Preface

About OpenStax

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About OpenStax Resources

About *Principles of Marketing*

Pedagogical Foundation

*Principles of Marketing* emphasizes marketing concepts relevant to people working in a variety of business functions. To illuminate the meaningful applications and implications of marketing ideas, the book incorporates a modern approach, providing connections between topics, solutions, and real-world problems. This multifaceted framework drives the integration of concepts while maintaining a modular chapter structure. Theoretical and practical aspects are presented in a balanced manner. *Principles of Marketing* exposes students to a diverse range of for-profit and nonprofit organizations, industries, products, brands, and services.

Additional Resources

About the Authors

Setting the Stage

Unit Introduction

Marketing and Customer Value

In the Spotlight

Marketing and the Marketing Process

Marketing Defined

When you ask a group of people, “What’s marketing?” most people will answer “advertising” or “selling.” It’s true that both of these functions are part of marketing, but marketing is also so much more. 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.”

 That’s kind of a mouthful, so let’s see if we can simplify it a bit.

How Marketing Benefits the Organization, Its Interested Parties, and Society

Before we go on, let’s consider all the people and groups that an organization needs to consider and serve. Interested parties are those persons or entities that have an interest in the success or failure of a company. These parties can be categorized into two types: internal and external, as shown in [link]. You may see these people and groups referred to as “stakeholders” in business writing and other media.

The Marketing Process Defined

The marketing process refers to the series of steps that assist businesses in planning, analyzing, implementing, and adjusting their marketing strategy. Do an internet search for “steps in the marketing process,” and you’ll immediately see that some websites outline a 10-step process, whereas others propose a 4-step or 6-step process. For our purposes, we’re going to use a 5-step process.

Steps in the Marketing Process

The 5-step process (see [link]) involves understanding the marketplace and customers, developing a marketing strategy, delivering value, growing customer relations, and capturing value from customers.

The Marketing Mix and the 4Ps of Marketing

Marketing Mix Defined

Having a great product or service is just the first step in establishing a successful business or building a successful brand. The best product or service in the world won’t translate to profits unless people know about it. How do you reach customers and help them connect with your product? That’s the role of the marketing mix.

The 4Ps of Marketing

To this point, we’ve been talking marketing in somewhat of an abstract manner. Instead of continuing with a theoretical discussion of the marketing mix and the 4Ps of marketing, we’re going to approach these topics using an example of a product you probably already own—a backpack. Let’s get started.

Factors Comprising and Affecting the Marketing Environment

The Marketing Environment Defined

Organizations don’t operate in a vacuum. They’re not self-contained, self-sufficient machines; rather, they are complex systems that require interaction with facets of both their internal and external environments in order to survive and prosper. In this section, we’re going to explore the internal and external factors that drive an organization’s marketing activities.

The Components of the Marketing Environment

As we’ll explore below, the internal environment is company-specific and includes the 5M framework and organizational culture. The external environment is subdivided into two components: the microenvironment (or task environment) and the macroenvironment (or broad environment), as illustrated in [link]

Components of the Macroenvironment

Obviously, marketers can’t ignore what’s going on in the external environment. One of the tools used by companies to assess the environment in which they are operating is a PESTLE analysis. PESTLE is an acronym for political, economic, social, technological, legal, and environmental factors that provide marketers with a comprehensive view of the whole environment from multiple angles.

 These macroenvironment factors can be used to understand current external influences so that marketers can more easily identify what might change in the future, mitigate the identified risks, and take advantage of competitive opportunities (see [link]).

Evolution of the Marketing Concept

The Evolution of Marketing

So now you’ve gotten the bird’s-eye view of marketing as a practice, and you now know what marketing is. However, let’s take a trip back through time to look at the evolution of marketing practices and how many of today’s marketing strategies came to be. As you can see from [link], and to use an old TV commercial tagline, you’ve come a long way, baby!

The Production Concept

In order to understand the production concept, it’s important first to understand the history of technology and mass production. Spurred on by the use of steam power, the Industrial Revolution began in the United States by the middle of the 19th century. Although much of the population was still employed in agriculture, the expansion of commerce and industry drew millions of factory workers into cities and towns. Suddenly, an abundance of manufactured goods was available to households at a rate never experienced before.

The Product Concept

From the 1920s until the 1950s, the product concept dominated. With product availability a thing of the past, consumers began to favor products that offered quality, performance, and/or innovative features. As a result, companies concentrated on making superior products and improving them over time. One of the problems with this type of thinking is that marketers may fall in love with a product (known as “marketing myopia”) and may not realize what the market truly wants or needs. Consider the manner in which railroad marketers overlooked the growing competition from airlines, buses, and automobiles. In his book *Marketing Myopia*, author Theodore Levitt writes, “The railroads did not stop growing because the need for passenger and freight transportation declined. That grew. The railroads are in trouble today not because that need was filled by others (cars, trucks, airplanes and even telephones) but because it was not filled by the railroads themselves. They let others take customers away from them because they assumed themselves to be in the railroad business rather than in the transportation business.”

The Sales Concept

By the 1950s, mass production had become the norm rather than the exception. Competition had increased over the years, and there was little unfulfilled demand in the marketplace. Marketing evolved from simply producing products that customers wanted to trying to persuade customers to buy through advertising and personal selling. The basic premise of the sales concept was that consumers and businesses need to be “coaxed” into buying, and the aim of companies was to sell what they made rather than make what consumers wanted.

The Marketing Concept

The marketing concept was built on the premise that an organization will achieve its goals when it satisfies the needs and wants of the consumer. As a result, firms began to focus on customer needs *before* developing products, rather than developing products and then trying to “sell” them to consumers. The marketing concept was also the start of relationship marketing— fostering long-term relationships with customers in order to ensure repeat sales and achieve stable relationships and reduced costs.

The Societal Marketing Concept

In a nutshell, the societal marketing concept is simple. Companies make good marketing decisions by considering not only consumers’ wants and needs but additionally the balance between those wants and needs and the company’s capabilities and society’s long-term interests. The concept emphasizes the social responsibilities that companies bear. This means meeting consumers’ and businesses’ current needs while simultaneously being aware of the environmental impact of marketing decisions on future generations’ ability to meet their needs.

Determining Consumer Needs and Wants

Identifying Consumer Needs and Wants

We’ve repeatedly mentioned satisfying customer needs. But understanding those needs and/or wants isn’t always as simple as it sounds. For example, some customers have needs of which they’re not fully aware; others can’t articulate their needs, or the words require some degree of interpretation. Consider this: what does it mean when a customer asks for a “restful” hotel, an “attractive” bathing suit, or a “powerful” lawn mower?

Satisfying Consumer Needs and Wants

You may be asking yourself at this point, “Does marketing satisfy needs, or does it create needs?” Some people feel that marketing creates needs and pressures consumers into buying unneeded products or services. However, marketing does not create needs; rather, it opens consumers’ eyes to their wants, and it’s up to marketers to understand those wants in order to guide consumers on the path to purchasing their products or services.

 Marketing creates value, and value speaks to the satisfaction of customer needs and the benefits customers receive from the product. It’s the customer, however, who ultimately determines how well the product fulfills their needs and how much value the product creates.

Customer Relationship Management (CRM)

The Impact of CRM on Customer Loyalty and Retention

In the final analysis, companies want to accomplish two things: improve customer service relationships and improve customer retention. It is typically easier and less expensive to retain a loyal customer than acquire a new one. One way to accomplish that is through customer relationship management (CRM)—the means through which companies track, manage, and analyze customer interactions.

The Role of CRM in Building Customer Equity

We have already talked about customer equity—the potential profit a company earns from all of its customers, both current and potential—and customer equity is a core CRM benchmark. CRM isn’t a one-way communication street to customers. It’s a two-way street that allows customers to define and consequently shape offerings in terms of their requirements. This paves the way for open, honest dialogue that can ultimately lead to benefits to customers, thus resulting in higher customer equity.

Ethical Marketing

Ethical Marketing Defined

As the term suggests, ethical marketing involves companies not only trying to market their products and services but considering how society will benefit from the introduction of those offerings. It’s not so much a practice as it is a philosophy that tries to promote fairness, honesty, and a sense of responsibility in all of the marketing done by the company.

The Importance of Ethical Marketing

Ethics are critical to a company’s reputation, particularly when public opinion—particularly negative public opinion—can go viral in an instant, thanks to social media.

The Dos and Don’ts of Ethical Marketing

The data cited above presents a somewhat dire picture for companies that do not practice ethical marketing, so let’s take a look at some of the dos and don’ts of ethical marketing.

Strategic Planning in Marketing

In the Spotlight

Developing a Strategic Plan

Strategic Planning Defined

Let’s start with a simplified definition of strategy and then move on from there. Many if not most of you have watched a football game, either live or on TV. Perhaps you’re a fan of a particular team or you’ll watch the Super Bowl (perhaps just to see the commercials). Every football coach knows that you don’t enter a game without a game plan—the process of taking plays out of the playbook and putting them into a game plan for a specific opponent. This isn’t an easy task. The coaching staff has to consider the skills and experience of the players on the team as well as the strengths—and weaknesses—of the opposing team, and they will develop the plays that they feel will best neutralize the strengths of the opposing team while taking advantage of the strengths of their own players.

Steps in the Strategic Planning Process

There are many variations of the strategic planning process—almost as many as there are publications on strategic planning. For our purposes in this textbook, we’re going to use the five-step process outlined in [link]. Keep in mind, however, that the process may be a little different for some organizations depending on the stage of their products in the product life cycle (which we’ll learn more about in Products: Consumer Offerings), the maturity of the industry in which the business participates, how competitive the marketplace is, and other factors.

The Role of Marketing in the Strategic Planning Process

Explain the Role of Marketing in the Strategic Planning Process

To get a better idea of the importance of marketing in the strategic planning process, let’s imagine that you’re the owner of a manufacturing business that produces widgets. You’ve been able to recruit top engineering talent to design these widgets and source components from trusted, reliable vendors, and your manufacturing facility is efficient and can produce the widgets in a cost-effective manner. Sounds like a winning business, doesn’t it?

Business Portfolio Definition

As noted above, many businesses have a single product or business unit. However, larger organizations such as Apple, Alphabet, General Electric, Meta, and Microsoft often have multiple diverse business units called strategic business units. Despite the fact that these SBUs report directly to the parent company’s headquarters, they typically develop their own vision statements, mission statements, objectives, and goals, and the strategic planning for these SBUs is performed separately and apart from other SBUs within the organization.

 When companies have multiple products or business units, these comprise the business portfolio—the total group of product lines, services, and business units that the company possesses.

Analyze and Design the Business Portfolio

There are many reasons why an organization would establish separate business units or product lines as it grows. For example, if the current product line is in a market where growth is limited, it may choose to branch out to other product lines or markets. Alternatively, an organization may choose to expand into other product lines to take advantage of emerging opportunities.

Strategy

Earlier in this chapter, we pointed out the differences between corporate-level strategy, business-level strategy, and functional strategy. If you’re a fan of movies like *Other People’s Money* or *Wall Street*, you might think that corporate strategy focuses on hostile takeovers, mergers, and ruthless acquisitions.

Purpose and Structure of the Marketing Plan

Purpose and Structure of a Marketing Plan

A company’s marketing plan ([link]) is without a doubt one of the most important planning tools in business. You might think that it’s an activity that generates an impressive, colorful document that sits in a desk drawer until the next time it gets revised, but you’d be wrong.

Marketing Plan Progress Using Metrics

Marketing Metrics Explained

There can be a lot of moving parts when running even a modest-sized organization. It is often helpful to focus on key measurable (quantifiable) values or variables that marketers aim to achieve within a specified period of time—known as marketing metrics. In the same way that a doctor measures height, weight, temperature, blood pressure, etc. to assess the health of a patient, a marketer uses marketing metrics to measure marketing performance.

Key Performance Indicators (KPIs) Explained

Have you ever pondered what life was like without the Internet? You can instantly type a term into a search engine, and within seconds, you’ll have hundreds of thousands (or even millions) of results. It’s estimated that, as of 2020, there was 40 zettabytes of data available on the Internet. (If you’re curious, a zettabyte is approximately 1 trillion gigabytes).

 That’s both a blessing and a curse. There’s so much information out there that sometimes it becomes difficult to focus on the information you really need.

Examples of Business Objective KPIs

There is a multitude of KPIs that marketers can choose to manage business objectives. The actual KPIs that are selected depend on the nature of the process, the type of information available, and the team. The important concept is to identify the “key” indicators that drive success. Instead of trying to develop information from a laundry list of 300 KPIs, it’s preferable to identify a handful of the most useful KPIs that allow for the effective management of information. In other words, sometimes less is more, and instead of sifting through mountains of statistics (remember all those zettabytes of information on the Internet), you can choose from a small subset of measurements to review on a regular basis. Let’s take a look at a few that you may wish to consider, as shown in [link].

Examples of Sales/Revenue Generation KPIs

One of the most important metrics for any organization concerns sales/revenue. Let’s look at some of the KPIs that can be helpful to marketers, as illustrated in [link].

Examples of Market Share KPIs

Of course, it’s important to track the sales/revenue KPIs mentioned above, but they don’t tell the whole story. It’s also important to track how the organization is faring in the marketplace compared to its competitors.

Examples of Customer Support KPIs

In a perfect world, companies would have products with zero defects and the same number of customer issues with those products. However, we all know we don’t live in a perfect world, and zero defects and zero customer issues simply aren’t a realistic expectation. There will be customer issues, and the key to retaining loyal clients is identifying and resolving those issues quickly. So let’s look at some customer support KPIs that matter to marketers, as illustrated in [link].

Ethical Issues in Developing a Marketing Strategy

The Importance of Ethical Marketing

Marketing ethics are essentially the moral guidelines that allow companies to scrutinize their marketing strategies and actions. It means that a marketer has an obligation to ensure that all marketing activities adhere to core ethical principles, such as integrity and honesty—both internally and externally.

