketing. Authored by: Lumen Learning. License: CC BY: Attribution

Screenshot Mobile Advertisement. Provided by: Lumen Learning. License: CC BY: Attribution

Screenshot Target Baby Registry. Provided by: Lumen Learning. License: CC BY: Attribution

Revision and adaptation. Provided by: Lumen Learning. License: CC BY-SA: Attribution-ShareAlike

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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