Key Ethical Considerations in Strategic Planning

It’s no secret that the primary goal of marketers is to increase growth by creating and maintaining customers. However, sometimes pursuing that growth to satisfy shareholder goals to the exclusion of other groups (like customers) has led to high-profile ethical dilemmas. Let’s consider a few:

Understanding the Marketplace

Unit Introduction

Consumer Markets and Purchasing Behavior

In the Spotlight

Understanding Consumer Markets and Buying Behavior

Consumer Markets and Consumer Buying Behavior Defined

How many buying decisions did you make today? Perhaps you stopped on the way to work or class to buy a soft drink or coffee, went to the grocery store on the way home to get bread or milk, or ordered something online. You likely make buying decisions nearly every day and probably don’t give most of those decisions much thought. But the way you make those decisions is significant for marketers, because if they can understand *why* you buy what you buy and *when* you buy it, they can use that information to boost revenue.

The Buyer’s Black Box

It stands to reason that the hundreds of millions of people who make up the global consumer market don’t all buy the same products and services. Why do certain people prefer different items than others? The answer lies in the factors that influence consumer buying behavior. One model of consumer buying behavior is what’s known as the buyer’s black box, which is named as such because little is known about what goes on in the human mind. It’s also known as the stimulus-response model.

Types of Consumer Buying Behavior

Buying behavior is not influenced solely by the external environment. It’s also determined by your level of involvement in a purchase and the amount of risk involved in the purchase. There are four types of consumer buying behavior, as shown in [link].

Factors That Influence Consumer Buying Behavior

Cultural Factors That Influence Consumer Buying Behavior

Why people buy isn’t always a straightforward question. Think about the last time you bought a car, a bike, or other item. Why did you buy that specific make and model? Was it because its sleek style made you feel good about yourself? Perhaps you bought a particular brand because someone in your family bought the same brand. These are just a couple of examples of some of the factors that influence consumer buying behavior. Let’s examine some others.

Social Factors That Influence Consumer Buying Behavior

Social factors are those factors that are prevalent in the society where the consumer lives. Every society is composed of individuals who have different preferences and behaviors, and these individuals influence the personal preferences of others in the society. Humans are social individuals, and the influences of people’s family, reference groups, and roles and status (refer to [link]) have a huge impact on their buying behavior.

Personal Factors That Impact Consumer Buying Behavior

Personal factors, such as your occupation, age and life cycle stage, economic situation, lifestyle, and personality and self-concept also play a major role in your buying behavior (refer to [link]). Let’s examine each of these in more detail.

Psychological Factors That Influence Consumer Buying Behavior

Your buying choices are further influenced by several major psychological factors, including motivation, perception, learning, feelings, beliefs, and attitudes (refer to [link]).

Situational Factors That Impact Consumer Buying Behavior

Situational factors influencing consumers are external (refer to [link]). These factors play an important role in how consumers experience a product and how these consumers’ opinions are formed.

The Consumer Purchasing Decision Process

Consumer Decision Process

This chapter has examined many of the factors that influence consumer buying behavior, but behind the visible act of making a purchase lies an important decision process that takes place before, during, and after the purchase of a product or service. [link] shows the five stages of the consumer decision process.

Stage 1: Need Recognition

The buying process starts when you sense a difference between your actual state and your desired state. This is referred to as problem awareness or need recognition. You might become aware of a need through internal stimuli (such as feeling hungry or thirsty when you’re on a long road trip) or external stimuli (such as passing a bakery and smelling the wonderful aroma of cookies baking).

Stage 2: Information Search

Now that you’ve identified the problem or need, you’ll be inclined to search for more information. There are two different search states. The milder search state is called “heightened attention,” in which you become more receptive to information about the product or service. The stronger search state is called “active information search,” in which you might do some research about the product or service on the Internet (referred to as an internal search), ask friends and/or family members their opinions (what’s known as an external search), or even visit stores to view and touch the product (called an experiential search).

Stage 3: Evaluation of Alternatives

Consumers are said to view a product or service as a “bundle of product attributes,” and you evaluate several attributes of a product or service in reaching your purchase decision. For example, if you’re buying a smartphone, you’ll consider factors such as battery life, speed, storage capacity, or price. If you’re booking a hotel, you’ll probably consider its location, cleanliness, free Wi-Fi, whether it has a free breakfast in the morning or a pool, and of course price.

Stage 4: Purchase Decision

This stage involves actually reaching a decision on the purchase of the product or service. One way people navigate all the information, evaluations, and choices in their purchase decision is to use heuristics—mental shortcuts or “rules of thumb.” Heuristics are types of preexisting value judgments that people use to make decisions.

Stage 5: Post-Purchase Evaluation

After purchasing the product or service, you’ll experience either satisfaction or dissatisfaction. You may have second thoughts after making a purchase decision, and these doubts lead to cognitive dissonance, or buyer’s remorse—tension caused by uncertainty about the correctness of your decision. This may lead you to search for additional information to confirm the wisdom of your decision in order to reduce that tension.

Ethical Issues in Consumer Buying Behavior

All purchase behavior is in some sense ethical, involving moral judgment. For example, a consumer is concerned about the abuse of human rights in a foreign country, so corporate involvement in that country may be a factor in the consumer’s purchasing decisions. Similarly, consumers concerned about animal rights may consider whether a cosmetic product has been tested on animals. For example, in one 2017 survey, 32 percent of US cosmetics consumers reported that they would “very likely” stop purchasing their favorite brand if the manufacturer tested on animals.

Business Markets and Purchasing Behavior

In the Spotlight

The Business-to-Business (B2B) Market

Characteristics of the B2B Market

B2B markets differ from B2C markets in several ways (see [link]). Let’s take a closer look at each of these differences.

Buyers and Buying Situations in a B2B Market

Types of Buyers in the B2B Market

The B2B marketplace is populated by many different types of buyers, each with their own requirements, policies, and procedures. Some B2B buyers (known as *producers*) purchase goods in the B2B market so they can produce other goods to be sold to other businesses or consumers. Other B2B buyers (known as resellers) purchase goods in the B2B market so they can resell, rent, or lease those goods or services. Still other B2B customers, such as the government and nonprofit institutions such as the Wounded Warrior Project, the Salvation Army, churches, and charities, purchase goods to serve the public in some way.

 These types of buyers are shown in [link].

Major Types of Buying Situations in the B2B Market

As a consumer, you face different types of buying situations every day. Some purchases you make are almost automatic and made with little forethought, such as when you stop for a cup of coffee on your way to work or class. Other buying decisions you make take more time and effort. The same is true in the B2B market. Buy classes refer to buying situations that are differentiated in terms of four characteristics: newness (i.e., how familiar or unfamiliar the product is to the B2B buyer), how many alternatives can/should be evaluated, how much uncertainty is involved in the buying situation, and how much information is required to make the buying decision.

Participants in the B2B Purchase Process

Think about how you make buying decisions in your household. You’re likely the only decision maker involved in minor purchases, such as groceries or personal clothing. If you’re buying a bigger-ticket item such as a new car or a flatscreen TV, you may involve other members of your household in the decision. That’s typically not the case in B2B buying. The decision-making unit of a buying organization is referred to as the buying center, sometimes called a decision-making unit. Buying centers are comprised of all of the different people in the organization who have a stake in the B2B buying decision and have some degree of influence in the purchasing decision. The buying center can have one or more of the following roles, as shown in [link].

Major Influences on B2B Buyer Behavior

External Factors

External factors at work in the B2B buying decision can be economic conditions, the political/legal environment, competition, and the social environment.

Internal Factors

Organizational factors are those factors internal to the organization that affect buying decisions. Every organization has certain business objectives and goals, and goods and services should be purchased according to these objectives. For example, if a company experiences a period of poor sales performance, management might slow down or halt major purchasing decisions until the financial performance of the company improves. Conversely, a company with a strong track record of sales may push for more strategic purchases to gain or maintain a competitive edge.

Individual Factors

Just as with consumers, B2B buying decisions are influenced by the characteristics of the individuals in the buying center. Consider just one factor: age. FINN Partners compiled its B2B Buyer’s Influence Report and discovered several interesting statistics. Millennials (i.e., those born between 1981 and 1995) are generally the most optimistic about purchase decisions. A whopping 83% are confident that they are paying a reasonable price, and 97% believed that the vendor would deliver as promised. This compares to only single digits for baby boomers (those born between 1946 and 1964).

Interpersonal Factors

Business buying decisions are typically collective and follow procedures established by the organization. The buying center usually consists of several individuals with different formal or informal authority, status within the organization, and technical expertise.

Conditional Factors

It stands to reason that the present financial condition of the organization will play a large role in the buying decision. If the organization is financially struggling and cash is in short supply, it may decide to make a purchase from suppliers who offer credit or may choose to purchase a less expensive product that is within its budget.

Stages in the B2B Buying Process

The B2B Buying Process

The B2B buying process—the journey B2B buyers and the buying center take to complete a purchase—is significantly different and more complex than the consumer purchasing decision process. You’ll recall from Consumer Markets and Purchasing Behavior. That the consumer buying decision encompasses five stages—need recognition or problem awareness, information search, evaluation of alternatives, purchase decision, and post-purchase evaluation. By contrast, the B2B process involves eight stages (shown in [link]). Let’s take a closer look at each of these stages.

Ethical Issues in B2B Marketing

Business Culture and Industry Practices

As we’ve seen above, there are several differences between B2C and B2B marketing. Consider purchasing, for example. Unlike B2C transactions, it is far more common in B2B transactions for vendors to offer “perks” such as free dinners, golf outings, and trips. In some foreign countries, B2B and government buyers not only expect these types of “perks” but also may demand bribes if you want to do business with them on their turf. This presents unique ethical challenges for B2B sellers and buyers. As a B2B seller, of course you want to make the sale, particularly if it’s a large sale. On the other hand, you know that a reputation for ethical behavior, including honesty, transparency, and open communication, is critical to the success of your business and may even be the decisive factor in a B2B buyer’s decision to buy from you instead of a competitor.

The Foreign Corrupt Practices Act

The Foreign Corrupt Practices Act (FCPA) was enacted in 1977. Its purpose is to prohibit the payment of bribes (sometimes called “facilitation fees”) to foreign officials in order to obtain or retain business. The FCPA applies to prohibited conduct anywhere in the world and extends to publicly traded companies and their officers, directors, employees, stockholders, and agents.

Market Segmentation, Targeting, and Positioning

In the Spotlight

Market Segmentation and Consumer Markets

Market Segmentation Defined

You may have heard the saying “You can’t be all things to all people.” That sums up the essence and purpose of market segmentation—the process of dividing a target market into smaller, more precisely defined groups of consumers or organizations who have common needs and are expected to respond similarly to a marketing action.

The Advantages of Market Segmentation to the Organization

It’s estimated that the average person sees an astounding 4,000–10,000 advertising messages each day.

 That’s why it’s critical to target the right market. Most marketers have limited advertising budgets, so using one marketing message to reach a broad audience may garner a few new customers, but it’s likely to come at a high advertising cost.

Methods of Segmenting Consumer Markets

There are several different types of marketing segments you can create. We’ll focus on four major types:

Using Multiple Segmentation Bases

Keep in mind that a company doesn’t have to use just one or two segmentation bases; it can use all of them or a mix of them, a process that’s also known as multi-segment marketing. It’s not uncommon for companies to develop products that compete against their own offerings as long as the new products offer different perceived benefits to consumers. For instance, Procter & Gamble sells several different types of laundry detergent, such as Tide, Gain, and Cheer. Each of these brands offers different benefits like all-temperature use, fresh scent, unscented, stain removal, or whitening. By having these different brands, P&G can appeal to multiple target markets.

Segmentation of B2B Markets

Challenges of Segmenting B2B Markets

Just like its consumer market counterpart, business-to-business (B2B) market segmentation focuses on identifying unique market segments based on common characteristics. However, segmenting a B2B market is in many ways far more challenging than segmenting a consumer market because the motivations, processes, and considerations of B2B buyers are quite different from those of business-to-consumer (B2C) buyers. Let’s take a closer look.

Advantages of Segmenting B2B Markets

Market segmentation is a tried-and-true method that’s been around since the 1950s, but there is still some confusion about how to use it in a B2B setting because it’s not as clear-cut as other forms of market segmentation. How does a marketer target the characteristics of something impersonal like a business? Despite the challenges of segmenting B2B markets, it still plays a critical role. Let’s examine some of the advantages.

Methods of Segmenting B2B Markets

How do you segment B2B markets? Just like with consumer markets, there is a variety of methods. Marketers can segment B2B markets based on firmographics, technographics, needs-based segmentation, value-based segmentation, and behavioral segmentation (see [link]). We will look at each of these in the following sections.

Segmentation of International Markets

Challenges of Segmenting International Markets

As we’ve outlined in this chapter, companies can’t be all things to all people because buyers differ in terms of their needs, wants, and demands. Accordingly, just as with consumer markets and B2B markets, companies typically find it necessary to segment international markets.

Advantages of Segmenting International Markets

The advantages of segmenting international markets aren’t all that different from the advantages of segmenting the consumer or B2B markets, but there are some subtle differences. A marketer in the United States may have a much easier time understanding the needs and wants of US consumers, but that may not be the case with international consumers. Segmenting the international market and conducting market research allows the marketer to have a better understanding of international customers. It also enables the marketer to identify similarities and differences across international markets, which may lead them to combine segments across countries or even regions.

Methods of Segmenting International Markets

There are four primary methods of segmenting international markets, as shown in [link].

Essential Factors in Effective Market Segmentation

There’s an acronym you can remember for the essential factors in effective and successful market segmentation—ADAMS. The acronym stands for five criteria:

Selecting Target Markets

Target Markets Defined

Ultimately, the purpose of segmenting a market is to highlight the differences between groups of customers so that you can decide on which group(s) to focus your marketing efforts and resources—that’s your target market ([link]).

Target Market Strategies

Thus far, we’ve discussed the how of segmenting a market and selecting target markets. At this point, it’s up to the marketer whether the company will focus its efforts and resources on one or more of the identified segments or instead cater to the mass market. That choice is the determining factor in the company’s marketing mix and its positioning plank. There are four generic target marketing strategies, as illustrated in [link].

Product Positioning

Product Positioning Defined

So far, you’ve segmented the market by dividing the market into distinct groups of customers using the segmentation process and you’ve determined which customer group(s) you want to focus your marketing efforts on—the target marketing process. **Product positioning** is the process of deciding and communicating how an organization wants its market to think and feel about a product or service.

Approaches to Product Positioning

There are two main types of product positioning in marketing: head-to-head and differentiation. Let’s take a look at both.

Positioning Statements

In your other college courses, you may have heard terms such as *vision statement* and *mission statement*. We’re going to add a third term to your vocabulary—*positioning statement*. Essentially, a positioning statement briefly describes your brand, product, service, and target market. Not only does it define how your brand meets the customer’s needs, but it also tries to clarify why it does so better than your competition. It answers the question “What experience do you want your customers to have with this product or service?”

Perceptual Positioning Maps and How They Are Used

A perceptual map is a visual diagram that shows how the average target market consumer perceives your product versus those of your competitors.

Ethical Concerns and Target Marketing

Ethical Implications of Target Market Selection

To understand unethical target marketing, let’s first review the notion of ethics in this realm. Ethics is the systematic study of morality—what people commonly refer to as “morals.” The American Marketing Association (AMA) has a clear Statement of Ethics, and marketers are expected to conform to this ethical code. Before examining the issue of ethical target marketing, let’s first review the general notion of ethics as it applies to marketing and other business disciplines.

Marketing Research and Market Intelligence

In the Spotlight

Marketing Research and Big Data

What Is Marketing Research?

Oftentimes people think of marketing as the process of communicating with a target market—sharing messages, products, and value with customers. However, marketers know that understanding customers, learning about their wants and needs, and developing a relationship with them is essential for success. Marketing research allows marketers to listen and assess the needs of the market, to understand what’s missing and how to reduce those gaps from their customers, target markets, and prospective clients. Managers need marketing information in order to make data-driven decisions rather than make assumptions about consumers. In this chapter we’re going to investigate the importance of marketing research, some strategies employed in the field, and how to complete the marketing research process.

Sources of Marketing Information

Identify Sources of Marketing Information

Data, as mentioned in the first section of this chapter, comes from a variety of sources. In this section, we’ll investigate the sources of important marketing information and how these resources can be accessed to meet the needs of the institution. Online resources such as company websites, journal databases, and e-commerce locations could provide valuable resources to someone opening a new business. For instance, if a new product is to be sold, some companies will review competitors’ websites to glean information about comparable pricing before setting their price. The sources identified are closely aligned with the category of information and are described below.

Describe the Different Categories of Marketing Information

Marketing information can be derived from many sources. We will review three types in this section—internal data, external data, and competitive intelligence—and further explain other types of data in the next section. External and internal data both have unique qualities that make them essential for businesses to utilize. Additionally, competitive intelligence refer to specific types of data that must be examined to further the company or organization’s continued success and effectiveness.

Steps in a Successful Marketing Research Plan

Define the Problem

There are seven steps to a successful marketing research project (see [link]). Each step will be explained as we investigate how a marketing research project is conducted.

Develop the Research Plan

Step two is to develop the research plan. What type of research is necessary to meet the established objectives of the first step? How will this data be collected? Additionally, what is the time frame of the research and budget to consider? If you must have information in the next week, a different plan would be implemented than in a situation where several months were allowed. These are issues that a researcher should address in order to meet the needs identified.

Select the Data Collection Method

Data collection is the systematic gathering of information that addresses the identified problem. What is the best method to do that? Picking the right method of collecting data requires that the researcher understand the target population and the design picked in the previous step. There is no perfect method; each method has both advantages and disadvantages, so it’s essential that the researcher understand the target population of the research and the research objectives in order to pick the best option.

Design the Sample

Although you might want to include every possible person who matches your target market in your research, it’s often not a feasible option, nor is it of value. If you did decide to include everyone, you would be completing a census of the population. Getting everyone to participate would be time-consuming and highly expensive, so instead marketers use a sample, whereby a portion of the whole is included in the research. It’s similar to the samples you might receive at the grocery store or ice cream shop; it isn’t a full serving, but it does give you a good taste of what the whole would be like.

Collect the Data

Now that all the plans have been established, the instrument has been created, and the group of participants has been identified, it is time to start collecting data. As explained earlier in this chapter, data collection is the process of gathering information from a variety of sources that will satisfy the research objectives defined in step one. Data collection can be as simple as sending out an email with a survey link enclosed or as complex as an experiment with hundreds of consumers. The method of collection directly influences the length of this process. Conducting personal interviews or completing an experiment, as previously mentioned, can add weeks or months to the research process, whereas sending out an electronic survey may allow a researcher to collect the necessary data in a few days.

Analyze and Interpret the Data

Once the data has been collected, the process of analyzing it may begin. Data analysis is the distillation of the information into a more understandable and actionable format. The analysis itself can take many forms, from the use of basic statistics to a more comprehensive data visualization process. First, let’s discuss some basic statistics that can be used to represent data.

Prepare the Research Report

The marketing research process concludes by sharing the generated data and makes recommendations for future actions. What starts as simple data must be interpreted into an analysis. All information gathered should be conveyed in order to make decisions for future marketing actions. One item that is often part of the final step is to discuss areas that may have been missed with the current project or any area of further study identified while completing it. Without the final step of the marketing research project, the first six steps are without value. It is only after the information is shared, through a formal presentation or report, that those recommendations can be implemented and improvements made. The first six steps are used to generate information, while the last is to initiate action. During this last step is also when an evaluation of the process is conducted. If this research were to be completed again, how would we do it differently? Did the right questions get answered with the survey questions posed to the respondents? Follow-up on some of these key questions can lead to additional research, a different study, or further analysis of data collected.

Methods of Quantifying Marketing Research

One of the ways of sharing information gained through marketing research is to quantify the research. Quantifying the research means to take a variety of data and compile into a quantity that is more easily understood. This is a simple process if you want to know how many people attended a basketball game, but if you want to quantify the number of students who made a positive comment on a questionnaire, it can be a little more complicated. Researchers have a variety of methods to collect and then share these different scores. Below are some of the most common types used in business.

Ethical Issues in Marketing Research

The Use of Deceptive Practices

In marketing research, there are many potential areas of ethical concern. Each day people share personal information on social media, through company databases, and on mobile devices. So how do companies make sure to remain ethical in decisions when it comes to this vast amount of research data? It is essential that marketers balance the benefits of having access to this data with the privacy of and concern for all people they can impact.

Invasion of Privacy

Privacy is another concern when it comes to marketing research data. For researchers, privacy is maintaining the data of research participants discretely and holding confidentiality. Many participants are hesitant to give out identifying information for fear that the information will leak, be tied back to them personally, or be used to steal their identity. To help respondents overcome these concerns, researchers can identify the research as being either confidential or anonymous.

Breaches of Confidentiality

One of the most important ethical considerations for marketing researchers is the concept of confidentiality of respondents’ information. In order to have a rich data set of information, very personal information may be gathered. When a researcher uses that information in an unethical manner, it is a breach of confidentiality. Many research studies start with a statement of how the respondent’s information will be used and how the researcher will maintain confidentiality. Companies may sell personal information, share contact information of the respondents, or tie specific answers to a respondent. These are all breaches of the confidentiality that researchers are held accountable for.

Marketing in a Global Environment

In the Spotlight

The Global Market and Advantages of International Trade

Global Market Opportunities Defined

For some, the thought of expanding business operations into the global market is new, exciting, and fun. For others, it may seem daunting or impossible. At some point, most if not all companies will decide if and how they will expand into global markets based on global market opportunities. Global market opportunities simply refer to conditions that are favorable for a company to expand outside its home country market. These conditions include internal factors, such as the company’s ability and knowledge, as well as external factors, such as market growth, customer demand, and regulations or trade barriers within the industry.

Advantages to International Trade

There are several advantages to international trade, including increased revenues, decreased competition, faster growth, diversification of risk, and the ability to more easily find buyers of excess inventory. Let’s look at each of these in more detail.

Challenges to International Trade

While there are numerous advantages to international trade, there are also challenges. Those challenges are discussed in more detail in the following sections.

Assessment of Global Markets for Opportunities

Internal Assessment for Global Readiness

According to Douglas Quackenbos and his coauthors in their *Harvard Business Review* article “Does Your Company Have What It Takes to Go Global,” “external factors only set the stage for an international opportunity.”

 In other words, even though a global market may represent an opportunity for the company, the organization also must be prepared internally to expand. The factors external to the organization—a country’s economy, for example—is only half of the equation. Company leaders must do a thorough internal assessment of their organization to determine if it has what it will take to expand globally. Managers and marketers who will be working directly in the international market should have fully assessed the other countries’ regulations, business landscape, and cultural differences, for example.

Economic Infrastructure

Economic infrastructure refers to the facilities of an economy that benefit the production and distribution of goods and services.

 Infrastructure includes anything that would be required to produce and/or transport goods and services—for example, roads, railways, and high-speed Internet. Imagine that you are starting a lemon tree farm. You would not plan your farm in Michigan, where the temperatures often fall below freezing, because that would wipe out your lemon crops. Or imagine starting an online company where you sell art, but you live in a location where your Internet access is spotty and unreliable. Infrastructure considerations are critical in business needs evaluation.

Consumer Income and Purchasing Power

There are three types of income for you to be aware of:

Purchasing Power

Purchasing power is defined as how many goods can be purchased with one unit of currency. As you can imagine, purchasing power varies greatly across the globe and is of great importance when deciding whether to expand into foreign markets. For example, in a country where consumers have very little income and poor purchasing power, it would be difficult to sell expensive, nonessential goods. Consumers simply would not have the money to purchase them.

Currency Exchange Rates

Marketers and other business executives must understand foreign exchange rates and how fluctuations can affect marketing strategies.

 An exchange rate is the rate at which one country’s currency can be exchanged for that of another country. Because currency exchange rates fluctuate daily, the prices of goods and services in global markets will also fluctuate. In turn, fluctuations in prices of goods and services will have an impact on the purchasing power of consumers and even larger effects on economic indicators such as jobs and inflation.

Analyzing Governmental Actions

Just as every economy in the world operates differently, so does each country’s government. Businesses are greatly influenced by politics in every country (some more than others). Therefore, understanding how governmental actions impact the ability to be successful in a global market is imperative.

Analyzing Sociocultural Factors

While the economic and political factors of a foreign market will determine a firm’s ability to *enter* a market, the sociocultural factors may be most important in determining whether goods and services will be *successful* in a market. Sociocultural factors include values, behaviors, culture, lifestyle, and language that shape a person’s or group’s way of living. As you can imagine, there are hundreds of cultures around the world, and every culture within a country has its own nuances, preferences, and even ways of conducting business. Marketers who want enter foreign markets must have a deep understanding of these factors to establish effective marketing strategies.

Entering the Global Arena

Ways in Which an Organization Can Enter the Global Arena

After a company has decided to enter the global marketplace, managers must determine which method of international involvement is best for the company’s strategic goals. These methods include exporting, franchising, licensing, joint ventures, strategic alliances, and direct foreign investment (see [link]). Each method represents a different level of involvement. Let’s look at each of these in more detail.

Forms of Global Competition

Global competition can come from international firms, multinational firms, and transnational firms. Let’s look at each to better understand their impact.

Marketing in a Global Environment

Adapting Marketing Strategies for the Global Marketplace

Until this point, we’ve mostly been learning about the bigger-picture decisions that a company must make when deciding whether to enter the global marketplace. Once these company-wide decisions are made, marketing managers must determine the most effective way to market their products in the new markets. They must determine if completely new products or existing products will be offered in the new market. Additionally, they must determine if the other marketing mix variables must be adapted to the local market.

The 4Ps of Marketing in a Global Environment

Now that the company has chosen either a standardized or adapted marketing strategy for its global operations, it’s time to consider each of the 4Ps of global marketing—product, price, place, and promotion.

Ethical Issues in the Global Marketplace

Identifying Ethical Issues in the Marketplace

As with all business decisions, there are ethical matters to consider when entering into the global marketplace.

Marketing in a Diverse Marketplace

In the Spotlight

Strategic Marketing: Standardization versus Adaptation

Standardization Strategy Defined

To meet the marketplace’s demands, companies must carefully formulate competitive strategies based on internal and external conditions. These strategies must balance the capabilities of the organization’s business activities, such as marketing, sales, operations, customer service, finance, and human resources management, with multiple environmental factors in the market. Among these are competition, globalization, technology, culture, and changes in consumer demographics and behavior. Companies can choose between two types of strategic approaches, standardization or adaptation, depending on these internal and external variables.

Adaptation Strategy Defined

Adaptation is the process of adjusting a company’s work efforts, goods, or services in response to specific needs, tastes, or expectations from different groups of consumers. An adaptation strategy typically involves two steps. The first is identifying the modifications required to increase an offering’s appeal among a targeted audience. The second is implementing the changes based on the organization’s abilities and resources. Both of these tasks are crucial to determine the strategy’s viability.

Diversity Marketing as an Adaptation Strategy

In marketing, an adaptation strategy translates into tailoring the marketing mix—product, price, place, and promotion—to suit the preferences of targeted populations. Adaptation strategies are often associated with entering a foreign country.

Diversity and Inclusion Marketing

Diversity Marketing Defined

As you read in the previous section, diversity marketing is a strategic approach that involves identifying diverse subsegments of the population within a market and creating intentional marketing efforts to reach wider audiences. This last piece is key. It has an element of inclusion because it purposefully incorporates identity-specific consumers that have been overlooked or pushed to the margins of society such as some ethnic minorities, people with disabilities, elderly adults, low-income persons, and other groups. Marginalized consumers are often excluded in mainstream advertising, translating into missed business opportunities. Diversity marketing is a strategy for marketers to include them.

Importance of Diversity Marketing

The idea of marketing driven by consumer diversity is very relevant and meaningful, because today’s marketplace is changing dramatically. This evolution is happening not only in the United States but also around the globe. For marketers, this means that generalizing buyers, households, or communities anywhere in the world is a shortsighted perspective, because it limits business growth and commercial possibilities. Plus, oversimplifying population segments can also adversely affect a company’s reputation by shifting the public’s opinion in a negative way. The consequences can hurt sales, lead to missed opportunities, and undermine competitive status. This makes it essential to align markets and diversity marketing goals.

Factors Impacting Diversity Marketing

As shown in [link], diversity marketing is based on a variety of cultural and sociodemographic consumer characteristics. Marketers have to be mindful of these distinctions so marketing communication campaigns launched are sensitive to the audiences they are attempting to serve. After all, cultural and sociodemographic factors can greatly influence consumers’ motivations, reactions, and decisions. Other related variables, such as behavioral and personal, can shape buyers’ consumption levels and their receptiveness to marketing messages. Given the impact of these factors, for companies to be successful in any market, the focus of diversity marketing has to be customer centric rather than company centric. Being customer centric is when a company targets customers first regarding any decisions about its goods, services, or experiences, while company centric is when a company focuses decisions from the perspective of the organization. Building a proper sociocultural conscience in marketing starts with good research.

Multicultural Marketing Defined

Multicultural marketing is a strategic approach to intentionally target audiences based on different racial, ethnic, and cultural identities and backgrounds. It focuses on relevant, value-rich, and culturally authentic communication tailored to multicultural consumers.

Sociodemographic Marketing Defined

Sociodemographic marketing is a strategic approach to intentionally target audiences based on shared social and demographic characteristics. Sounds familiar? Like multicultural marketing, sociodemographic marketing also focuses on relevant and authentic communications with consumers. Both strategies help business and organizations align their products and services with audiences’ needs, preferences, and expectations.

Multicultural Marketing

What Is Culture?

You have already read about corporate culture in Marketing and Customer Value and cultural factors influencing buying behavior in Consumer Markets and Purchasing Behavior. Let’s explore culture in more detail. After all, learning about culture is the first step to understand why the concept is a fundamental component of multicultural marketing and how it connects with diversity marketing.

Tangible versus Intangible Culture

Culture is both tangible and intangible. This means that it can be seen, but it can also be concealed. Anthropologist Edward T. Hall describes it as an iceberg with external and internal surfaces.

 As [link] depicts, some elements of culture are readily visible, like the tip of the iceberg. Traditions, music, languages, artifacts, clothing, and literature are just a few aspects that are easy to recognize. They are tangible and external. In other words, they are the conscious part of culture.

Main Expressions of Culture

Culture is expressed through emotional experiences, symbols, linguistic communication, values and attitudes, and other practices. Cultural expressions are a vital part of a person’s identity. They provide insights about what an individual believes in or why an individual behaves a certain way. How would you perceive somebody waving an American flag on a holiday like Memorial Day, Fourth of July, or Veteran’s Day? You would probably think the person is patriotic, right? What about somebody with a colorful sugar skull face painting on Día de Los Muertos? Or how about someone with beautifully henna-decorated hands for Diwali? Visible manifestations of culture empower people to be comfortable with personal thoughts and feelings. Visible symbols also help people to be accepted in a given community by showing solidarity.

How Culture Influences Diversity Marketing

Identifying multicultural population segments and engaging them with intentional efforts is at the core of multicultural marketing. However, this requires having cultural insights because culture influences consumers’ decision-making processes and purchasing behaviors. The lack of cultural insights can spell disaster when marketing to this audience.

Marketing to Hispanic, Black, and Asian Consumers

Hispanic, Black, and Asian Consumer Identities

The United States is a mixture of nationalities, backgrounds, cultures, and identities. This mixture has been shaped through many decades of immigration from people across many lands and by their interactions with their new environments. The US population is often referred to as consisting of majority and minority groups. The majority consists of non-Hispanic White people. The minority consists of other races, ethnicities, and communities. From a marketing standpoint, companies have historically treated the majority segment as the mainstream market. Conversely, the minority segment has been treated as a subgroup of consumers, or the multicultural market.

The Acculturation Spectrum

People who immigrate to the United States from another country will probably experience some personal level of acculturation. Even American-born multicultural individuals whose families speak another language at home besides English may also experience acculturation. Acculturation is the process by which a person’s family cultural patterns change because of direct and constant contact with a different culture.

 Acculturation can happen in various degrees. The spectrum ranges from complete adoption to total rejection of the new culture. Individuals that simultaneously merge both cultures in daily life are considered bicultural.

Identity-Connecting Characteristics and Factors

The Hispanic, Black, and Asian populations each have a general set of cultural characteristics based on their multicultural identities. Being aware of each segment’s personal characteristics helps marketers create effective marketing promotions and advertisements. In addition to internal characteristics, these consumers are also influenced by external factors such as social circumstances and market behaviors. Let’s explore characteristics and factors in more detail.

As you have seen, marketing to each of these multicultural segments is unique. Marketers must do the research and understand the demographics, cultures, identities, and group characteristics of these targeted consumers. It is also equally important to recognize that none of these elements are static. They are dynamic and interact with one another.

Marketing to Sociodemographic Groups

Sociodemographic Marketing

As defined earlier in the chapter, sociodemographics is the combination of two distinct factors—social and demographic—within a given population. This combination results in a set of quantifiable variables for narrowing down customers in a large market. Social variables can be quite literally *anything* with which people identify. In other words, social variables are associated with identity. Because of that, they can include racial and ethnic identities too. Social variables are broad and can feel loosely defined. However, it is this unstructured nature that often provides important insights for marketers. Demographic variables, on the other hand, are more specific or have precise descriptions. These include things like gender, age or generation, religion, marital status, income, employment, education, political affiliation, disability, and more.

Marketing to the LGBTQIA+ Community

The LGBTQIA+ population is composed of consumers who express a diversity of gender identities, preferences, and sexual orientations. The acronym stands for lesbian, gay, bisexual, transgender, queer/questioning, intersex, and asexual. The plus sign (+) represents other sexual identities as well as allies who are not LGBTQIA+ members but support the community’s cause. The acronym has evolved over the decades to become more inclusive and capture diverse relationships, expressions, and identities.

Marketing to the Generations

Age is a frequently used demographic statistic for segmenting populations. Age is also expressed or compared in terms of generational groups. This approach enables marketers to capture a larger number of consumers by grouping them into defined categories.

Marketing to Consumers with Disabilities

Americans with disabilities make up a much larger segment of the market than you might realize. There are approximately 61 million Americans with disabilities. That number is over 18 percent of the total population of the United States. When the word *disability* is used, many people usually visualize a mobility difficulty like having trouble walking or climbing stairs. However, as seen in [link], functional mobility makes up less than a third of the different types of disabilities. Other forms include cognitive or neurological, autonomous living, and sensory related. This makes consumers with disabilities a very diverse group too.

Developing Sociodemographic Trends and Their Future Impact

Discovering sociodemographic trends takes an enormous amount of study. To do an effective job, marketing researchers are constantly working with a multitude of variables. They set parameters, collect data, analyze it, and come up with ideas based on results. This work is done repeatedly over time. It is precisely the extended time frame that enables marketing researchers to see market patterns surface. Let’s check out some current trends that will have a future impact for companies and marketers in general.

Ethical Issues in Diversity Marketing

Ethical Considerations in Marketing

The issues related to business ethics reside within society’s definitions and standards. Like with many topics, what is considered ethical business behavior or an accepted practice today can change tomorrow based on context. In other words, business ethics do not remain fixed. Ethical standards transform and adapt in conjunction with changes in the business environment.

Ethical Issues in Diversity Marketing

One of marketing’s primary functions is to reflect an organization’s business ethics and values to the marketplace and to consumers. This must be done in an active and intentional manner. Marketers have a responsibility to ensure that efforts and communications are honest, balanced, and authentic to the company and to the marketing profession. Creating awareness of cultural and social issues that impact ethical practices is also a key function of diversity marketing.

Product, Promotion, Price, and Place

Unit Introduction

Products: Consumer Offerings

In the Spotlight

Products, Services, and Experiences

Products and Services Defined

When a customer makes a purchase, they expect value from that exchange. Think about what you ate for breakfast today. You paid money to receive a product that satisfied your hunger. Is that all the value you received? Perhaps not. If you ate eggs, bacon, and coffee at a restaurant, you had both a product and a service experience. Maybe someone at the restaurant handed you a menu, took your order, brought your food, refilled your coffee, cleaned up dishes, and collected payment for your meal. The eggs, bacon, and coffee were the product, while the acts of the restaurant staff were a service. And the summation of it all was the product–service experience.

Customer Experience

Customer experience (CX) is the overarching impression that customers have of a brand. Therefore, each touchpoint with a product or service becomes a part of the customer experience. A strong customer experience integrates technology, marketing, sales, and customer service to deliver a strong brand perception.

Classifications of Consumer and Business Products

Product managers classify products first by whether they are consumer products or industrial products. This classification is essential because businesses typically make product purchase decisions to create a consumer good. Meanwhile, consumers are buying products for their personal use. Therefore, this distinction impacts how product managers design, market, and sell products.

Classifications of Business and Industrial Products

Businesses purchase products to aid in manufacturing or creating consumer products or services. For example, if you have ever been to a doughnut shop, you might think about how the bakers produce a doughnut. The bakers have probably purchased baking equipment, ingredients for the doughnuts, boxes to package the doughnuts, and a service to make deliveries. Business and industrial products are classified as follows:

The Three Levels of Product

In marketing, we often say that consumers do not make rational decisions—this consumer decision-making process ties directly to how we think about products. Therefore, product marketers should ask themselves, “What’s the problem the consumer is trying to solve?” The answer to this question gets to the root of the core product. The core product is what your customer is actually buying: convenience, ego, ease, flexibility, etc. For example, if you have ever purchased single-use plastic water bottles, you were likely purchasing a core product of convenience.

Product Items, Product Lines, and Product Mixes

Product Line Length and Depth

Companies typically sell many products, some of which are singular and some of which are part of a larger category of offerings. So let’s start with a product item, a particular good that a company sells. For example, Domino’s Pizza sells its original hand-tossed pizza as a product item on its menu.

Product Line Depth and Product Mix Width

Product line depth refers to the number of products in the line. Using our previous example, Domino’s carries five products in the pizza product line. Meanwhile, the product mix width refers to the number of product lines a brand carries. Domino’s offers seven product lines within its product mix (pizza, salads, sandwiches, appetizers, pasta, desserts, and beverages).

Product Line Filling and Product Line Stretching

One of the reasons for an ample product line is to leave no room for competitors to solve a customer’s need. Companies use a product line filling strategy when they add products to the product line to ensure that competitors do not enter their market. If you wonder why Domino’s has so many pizza toppings, consider that it might be product line filling at work.

The Product Life Cycle

The Product Life Cycle

Have you ever wondered what happens after a new product launch? Is the product successful right away, or does it need a little help from marketing to realize its potential? Then, as the product matures, does it stay on the shelf, or does it have a natural endpoint? The product life cycle (see [link]) maps the stages a product goes through, tracking its sales and profitability.

The Product Life Cycle Stages

The product life cycle begins in the introduction stage. This is when consumer awareness is building and sales are starting to grow. The marketing investment is high as brands invest heavily in advertising and sales promotion to encourage trial. Profitability is low due to costs to launch and scale a new product. What products can you think of that are in the introduction stage of the product life cycle?

Marketing Strategies at Each Stage of the Product Life Cycle

Marketing Strategies in the Introduction Stage

The introduction stage is characterized by awareness-building to encourage trial. There is a significant investment in marketing activities at this stage to make the shift from early adopters to a broader audience, and pricing is a means of enticing trial.

Marketing Strategies in the Growth Stage

The growth stage is characterized by growing sales and increasing competition in the marketplace. Investment in product and place is essential at the growth stage to maximize market share and scale quickly.

Marketing Strategies in the Maturity Stage

Stability characterizes the maturity stage: profits, customers, and pricing. While this sounds like good news, brands must defend their market share from increasing product replication and product innovation from competitors.

Marketing Strategies in the Decline Stage

The decline stage of the product life cycle is characterized by declining sales and profitability. The product is at the end of its life cycle and is no longer sustainable or a good investment. Brands reduce to a core set of activities and set out to divest the brand asset.

Branding and Brand Development

Branding

A brand is an intangible asset with tangible value. We cannot see, touch, or put a brand on a balance sheet. Rather, a brand is a feeling that is made up of the organization’s promotion efforts along with consumer meaning. The value of a brand is challenging to measure, but it is often the most valuable part of a company.

Benefits of Branding

The central benefit of branding is establishing a connection with customers that encourages them to purchase the brand, creating a financial return. But you may be wondering how companies can measure the impact of their brand. Brand value is the financial asset associated with a brand. Brand valuation occurs when a company is sold and becomes a part of the financial transaction, along with the assets and liabilities on the company’s financial statements. There is no singular measure of brand value, so the valuation process is subjective and may be based on brand visibility, customer loyalty, and perception of the brand, along with financial measures such as revenue.

Building Strong Brands

If a brand is a combination of the efforts made by the marketing team and how consumers think, feel, and act, then there is some room for the marketing team to build a strong brand. A strong brand is resonant in the minds of consumers and solves their problems.

Forms of Brand Development, Brand Loyalty, and Brand Metrics

Brand Development

New products can be added to a brand at any time. There are a few ways to add products that are classified on two measures: new/existing brand name and new/existing product category (see [link]).

Brand Loyalty Levels

As you can see, brands spend time and resources to gain loyal customers. Loyal customers are the holy grail of marketing because they will purchase your brand and advocate for the brand to others. Loyal customers become instant word of mouth, spreading the positive attributes of a brand. However, not all customers are intensely loyal to one brand. Instead, customers fit into one of four loyalty categories (see [link]).

Metrics to Measure Brand Effectiveness

Brand sentiment is challenging to measure. Unlike sales or revenue, sentiment is not easily quantifiable. However, brands must measure their effectiveness because organizations invest heavily in building brands. There are three ways to quantify a brand’s impact: brand lift, brand engagement, and brand preference.

Creating Value through Packaging and Labeling

If you have ever purchased from Apple, you know the power of sleek packaging. Apple is known for its simple white design packaging with metallic logos. Products are visually appealing in their packages, and unboxing an Apple product feels like an experience. Apple’s packaging is as innovative as its products, which brings us to an important lesson in packaging. The package and label must represent the brand effectively (see [link]). While not one of the 4Ps of marketing, packaging is an important element of the marketing mix based on its close tie to the product. Packaging is also a critical shopper marketing tool as related to place. And, certainly, effective packaging can be its own form of promotion.

Packaging Used as a Marketing Tool

Packaging can be used to differentiate a brand, either through design or functionality. For example, beautifully designed packages, such as Tiffany’s little blue box, differentiate the brand through its status. Meanwhile, functional packaging, such as potato chip bags filled with air, serves as differentiation to deliver uncrushed chips.

Environmental Concerns Regarding Packaging

Environmental Concerns in Product Packaging

Consumers are increasingly concerned about the environmental impact of packaging and its contribution to waste. A study by McKinsey indicates that more than half of US consumers are highly concerned about the impact of product packaging. While it is not a top criterion for purchase, product packaging is a consideration among consumers. Furthermore, consumers are willing to purchase products that have green packaging, such as recycled plastics and fiber-based substitutes.

Ethical Issues in Packaging

The Importance of Ethics in Product Packaging

In addition to concerns about sustainability, marketing professionals must be mindful of ethical concerns regarding packaging. Remember, a consumer can see the package on the store shelf, not the product inside. The customer is seeking guidance, explanation, and assurance of a product’s quality from the packaging. The package must not mislead customers about the size, quality, ingredients, or health claims. The graphics on a package must also properly represent the product inside. For example, a package might display a photo of a product that is larger or more substantial than the product inside, leading the consumer to erroneously believe that the product matches the photo.

Maintaining a Competitive Edge with New Offerings

In the Spotlight

New Products from a Customer’s Perspective

New Product Defined

You’ve probably watched at least one episode of the popular television show *Shark Tank*, where budding entrepreneurs pitch their business plans to a panel of investors in return for funding. To date, over 1,000 sales pitches have been made on the show—some forgettable, others memorable—and some pitches have resulted in wildly successful businesses. Some of Shark Tank’s most successful products include the Squatty Potty (over \$200 million in sales since appearing on *Shark Tank*), Bombas Socks (over \$225 million), and Scrub Daddy (over \$330 million).

Customer Perceptions of Newness

Just as there are different ways to categorize new products, there are different customer perceptions of newness. The difference in these perceptions is the result of how much change they cause in a consumer’s existing habits. Newness can be categorized three ways:

Risks and Rewards of Developing New Products

We started this chapter with a discussion of *Shark Tank* and some of the products that have been successful in the market as a result of the television show. However, not all products are successful, and there are both risks and rewards when developing new products.

Stages of the New Product Development Process

The New Product Development Process

The new product development process involves activities where a company thinks of a new product concept and introduces a new product offering. New product development usually follows a process divided into stages (see [link]).

The Use of Metrics in Evaluating New Products

The Importance of Establishing New Product Metrics

There are few marketing activities that are as difficult to manage as new product development. Not only does a company have to juggle multiple tasks like new features and innovative technologies against factors like cost, risk, and time to market, but it has to ensure that it’s making the most efficient use of its limited resources on new products that will meet both its short-term and long-term strategic goals. In this section we’re going to review product development metrics that can measure the success (or failure) of your new product launch.

Specific Metrics Used to Evaluate New Products

There are any number of metrics you can use to measure the success of a new product. For our purposes, we’re going to focus on just a few of the more common KPIs (see [link]).

Factors Contributing to the Success or Failure of New Products

What Factors Contribute to the Success of New Products?

The story about how the Dollar Shave Club was started is more than just urban legend. Founders Mark Levin and Michael Dubin met at a party and commiserated about how expensive razor blades were. After that party, using their own money and investments from start-up incubator Science Inc., they launched their website that sold razor blades much more cheaply starting in April 2011. These founders seized an opportunity based on several insights: that prices for blades charged by market leader Gillette were perceived as too high; that most men do not want to shop in stores for shaving supplies; and lastly, that the move to online/subscription boxes was gaining traction. Five years later, the company was bought by Unilever for an astounding \$1 billion.

What Causes New Products to Fail?

We’ve just examined the factors that are favorable to the success of a new product, but what about the reverse? Those failure rates we mentioned in the previous section aren’t to be taken lightly.

Stages in the Consumer Adoption Process for New Products

Stages in the Adoption Process

Consumers go through five stages in the process of adopting a new product (see [link]).

New Product Adopter Categories

Consumers adopt new products at their own speed. Some want to have the “latest and the greatest” as soon as it is available. If you doubt that, just look at the lines around any Apple store on the day of a new product release. Others tend to wait a while before buying. Scholar and professor of sociology at The Ohio State University Everett Rogers is credited with introducing the diffusion of innovation theory in 1962, in which he explained how a product or idea gains momentum and spreads through a population or society. In his theory, he identified five adopter categories (see [link]).

Ethical Considerations in New Product Development

Violations of Patents, Trademarks, and/or Copyrights

Before we proceed with a discussion of the areas of concern with respect to patents, trademarks, and copyrights in new product development, it would probably be helpful to have some definitions. Patents secure the right to exclude others from making, using, or offering for sale the invention you’ve developed. As a general rule, US patents last 20 years from when the application is filed with the US Patent Office. Copyrights are original works of authorship that include software, songs, television shows, and motion pictures. Trademarks are words or symbols legally registered or established by use as representing a company or product. Collectively, these terms are referred to as intellectual property (IP).

Methods of Exercising Due Care During Product Development

Intellectual property rights add immense value to a company’s assets. Imagine having a product team invest time, energy, and money developing and then launching a new product only to discover that the company’s intellectual property rights aren’t protected or—worse yet—that the product team has infringed on another company’s intellectual property rights. That’s why it’s important in the product development stage to do three things:

Services: The Intangible Product

In the Spotlight

Classification of Services

Services Defined

You may have heard that the United States’ economy is primarily considered a service economy. But do you know why this is? [link] provides the answer. It outlines the percentage each industry contributed to the gross domestic product (GDP) in 2020.

 (A quick refresher from your economics course: the GDP is a measure of the total monetary value of all finished goods and services generated within a country’s borders during a specified period of time.) Which industries are the largest contributor to the GDP? Service industries. (Note that this figure does not include smaller industries such as utilities, or mining and agriculture.) When you total the service industries, they make up a whopping 67 percent of GDP versus only 10.8 percent for manufacturing.

Classification of Services

Services are classified as people-based services or equipment-based services. And within those classifications, there are subcategories (see [link]).

Characteristics of Services

As outlined in [link], service industries contribute the major percentage of the US GDP. It’s important to understand that this shift from the manufacturing sector to the service sector isn’t limited to the United States. Increasingly, the world economy is being characterized as a service economy. Looking at economic history, we can see a natural evolution in developing countries from the agricultural industry to the service sector as the mainstay of the economy. That’s why it’s critical for marketers to understand the characteristics of services.

The Service-Profit Chain Model and the Service Marketing Triangle

Definition and Purpose of the Service-Profit Chain Model

Just like goods-producing businesses, service firms use marketing to position themselves in selected markets. These businesses position themselves in the market through marketing mix activities (i.e., product, price, place, and promotion). However, because of the inherent differences between services and tangible products, different marketing approaches may be required. Consider a product like a laptop or smartphone. The products are fairly standardized, so they can be produced and shipped to retailers and then sit on shelves in the store until purchased by a consumer. However, if you’re a service business, it takes the interaction of the frontline employee and the customer to literally create the service. The interaction between the employee and customer is important in creating the value of that service.

Steps in the Service-Profit Chain Model

The service-profit chain model connects the interworkings and relationships between the different parts of a business. It impacts employee satisfaction and retention, customer satisfaction, customer loyalty, and profitability. Let’s take a closer look.

The Service Marketing Triangle

The Service Marketing Triangle is a visual image of a model that speaks to the importance of people in a company’s ability to keep its service promises (see [link]). It might help to imagine the Service Marketing Triangle as a three-legged stool. Take out one of the legs, and the stool won’t stand for long. That’s the premise and the importance of the Service Marketing Triangle—all three aspects must be achieved or exceeded for the customer to be delighted.

The Gap Model of Service Quality

Dimensions of Service Quality

While we’re still on the subject of customer satisfaction, let’s take a look at still another model that aids marketers in better understanding customer satisfaction: the Gap Model of Service Quality (sometimes also known as the Customer Service Gap Model or the Five-Gap Model), first proposed in 1985. The importance of this model is that it demonstrates that customer satisfaction is essentially a function of perception. In other words, if the service provided meets or exceeds customers’ expectations, they will be satisfied; if not, they will be dissatisfied, likely as a result of one of the customer service gaps presented below.

The RATER Model

In their book *Delivering Quality Service,* researchers Valerie Zeithaml, A. Parasuraman, and Leonard Berry identified five dimensions of service that customers use when evaluating service quality. Their research pointed to the fact that these five dimensions result in service excellence and lead to higher customer loyalty. This model is sometimes known as the RATER framework of service quality.

 Refer to [link] for a visual representation of the RATER framework.

Ethical Considerations in Providing Services

How Do Ethics Contribute to Customer Satisfaction?

In 2019, AT&T ran a series of TV commercials featuring a variety of professionals who don’t quite “make the grade.” These commercials included a surgeon who has “almost” been reinstated and a tax professional who will get your taxes into an “okay” place when his audit is over. The catchphrase is each of these commercials was “Just OK is not OK.” The same is true of an organization’s ethical culture. Do you want your ethical culture to be “just OK”?

Service Excellence through Ethics

Obviously, ethics matter. But how do you ensure that those ethics are instilled and demonstrated by your employees, particularly those frontline employees who interact directly with the customer? The National Ethics Association (NEA) has two suggestions. First, within your ethics program, make customer service a core component. Second, promote values and ethics, and include them within the rules for your frontline workers along with the consequences if they aren’t followed.

Pricing Products and Services

In the Spotlight

Pricing and Its Role in the Marketing Mix

Pricing Defined

Anytime anything is sold, a price is involved. Recall that during the exchange process, a seller is offering something of value to a buyer in exchange for also something of value. This value to the seller is often referred to as price. The practice of pricing is not a new concept. Some of the oldest records of prices ever discovered were found on clay tablets with symbols in Uruk, located in modern-day Iraq. The records are written receipts of exchanges of sheep, beer, and barley and date back to 3300 BCE!

Elements of Pricing

While a marketer is determining the price of goods and services, they must keep in mind that pricing must benefit both parties involved in the exchange process: the seller (company) and the buyer (customer). Both parties must see value in the product process through pricing for the exchange process to be successful. We’ll first discuss how price is an indicator of value to the buyer and then turn our attention to the seller.

The Psychology of Pricing

From a marketer’s standpoint, these are all factors that must be considered when setting price. In addition to the value perceived by the buyer, the marketer must also understand other psychological factors that influence the buyer’s perception of price. Several psychological pricing examples are discussed next.

The Five Critical Cs of Pricing

Cost

What should you charge for a product or service? As you’ve probably discovered by now, pricing is not something that marketers approach without a lot of research. Using the five critical Cs of pricing can help to determine the *best* price—one that provides optimal value to the buyer and profit maximization for the company. [link] illustrates the five critical Cs to consider when pricing: cost, customers, channels of distribution, competition, and compatibility.

Customers

Customers are another key element to pricing decisions, as you’ve learned already in this chapter. Marketers must determine not only what customers expect a product or service to be priced at but also what those customers are willing to pay. Toyota manufactures cars and markets them toward the middle class. Through research, it has determined what its target market is willing and able to pay for a particular vehicle. Alternatively, Lexus, which is marketed as more of a luxury car, has a higher price point and is marketed to a different market than that of Toyota.

Channels of Distribution

Many products are sold through channels of distribution—intermediaries who move products from manufacturer to end users. Intermediaries affect the prices of products because they also need to maximize their profits. Therefore, pricing decisions must consider profits, expenses, and the value they are adding to the product or service.

Competition

Every company and product faces competition. Even the most unique products are competing for buyer dollars. Buyers’ perception of one product in comparison to that of alternatives has an important impact on pricing decisions. Gazelle Bikes is a top-tier manufacturer of bicycles. The bikes offered by Gazelle have a starting price point of \$1,499.

 One of Gazelle’s competitors, Giant, has a starting price point of \$1,720. For bicycle enthusiasts, these price points are important when comparing one brand with another; an enthusiast who comes across a new brand of bicycles with a starting price of just \$200 would not position it with Gazelle and Giant bicycles.

Compatibility

Panama City Beach has been one of the most popular spring break destinations of college students for decades. In fact, it is considered the “Spring Break Capital of the World.”

 It is well-known for its late-night parties, concerts, and celebrity sightings. Hotels and clubs along the beach of Panama City drive their marketing efforts toward this segment of the market: college-aged spring break–goers. The prices they set for the weeks of spring break are compatible with both this segment of the market’s ability to pay and the businesses’ profitability. Conversely, hotels in areas of Florida that are more family-friendly set prices that are considered a value for families and promote the hotels toward families rather than college-aged partygoers.

The Five-Step Procedure for Establishing Pricing Policy

Determine Pricing Objectives

Whether a product is new to the market or established, marketers face the challenge of setting prices. Recall that the main objective for pricing is for the buyer to perceive value in the product while the company maximizes profits. Marketers often use a five-step approach for establishing pricing policies (see [link]).

Estimate Demand

After setting the pricing objectives, marketers will estimate the product or services demand. Demand is an economic term that refers to the buyer’s desire and willingness to purchase a product or service at various prices. All other factors being consistent, an increase in price will result in a decrease in demand. The demand curve is a visual representation to understand demand.

Estimate Costs

The next step in determining a pricing policy is to estimate the total cost of producing a product or service. Recall that maximizing profits is the goal of a pricing strategy and marketers must factor the cost of doing business into pricing considerations. When estimating total costs, it is important to divide costs into fixed and variable costs.

Analyze the External Environment

The fourth step in determining prices is to analyze the external environment. The external environment is comprised of factors outside of the organization that impact marketing decisions. While marketers cannot directly change these factors, they should be aware of how they might impact pricing decisions.

Select Pricing Strategies or Tactics

After gathering all the data explained in previous steps, marketers are ready to set specific pricing strategies or tactics. The strategies and tactics chosen for a product or service should align with the other marketing mix elements, create value for the customer, and maximize profits for the company. In the next section, we will discuss specific strategies and tactics and how to optimize each.

Pricing Strategies for New Products

Price Skimming

When a new product is introduced to the market, marketers often use one of three pricing strategies. Remember that when a company introduces a new product to the market, a good deal of financial resources have already been used even before the first unit is sold. Therefore, it is important for marketers to choose an appropriate price that both appeals to buyers and helps to recuperate the costs of research and development so that the company can begin to maximize profits more quickly.

Market Penetration Pricing

The opposite of price skimming is penetration pricing. The penetration pricing strategy is one in which the new product or service is set at the lowest price possible. This strategy’s objective is to penetrate the market, or gain as many customers in all segments as possible from the beginning of the product life cycle.

Break-Even Pricing

Break-even pricing is a pricing strategy in which marketers choose a price that will cover all of the costs of manufacturing. The break-even point is when the number of units produced equals the revenue for the product. The break-even point will produce zero profit but will cover all associated costs.

Pricing Strategies and Tactics for Existing Products

Product Line Pricing

More often than not, marketers must make pricing decisions on existing products rather than new products. As products go through the product life cycle, price changes will likely need to occur to maintain value for customers and continue to maximize profits. Some common strategies and tactics for existing products are discussed next.

Captive Product Pricing

Assume you need to purchase a new printer for your home computer. Once you buy the printer, you’re also going to need to purchase what? That’s right, ink. Captive product pricing uses a strategy that requires both a core product and a captive product. In the above example, the core product is the printer and the captive product is the ink. When you are shopping for the printer, you are likely to take into consideration the price you will have to pay for ink as well. Marketers may price the printer at a very reasonable price, knowing it will catch your attention and thus make the price of the ink seem less expensive. Captive product pricing maximizes profits by intentionally pricing both the core and captive products at a level that will increase the perceived value to consumers.

Bundle Pricing

Bundle pricing is another popular pricing strategy that marketers use to promote purchasing multiple products at once. Consider when you go to the drive-through at your favorite fast-food establishment. Ever notice that it is cheaper or nearly so to purchase a “meal” than each item individually? Have you ever gone to the drive-through intending to get a cheeseburger but feel compelled to get the value meal instead because it only costs a little more? This strategy is used to prod customers to purchase (and spend) more than they may have otherwise.

Psychological Pricing (Odd/Even Pricing)

One popular form of psychological pricing is odd-even pricing. Similar to price appearance discussed earlier in this chapter, odd-even pricing banks on human motivation to lure in customers. The “odd” in this pricing tactic refers to the odd number at the end of a price, such as \$19.95. Psychologically, the odd number in the price equates to value; the product is not \$20.00, it is still in the “teens” at \$19.95. Conversely, the “even” in the tactic utilizes even numbers at the end of the price, often zero, as in \$50.00. This pricing tactic leads buyers to believe that the product is of higher quality because it is a nice, even number. Luxury items are often priced using the “even” side of odd-even pricing.

Economy Pricing

When you are grocery shopping, are you surprised to see that name-brand products are priced much higher than store brands even though the product is essentially the same? Does the name brand really cost that much more to produce? Well, yes and no. Brand-name items spend considerably more on advertising than store brands. In order to recoup those costs (and based on the fact that name brands have a higher value perception to buyers), companies set prices higher for name brands. Economy pricing, on the other hand, is a tactic in which store brand prices are set much lower than their name-brand competitors. The focus on these products is selling in high volume by lowering prices and minimizing advertising costs.

Ethical Considerations in Pricing

Price Fixing

Recall that *ethics* is defined as behaviors based on values and beliefs of right and wrong. In marketing, unethical behavior can have catastrophic consequences. If a customer’s trust is broken with a product, their likelihood of continuing to do business with that company dramatically decreases. Companies practicing unethical behavior run the risk of not only losing customers and profits, but also facing legal consequences. Let’s explore some unethical (illegal) practices as they relate to pricing.

Deceptive/Illegal Price Advertising

Deceptive price advertising is an unethical pricing practice in which the advertised price of a product is misleading to consumers. For example, let’s assume a company advertised a product with a “suggested retail price” of \$9.99 but is offering the same product for the “low price of only \$4.99.” If the same product is actually priced in a market in the same country for \$9.99, it is not considered deceptive. However, if the product is not priced at \$9.99 in any other market, it is considered deceptive.

Predatory Pricing

Another unethical (and usually illegal) pricing strategy is that of predatory pricing. Predatory pricing occurs when a company prices goods or services so low that other companies cannot compete. Predatory pricing often entails a company selling products below its cost with the intent of driving out competition and creating a monopoly situation. Once competition is eliminated, the company will often increase the prices exponentially—not only to recuperate losses from the lower prices, but also to make more profit. Under various antitrust laws, this practice is illegal when it seeks to drive out competition and makes a market susceptible to monopolies.

 In 2000, Walmart was accused by the Wisconsin Department of Agriculture, Trade, and Consumer Protection of predatory pricing practices. The complaint stated that the company was selling staple goods such as butter and milk below cost with a goal to drive out competition and create a monopoly. In short, predatory pricing undermines the free market where supply and demand sets prices.

Price Discrimination

Price discrimination is a pricing strategy that charges different prices to customers based on what the seller believes it can get the customer to agree to. This pricing strategy is not illegal so long as it does not cause specific economic harm. But marketers should be wary of using this price tactic, as it could lead to disloyal customers if they feel they are not getting the best price.

Monopoly Gouging

Monopoly gouging is when a seller increases the prices of goods and services that are not considered fair or competitive. If there are no or very few substitutes, a company may be enticed to force buyers to pay a much higher price, leaving them no options. When there are very few competitors in a market, such as utilities, the industry is highly regulated by the government. For example, your electric company cannot choose to randomly increase prices to increase profits; it must follow a regulated process when increasing prices.

Integrated Marketing Communications

In the Spotlight

The Promotion Mix and Its Elements

What Is the Promotion Mix?

We are all consumers, and we have all been the target of promotional campaigns. To connect with consumers of a target market, companies conduct extensive market research so that they may better understand the consumer. When companies understand the consumer, they can better structure a message to appeal to the consumer and also find the best channels for reaching the customer.

Elements of the Promotion Mix

When analyzed individually, each of the promotional mix elements is powerful. They each have a part to play in the overall success of a company. When combined and carefully executed, they create powerful brands with legions of loyal fans and followers—the consumers. What do each of these promotional mix elements do, and how do they contribute to the whole process of connecting with the consumer?

The Communication Process

Communication Process Defined

At first glance, the communication process seems simple. However, a deeper look shows the complexity and issues that are involved with communicating. When choosing how to send a message to the consumer, it is important to understand how the communication process works. All forms of marketing promotion are methods of communicating from the company to the consumer. No matter which method of promotion you use, the elements of the communication process are important to recognize and consider.

The Elements of the Communication Process

In order for communication to happen, it must go through a process. Both personal and professional communication are comprised of several elements that occur in order for the exchange of information to take place. For communication to happen, there must be a sender of the message and a receiver of the message. Between the sender and the receiver is the message itself as well as the channel by which the message is sent. All the variables in between include the elements that are uncontrollable and, if not managed well, can cause issues. These elements include the encoding and decoding of the message as well as the noise that gets in the way and the feedback that helps us gauge the success or failure of the message.

Integrated Marketing Communications

Integrated Marketing Communications (IMC) Defined

Now that you are familiar with the various forms of marketing promotions, how do you use them? Because consumers are all different—no matter how they fit into your target market—it is important to reach them through a combined approach, using a variety of the methods in the marketing promotion mix.

Importance of IMC in Marketing

If a group of friends is planning to go out to dinner, as the group organizer you may find it best to text some friends and call others. The message is the same: “Let’s meet for dinner at Chipotle at 6:00 p.m.” The methods of communication are different depending on the traits and characteristics of the group. This works similarly in marketing. Marketers have many forms of communicating through the various methods available in the promotional mix. However, it is important to send the same message in different ways to reach different customers within the target market. And consumers need to hear the same message many times and in many different forms.

Steps in the IMC Planning Process

Identify the Target Audience

All successful IMC campaigns start with a good foundation and a carefully written and executed plan. Every step in the marketing process should be driven by research; the same is true for the IMC planning process (see [link]).

Determine the Marketing Communications Objectives

Marketing campaigns must start with clear objectives. Objectives define what needs to be done, and they help to keep the strategy and tactics clearly aligned. Good objectives will help marketers create cohesive messaging across all the promotional mix methods. Objectives need to be simple, and they should be written in such a way that they provide opportunity for analysis. If done correctly, marketers should be able to analyze if the messaging and the medium are working. When creating objectives, follow the SMART guidelines: simple, measurable, actionable, realistic, and time-bound.

Design the Message

A key element of integrated marketing communications is creating the message. Messages are designed to fulfill the established objectives. Depending upon the objective and the desired action of the consumer, the marketer may create the message to meet the various stages in the customer journey and have a call to action.

Create the Message Content

When creating the message, the marketer has to consider not only the stage of the customer journey, but the product’s features and benefits as well. Other factors to consider in the message content include the media and the traits and characteristics of the target market. All of the segmentation bases should be considered when creating the appeal.

Determine the Budget

Promotional budgets are determined based on many variables. In developing the promotional budget, it is important to consider where the consumer is in their journey. Additional considerations include the current level of brand awareness for the product, accessibility of the target market, creation of the promotion, and specific media under consideration. There are several commonly used methods of creating promotional budgets.

Develop Strategies and Tactics

The promotional strategies include the promotional methods the marketer chooses in order to achieve the objectives. Within the promotional methods, the tactics are the specifics the marketer must use to achieve the objectives. For example, if Panera Bread wants a 10 percent increase in brand awareness for its decorated Christmas sugar cookies from November 26 to December 30, it may choose to use the following strategy and corresponding tactics:

Select the Promotional Tools

The marketer must decide on the mix of promotional tools based on the established marketing objectives. Choosing the mix of promotional methods is also primarily dependent on the consumer and how best to reach them.

Designing the Promotion

In considering the target market and the message to send, the marketer must think of the desired response. Three important issues arise in the design of the promotion: what to say (message), how to say it (creative), and who should say it (source). This leads the marketer to the overall message strategy, which will look at the appeal as it relates to the brand positioning. A marketer will consider the following in designing a promotion:

Evaluate and Measure the Objectives

Before starting a promotional campaign, marketers must establish objectives. Including measurable and time-bound objectives is important. The marketer must evaluate the campaign on a continual basis to ensure that every element in the campaign is working to achieve the objective. Measuring and evaluating the campaign on a continual basis allows the marketer to evaluate the elements and make changes. Typically, objectives also have financial accountability. Changing elements of a campaign avoids overspending on components that are not working to meet the objectives.

Ethical Issues in Marketing Communication

Socially Responsible Marketing Communications

While some argue that marketing makes people buy things they don’t want, marketing cannot *make* someone buy something. The adage “buyer beware” still holds true. And while there are stories of rogue marketers not holding to the American Marketing Association (AMA) code of ethics, ultimately marketers want lifetime customers. The lifetime customer is easier to educate, more agreeable, and generally a good word-of-mouth testament for the company. It is difficult to get and keep customers without ethical marketing.

Maintaining and Fostering Ethical Marketing Communications

Ethical marketing communications includes avoiding activities that could mislead consumers—communication such as withholding information, making misleading claims, and misstating information. In an effort to make products be all that a consumer would want from them, marketers can easily go down the slippery slope that leads to ethical missteps. To make sure marketing communication doesn’t follow any of the common unethical practices, it is important to be aware of two of the most used and violated ethical issues:

The Promotion Mix: Advertising and Public Relations

In the Spotlight

Advertising in the Promotion Mix

Advertising and its Importance in the Promotion Mix

Marketers utilize a variety of ways—or media channels—to promote the organization’s offerings. Regardless of the media channel used, marketers must be consistent in the communication they send to customers.

Importance of Advertising

While there has been a major increase in commercial-free television and the ability to skip ads in multiple media platforms, advertising still remains an important part of the promotion mix. Advertising assists in consumer awareness—making sure the audience is aware of a product or service and its benefits. Advertising also helps to retain customers through reminders and can show audiences that a business aligns with their values. However, with the increase in society’s reluctance to believe what they see in advertisements, it is more important than ever that marketers ensure they are sending the right message at the right time.

Major Decisions in Developing an Advertising Plan

Major Advertising Decisions in an Advertising Plan

As with any successful plan, certain decisions need to be made while creating an advertising plan. Advertising is expensive and should have specific objectives with clear communication to the audience to ensure the right message is being sent at the right time with the biggest impact. These steps include choosing the objective(s), choosing a push or pull strategy, establishing a budget, developing the strategy, executing the program, and assessing the impact (see [link]).

Developing the Advertising Strategy

After marketers and other company executives set a budget for the advertising plan, it is time to work toward the advertising strategy. In this stage of planning, marketers will create the message and choose the appropriate media.

Executing the Advertising Program

At this stage in the advertising plan, marketers are almost ready to release their advertisements to the chosen media. However, before doing so, most marketers will choose to test their advertising to a small group of the target audience to ensure all the messaging is clear and concise.

Assessing and Evaluating the Advertising Program

After pretests are completed, it is time for the marketers to make any necessary changes and disseminate the ads to the target audiences through the chosen media. But the advertising planning does not end there. Once advertisement messages have been out, marketers then must assess and evaluate the programs. Even the best-planned and best-tested programs can still be failures.

The Use of Metrics to Measure Advertising Campaign Effectiveness

Key Metrics in Measuring Success

The most well-planned advertising campaigns are only effective if they bring about some result. Marketers use performance metrics to determine the effectiveness of a campaign.

Public Relations and Its Role in the Promotion Mix

Public Relations Defined

With today’s ever-changing media landscape, maintaining a positive image with the public is of utmost importance. This is where public relations becomes an important tool in the promotion mix. Public relations is about creating and maintaining a favorable public image. Unlike other tools in the promotion mix, public relations is not paid for; it is earned media. The result of public relations is called publicity.

The Role of Public Relations in the Promotion Mix

In many organizations, public relations has been an afterthought or a sidebar to marketing, something used only when a crisis has occurred. However, public relations is more important than ever as the public seeks brands that have values aligned with their own and are not hesitant to boycott those who don’t. In fact, according to a 2017 survey, 86 percent of consumers say that authenticity is a key factor when deciding which companies and brands they will support.

 For example, in the past several years, the public has become more aware and vocal about the use of Photoshop in advertisements. In fact, many celebrities have spoken out about their own photos being Photoshopped in media and the unauthenticity it translates to the public. Similarly, companies such as CVS, Dove, and Target have stopped—or limited—the use of model editing to challenge unrealistic beauty standards.

The Tools of Public Relations

In an age of information access and sharing, companies can no longer afford to hide behind their mistakes, nor can they afford to miss opportunities to boast about their good deeds. Marketers need to be keenly aware of how the organization’s image is portrayed publicly—to all interested parties. There are several tools that marketers should use to positively impact this image. While the goal of public relations and publicity is to promote positive images to the public, marketers must use public relations to minimize the impact of negative publicity as well.

The Advantages and Disadvantages of Public Relations

Advantages of Public Relations

From a business perspective, the greatest advantage to public relations is that of cost; public relations is not a paid form of promotion. However, there are other advantages that accompany a well-thought-out public relations strategy.

Disadvantages of Public Relations

While public relations is a cost-effective way to potentially reach a large audience, it does come with its own set of challenges, including no direct control, lack of guaranteed results, and a difficulty in evaluating effectiveness.

Ethical Concerns in Advertising and Public Relations

Ethical Issues Related to Advertising

Marketers must be keenly aware of not only the legal implications of advertising, but also the ethical ramifications. The Federal Trade Commission (FTC) has a number of laws that help to protect consumers against false claims in advertisements. The watchdog group Truth in Advertising is an independent, nonprofit organization that “empower[s] consumers to protect themselves and one another against false advertising and deceptive marketing.”

Ethical Issues Related to Public Relations

Similar to being truthful in advertising, marketers must also be aware of how they are disseminating information via public relations. Again, with the increase in social media and the Internet in general, it is much easier for consumers to find information regarding companies. In addition, it is much more commonplace for consumers to call out companies that are being unethical or dishonest. It is much easier for organizations to be honest and transparent up front than try to dig themselves out of a public relations nightmare.

The Promotion Mix: Personal Selling and Sales Promotion

In the Spotlight

Personal Selling and Its Role in the Promotion Mix

Personal Selling Defined

Personal selling is the one-on-one interaction between a company representative (salesperson) and the buyer (customer or prospect). The interaction is intended for the salesperson to uncover the needs and wants of the prospect and discuss how the product or service will help to satisfy the customer’s needs and wants. The salesperson works to develop a relationship with the prospect with the intention of having them buy the company’s product and become a customer.

The Role of Personal Selling in the Promotion Mix

The promotion mix includes the marketer’s tactics for communicating with consumers. Determining how to use the promotion mix is dependent on the goals and objectives of the overall marketing strategy as well as the nature of the product, the market segments being targeted, and the message the marketer wishes to send.

Relationship Selling

Relationship selling is a method of personal selling used to better understand the needs and wants of the buyer. If the product is relatively high in price and has some customizable attributes, the salesperson will strive to become a trusted advisor to the customer. This allows the salesperson to develop a relationship that will create trust and ultimately fit the best product with the customer to fulfill their needs and wants and solve a problem they are having that put them in the market for the product. TalEx, a fast-growing human resource company, works with its clients to find the right talent for open positions at a variety of companies. Sales representatives for TalEx work as trusted advisors to collaborate with clients to help find the right staffing solutions for growing companies.

When to Use Personal Selling

Personal selling is best utilized as a promotional strategy when the products are higher in price, variable in nature, and require some explanation or education. Hilton Grand Vacations (HGV) employs real estate agents to sell club memberships. Due to the variety of membership purchase levels, the explanation and education of how to use the membership, and the higher price of the time-share vacations, the sales force spends time educating clients about the product. Typically, personal selling is used for products that are also in the introductory stage of the product life cycle and for products that require significant follow-up after the sale. Business-to-business (B2B) strategies are largely reliant on personal selling as a primary promotional strategy.

Classifications of Salespeople Involved in Personal Selling

Order Takers

Within the role of personal selling, there are various types of selling functions. Many organizations utilize more than one type of personal selling. Various sales personnel within an organization may fulfill several of the roles. The type of personal selling is dependent on the nature of the product as well as the customer.

Order Getters

The role of the order getter is critically important to the revenue of many businesses. The order getter is responsible for finding customers and persuading them to purchase. They might also be responsible for increasing orders from current customers. The order getter is typically well versed in their products and has superior knowledge about the industry. Additionally, successful order getters are often viewed as a trusted advisor by the customers they serve. Many businesses rely heavily on the order getter to work with them to solve their problems through the products they represent.

Support Personnel

A typical sales force includes various support personnel that help facilitate the sales process. Support personnel can take on many functions in the process of making the sale, including marketing, prospecting, setting appointments, educating customers, building goodwill, checking inventory and order status, as well as providing service after the sale. There are two primary types of support personnel utilized in the sales process: missionary salespeople and technical specialists.

Team Selling

Many of today’s customers and products are complex. The more expensive and high-tech the product, the more important it is to have a team of people to assist the client in making sure the product meets their needs and wants. Team selling is a sales approach that can improve the likelihood of a good experience that meets or exceeds the customer’s expectations. Team selling involves the lead salesperson bringing in other functional support people from within the organization. Other functions that are often involved include finance, engineering, and accounting. These various functions can assist with the skills and knowledge to address specific customer problems or issues and work through objections or special circumstances that may be required to make the sale. Bringing extra skills and knowledge to the situation can make for a better product fit and a good outcome whereby the client sees the company and products as invaluable.

Steps in the Personal Selling Process

Step 1: Prospecting and Qualifying

The selling process is a seven-step process (see [link]) used for selling a product. The process can be multifaceted, lengthy, and complex, depending on the product and the prospect. While all salespeople are different, generally most sales professionals go through the same selling process.

Step 2: Pre-approach

The pre-approach stage can best be described as a thorough analysis or research of the potential candidate. It is in the pre-approach stage that the sales professional will conduct a very detailed study of the prospect, which will often include information about specific product needs, what current brands they might be using, brand awareness, who the decision makers are, and general knowledge of personal interests and financial standing. The research findings are meant to help the sales professional to find out needs and wants as well as the best way to approach the prospect for the sales presentation.

Step 3: Approach

Information gathered in the pre-approach helps the sales professional during the approach phase. Utilizing the insights they have gathered about the prospect, the sales professional seeks to contact the prospect to build rapport and gather more information on the needs and wants of the prospect. During this phase, it is very important for the sales professional to create a positive impression, ask the right questions, and begin building a relationship with the prospect.

Step 4: Presentation

Once the prospect has made it through the approach stage, the sales professional is ready to present the product to the prospect. During the presentation stage, the goal is to showcase the features about the product that will be of most benefit to the prospect based on the needs uncovered during the pre-approach and approach stages. Often the presentation may include education on the aspects of the product that the prospect will find most beneficial to solve their problems. This is the time for the sales professional to highlight the benefits of the product and answer questions the prospect might have. For example, college admissions departments work with students to showcase the best of the university in an attempt to persuade them to enroll. Part of the presentation process includes tours of the campus, meetings with current students, attending classes, and experiencing campus life.

Step 5: Handling Objections

Preparation during the qualification, pre-approach, and approach stages of the sale process, provide the sales professional with the information they will need to handle objections. In many situations, seasoned sales professionals are able to successfully present the product and answer questions without having objections. Good research on the customer and an understanding of how the product will help them and solve their problems allow the sales professional to avoid objections. However, when the customer does present an objection, the skilled sales professional will need to be agile at handling them.

Step 6: Closing

Asking for the order is perhaps the hardest step in the sales process for many sales professionals. Up to the point of the close, the sales professional has spent a tremendous amount of time and energy with the prospect. Much of the work of the sales professional has been around building a relationship with the prospect. Asking for the order is a source of tremendous fear for many sales professionals because this is the point where all of their work could unravel. What if the customer says no? Then what?

Step 7: Follow-Up

After the order is placed, the real work begins. Upon closing a sale and signing the prospect as a customer, the sales professional is now tasked with onboarding the customer and ensuring that everything progresses smoothly with the sale of the product. Because it is much more lucrative for a company to keep current customers happy than to go out and prospect for new customers, the follow-up is a major step in creating lifetime customer value (LCV). Most salespeople would rather maintain their current clients than search for new clients. The follow-up after the sale is a critical step in getting repeat business, customer referrals, and upsells during the next order cycle.

Management of the Sales Force

Issues Involved in Managing a Sales Force

A sales force can be the lifeblood of an organization’s revenue cycle, so it’s important that they are incentivized to produce new clients, maintain current clients, and generate revenue for the organization. Proper management of the sales force includes setting goals, motivating, incentivizing, supporting, and monitoring.

Serving Existing Customers

Much of the work of a sales professional is around serving the existing customer. It is important to keep customers satisfied. Most organizations rely heavily on existing customers to provide good reviews, customer referrals, repeat purchases, and upsell of existing products. Sales professionals are expected to continue developing and building the relationship with existing customers to ensure they are satisfied. This can include checking on inventory, dealing with supply issues, and educating on product application. Objectives may include how often the sales professional is expected to keep in contact with the existing customer.

Developing New Customers

Growth is a key driver of most organizations, and growth comes through new sales to existing customers and also through sales to new customers. A sales force objective of obtaining a certain number of new customers is common. The sales force must have a lead pipeline of prospective customers they are constantly working to turn into customers.

Increasing Market Share and Profit

Additional methods for companies to grow include obtaining more market share as well as more profitable sales. When there are sales objectives for market share, they usually focus on an increase in the proportion of the firm’s sales as compared to the total number of products the firm sells overall in the industry.

Enhancing Customer Satisfaction

An important element of obtaining new customers as well as getting additional sales from existing customers is keeping customers satisfied. Satisfaction can mean good reviews, referral business, and lifetime customers. Objectives for customer satisfaction usually involve the sales force working with customers and obtaining reviews and endorsements.

Designing the Sales Force Strategy and Structure

There are many ways to design and develop a sales force. Careful thought to the customer is usually the best practice for establishing the right structure. Other factors in determining the best structure involve the company and its products. Sometimes organizations utilize all of the methods to structure the sales force.

Determining the Size of the Sales Force

Investing in a sales force is significant for any company. Sales professionals must be properly incentivized, and the pay and benefits packages can be quite high for experienced and well-trained employees. Companies must determine the number of potential customers as well as the time to nurture prospects into customers. The size of the sales force must be considered in relation to the complexity of the product, the profit margins on sales, and the size and number of customers in the markets served.

Recruiting and Selecting Salespeople

Hiring and training a sales force is a significant process and cost for companies. The sales manager must have a set of skill requirements and product knowledge that the right candidate must have in order to fill the available roles. There is significant agreement that good salespeople all possess the traits of self-motivation, time management, optimism, empathy, and the ability to network. Many salespeople make themselves valuable based on the network of contacts they are able to maintain.

Training Salespeople

Training of the sales force is a significant effort for most companies. Many organizations have a formal training program and spend considerable time and resources to keep the sales force knowledgeable on the products and industries served. Areas of training include sales strategies and how to sell, the products being sold, the industries served, and the company itself.

Compensating Salespeople

Compensation of the sales force is typically focused on providing a fair wage as well as incentivizing and motivating. Many organizations combine a variety of compensation methods to meet both individual goals and the overarching organizational goals.

Supervising and Evaluating the Sales Force

While most sales professionals are self-motivated, they still require supervision, and this will include methods of evaluation to make sure the predetermined objectives have been met. Sales managers are tasked with developing the objectives and goals as well as monitoring and evaluating the success of the sales effort. There are a number of methods used to supervise and evaluate.

Useful Metrics to Assess Sales Performance

There are many metrics utilized by sales managers to gauge the performance of the sales force. The metrics should align with the goals and objectives of the organization and the sales function. Ideally, sales managers rely on metrics to provide the sales force with clear targets to work toward.

Sales Promotion and Its Role in the Promotion Mix

Sales Promotion

Sales promotion is a promotional strategy focused on inducing sales in the short term. Of all the promotional activities, sales promotion is solely focused on a direct call to action to buy something. Sales promotion can be targeted to intermediaries through a push strategy or directly to consumers through a pull strategy. Marketers often use sales promotion in tandem with other promotional strategies. When McDonald’s advertises, for example, “Free fries on Friday when you purchase a menu item through the app,” it is using advertising along with sales promotion to induce consumers to use the app and to increase sales on Fridays.

Importance of Sales Promotion in the Promotion Mix

Many of the strategies in the promotion mix are informative in nature. However, when other strategies are combined with sales promotion, there is a direct and immediate call to action to purchase the product. Companies needing to create sales in the short term will benefit from sales promotion. Utilizing sales promotion is a very effective strategy for generating trial of a product in the introductory stages of the product life cycle (PLC).

Main Types of Sales Promotion

Consumer-Oriented Sales Promotion

Sales promotion can be categorized in two ways. The first category of sales promotion is consumer-oriented, which focuses on the consumer pulling the product through the marketing channels. The second category is trade-oriented, which is intended to push the product through the channel to the consumer.

Trade-Oriented Sales Promotion

Trade-oriented sales promotion is focused on the channel intermediaries: the wholesalers and retailers. The goal is for the intermediary to be incentivized to push the product to the consumer.

Ethical Issues in Personal Selling and Sales Promotion

Ethical Issues in Personal Selling

The goal of sales is to create customer loyalty and repeat purchases. Developing the relationship with the customer is best done through honesty and integrity. Sales should always be conducted with a long-term goal of developing a lifetime customer and not just one sale.

Ethical Issues in Sales Promotions

When it comes to sales promotions, many ethical issues can arise. One of the most well-known issues with sales promotion happened with a popular McDonald’s game (see [link]). For years, McDonald’s ran its Monopoly game as a method to increase the consumer purchase of meals along with Monopoly game pieces that could net customers winnings from the fast-food giant. Not only was the game popular with customers, but it did exactly what the sales promotion was supposed to do: it increased sales. Unfortunately, the head of security for the company that ran the promotion and printed the game pieces took out all the winning game pieces in a scam worth \$24 million.

Direct, Online, Social Media, and Mobile Marketing

In the Spotlight

Traditional Direct Marketing

Forms of Traditional Direct Marketing

Direct marketing involves using communication tools to engage directly with individual consumers for the ultimate purpose of calling them to take some marketing action (see [link]). That action can be a consumer visiting a website or calling a phone number. Ultimately, the goal is to motivate the consumer to make a purchase. If you’ve received a catalog in the mail or caught yourself watching an entire infomercial about the newest kitchen gadget or gym equipment, you’ve experienced traditional direct marketing as a consumer.

How Has the Digital Age Impacted Marketing?

The digital age has changed the way marketers engage with customers and build relationships. While the traditional channels of print, television, and radio certainly present advantages, the digital age has created opportunities for marketers to engage with consumers in a highly personalized and interactive way.

Online Direct Marketing Defined

While traditional forms of direct marketing center on engaging directly with consumers through channels like mail and television, online direct marketing uses a rich collection of digital tools to target individual consumers with an offer that requests a response or action. The online direct marketing tools covered in this section include website marketing, email marketing, content marketing, online video marketing, blogs, and online forums.

Direct Meets Digital: The Evolution of Direct Marketing with Technology

The explosion in internet usage and online shopping coupled with the evolution of digital technologies has resulted in the emergence of online direct marketing. While traditional forms of direct marketing remain important for engaging with consumers, the channel has evolved as technology has evolved. With 3.5 billion smartphone users worldwide, marketers recognize the value in engaging with consumers through mobile devices. In the United States alone, 65.6 percent of Americans report that they check smartphones 160 times a day.

Forms of Online Direct Marketing

There are several online direct marketing tools that can be used (see [link]). Let’s take a look at each tool in the following section.

Advantages of Online Direct Marketing

There are several key advantages that make online direct marketing an attractive tool for marketers. First, online direct marketing is not restricted by geographical boundaries. The internet is readily available to most consumers globally, making it practical to market around the globe.

Social Media and Mobile Marketing

Social Media Marketing

As discussed in the previous section, internet and digital technology usage have surged across the globe, creating opportunities for marketers to engage with consumers in real time. Social media marketing has emerged as a powerful online marketing tool as consumer time spent on these platforms (see [link]) has grown substantially over the last decade. A growing share of Americans report that they use YouTube and Facebook more than any other social media platform. In segments under the age of 30, the most popular platforms are Instagram, Snapchat, and TikTok.

Facebook

Facebook, whose parent company was rebranded as Meta in 2021, is the largest social media platform, with over 2.9 billion monthly active users and \$117.92 billion in revenue.

 These numbers make this platform attractive for reaching a diverse, global audience. Facebook is facing the challenge that a growing percentage of its users are baby boomers (born between 1946 and 1964) while teens are using other platforms, like TikTok and YouTube, more frequently.

Instagram

As a social media platform, Instagram’s growth has exploded over the last decade. While not as large as Facebook in terms of users, it still boasts 1 billion active users every month. Instagram attracts a younger demographic, mostly people under the age of 30, which makes it attractive for brands targeting this audience.

LinkedIn

For business professionals seeking networking, partnership, and employment opportunities, LinkedIn proves to be an excellent social media platform (see [link]). LinkedIn boasts 722 million users, who are known as members. Among social media platforms, LinkedIn is considered the most trusted, with 73 percent of members agreeing that LinkedIn protects members’ privacy.

Pinterest

With 478 million monthly users, Pinterest is a social platform that allows users to visually explore an endless array of ideas from recipes to home decor to crafts to personal style.

 Users can use the platform’s search bar to look for topics or people that interest them, which produces results related to search keywords.

Twitter

As a social platform, Twitter is a microblogging news and networking site where users typically post shorter messages known as tweets. After receiving complaints that 140 characters weren’t enough room to express ideas, Twitter expanded its character limit from 140 to 270 in 2017. It has approximately 238 million daily active users, with about 14.5 million living in the United States. It has seen steady growth in international appeal.

Podcasts

Podcasts are often free, on-demand, downloadable audio recordings that cover a variety of topics and are typically made available on a weekly or monthly basis. Podcasts are distributed through applications such as Apple’s Podcasts, Google Podcasts, Spotify, and Audible, but they can also be published on a company’s website. Podcasting has been growing at a “hockey stick” rate—200 percent year-on-year growth.

 Recognizing a huge opportunity, Spotify acquired podcasting company Megaphone in 2020. The acquisition positions Spotify as the “go-to” platform for premium podcast content, which offers new opportunities for advertisers. In a world where people question information they are given, podcast hosts stand out because 52 percent of listeners trust advertising when endorsed by the host. The hosts can offer brand endorsements and approvals in addition to stories that they bring to life via audio. Listeners take in what the host says and then build it out in their own minds. Podcast creators leverage social media platforms to drive traffic to applications and sites where the podcasts can be played or downloaded.

Mobile Marketing: Definition and Strategies

Mobile marketing is defined as the use of multiple digital marketing channels that are designed to reach consumers on their smartphones and tablets. Given the variety of digital tools that marketers use to engage with consumers, it’s important to discuss how mobile device use impacts digital marketing strategies. Usage of mobile devices to access the internet and applications has steadily increased over the last ten years.

 As mobile device technology and digital technology has improved, people are doing everything from refinancing their homes to buying cars online. Mobile device usage will continue to grow, and as consumers spend more time on mobile devices, marketers must adapt their strategies to meet consumers where they are.

Metrics Used to Evaluate the Success of Online Marketing

Types of Online Marketing Metrics

While online marketing tools have numerous advantages over traditional tools, it’s important for marketers to pay close attention to metrics that indicate the performance of their online marketing campaigns. Metrics are goals that marketers are trying to reach through their campaigns, and they are typically quantitative in nature. For example, companies measure the performance of their social media campaigns by measuring how many likes, shares, or comments are posted in response to the content. While each online marketing tool has its own set of metrics, we’ll focus on the following tools.

Ethical Issues in Digital Marketing and Social Media

Privacy, Transparency, and Awareness

While digital marketing tools and social media provide online marketers with effective ways to engage with customers, build relationships, and drive consumers toward a purchase, there are ethical issues that marketers must consider when utilizing these tools.

Tracking Consumer Data

The reality is that it’s not just social media companies and search engines that track consumer data. A majority of companies use tracking codes to follow consumers and data about them as they navigate the web. Zoho, a productivity and collaboration app, reported that in the B2B space, about 72 percent of businesses do not inform customers that they are being tracked by third parties.

The Use of Client Reviews

Client reviews involve feedback that a customer or client posts directly to a platform that can accessed by consumers during the buying process. Companies that use client or customer reviews include Amazon.com, Wayfair, and Lands’ End. Customers rate their experience with the product typically by assigning stars and commenting on their satisfaction.

Distribution: Delivering Customer Value

In the Spotlight

The Use and Value of Marketing Channels

What Are Marketing Channels?

In addition to identifying ways to create value for consumers, marketers must also decide how to distribute market offerings. In this section, you’ll explore the important role that marketing channels play in delivering value to targeted customers.

Intermediary Functions

The intermediaries’ role is critical, and they perform a variety of functions (as shown in [link]) that create value for other members in the marketing channel.

How Intermediaries Add Value to Customers

Intermediaries play a critical role in adding value to customers. They specialize in aspects of distribution that manufacturers don’t wish to specialize in. They create efficiencies in the marketing channel by reducing transactions, sharing important information among partners, and matching the right quantity of the right product to customer demand. While manufacturers focus on creating value for customers, intermediaries focus on delivering that value.

Types of Marketing Channels

Types of Marketing Channels

When determining the most effective and efficient way to reach consumers with products, companies have two options. Companies can either sell and distribute their products directly to consumers, known as a direct channel, or they can partner with intermediaries who can assist with the distribution, known as an indirect channel.

Marketing Channels for Business/Industrial Products

The business-to-business (B2B) market is comprised of companies who buy from and sell to other companies. In the B2B space, businesses are not distributing to final consumers but rather to other businesses. Companies in the B2B market buy, sell, and use materials, resources, and technology from one another to create products, where a business is the final consumer or destination.

Other Marketing Systems

Manufacturers or producers along with their intermediary channel partners work in a system to move products and services to consumers. There are four major system types: a vertical marketing system, a horizontal marketing system, a multichannel marketing system, and an omnichannel marketing system. We’ll explore each of these systems next.

Factors Influencing Channel Choice

Target Market Coverage

Target market coverage is defined as having the resources and capabilities to reach and serve consumers in a company’s target market. Companies of all sizes must determine precisely how they will reach consumers with their products and services. Smaller companies tend to focus on smaller, more local markets, while larger companies must meet the consumer demand of larger, even global markets. A company’s decision about which channel is best for meeting the needs of consumers involves a number of considerations.

Fulfillment of Buyer Requirements

In addition to determining target market coverage, companies must also consider a channel’s ability to fulfill the requirements of buyers. Consumers have specific product and service expectations that must be fulfilled in order to satisfy their wants and needs. For example, when consumers purchase bottled water, they expect the bottle to be filled to the top, the cap to be sealed before opening, and the water to taste fresh and clean. With these buyer requirements in mind, companies who make bottled water must ensure that they work with channel members who are able to fulfill these buyer requirements because these requirements are critical to the perception of consumer value.

Product-Related Factors

In addition to target market coverage and requirements of the buyer, there are product-related factors that can influence channel decisions. Product-related factors include things like unit value, perishability, and the bulk and weight of a product. These factors can influence the distribution decisions that companies make (see [link]).

Profitability

The profitability of a channel can also influence channel decisions. Profitability relates to the amount of money that stands to be gained after a company pays its expenses. A simple way to calculate profitability is to subtract these expenses from the revenue generated.

Managing the Distribution Channel

Selecting Channel Members

After a manufacturer has evaluated its distribution channel options, it now needs to select the right channel members and manage and motivate them to operate effectively and efficiently. In addition, the manufacturer must also address any conflicts that may arise in the marketing channel. A channel member, also known as an intermediary, is a company that works in a network with other companies to help move products from manufacturers to final consumers. Channel members perform a variety of important tasks that collectively create value for the consumer.

Managing and Motivating Channel Members

After channel members have been selected, manufacturers must continuously manage and motivate members to work together to achieve their collective goals. It’s similar to a partnership or relationship where companies depend on one another to marshal the product along the marketing channel.

Evaluating Channel Members

Manufacturers must systematically evaluate channel member performance to ensure that each member is meeting standards. Failure to evaluate performance can lead to inefficiencies in the channel and a decline in customer-perceived value.

Handling Channel Conflict

Sometimes channel members experience conflict during the distribution process. Channel conflict is when companies in the distribution channel have disagreements due to a competitive versus collaborative mindset. For example, a channel member may cause conflict because its focus isn’t on creating value but on driving down costs at the expense of the customer. This could create conflict in the channel if channel partners and ultimately consumers are impacted by an excessive profit orientation.

The Supply Chain and Its Functions

Supply Chain Management (SCM) Defined

A supply chain is the entire process of distribution from acquiring the raw materials needed to make products to delivering final goods to consumers. Companies with high-performing supply chains recognize that it starts with a customer-centered mindset. All activities must be managed with the end goal of creating and delivering value to the target consumer.

The Role of Marketing in Supply Chain Management

Marketing plays an integral role in the management of the supply chain. Marketing entails creating and delivering products that meet the needs of customers all while building relationships through customer engagement. Companies ensure that they deliver on their value proposition to consumers through the features and benefits of the product itself. Ensuring fulfillment of a company’s value proposition starts with working with the right suppliers who provide the materials and ingredients to help companies fulfill their promise.

Functions of Supply Chain Management

Supply chain management has five major functions. These include purchasing, operations, logistics, resource management, and information workflow (see [link]). Good supply chains perform these functions in a way that meets the wants and needs of final consumers efficiently.

Logistics and Its Functions

Logistics Defined

An important function of the supply is logistics, which includes all the activities involved in the flow of products from manufacturers to consumers. Logistics is the planning, organizing, and controlling of the movement of raw materials and ultimately finished goods from manufacturers to final consumers.

Functions of Logistics

Getting products from manufacturers to final consumers requires the coordinated efforts of all channel members. These efforts require an understanding of key activities that need to occur as products flow through the marketing channel. The major functions of logistics explored next include warehousing, inventory management, and transportation.

Logistics Information Management

For a supply chain to be effective, manufacturers, suppliers, channel members, and customers need useful logistical information that can help them make informed decisions. Logistics information management is the recording and reporting of useful information that channel members can analyze and validate during the process of moving products.

Integrated Logistics Management

Integrated logistics management means that every element of logistics works cohesively to ensure that products flow from manufacturer to final consumer in an efficient and effective way. Companies must first begin by defining the objectives of logistics management. For example, in the procurement and distribution of agricultural products, the supply chain might collectively set objectives that everyone along the chain commits to. They may, for example, set objectives to minimize costs, meet delivery times 95 percent of the time, and communicate openly and honestly about product availability and product flow in a consistent and systematic way. Or they may strive cohesively to manage inventory more effectively to reduce the possibility of shortage or surplus.

Ethical Issues in Supply Chain Management

Carbon Footprint versus the Speed of Shipping

As companies strive to deliver the right products to the right customers at the right time, they are faced with the competing interest of protecting the environment in which they operate.

Sourcing Sustainably

Sustainable sourcing is the process of considering suppliers’ social, ethical, and environmental performance. The benefits of sourcing sustainably are improved reputation, brand protection, and an opportunity to attract new consumers and reach new markets. When a company claims it sources sustainably, it means that it is both transparent and ethical regarding the raw materials it uses in its products. It is not only transparent and ethical in its sourcing of materials but also environmentally conscious about its manufacturing process.

Retailing and Wholesaling

In the Spotlight

Retailing and the Role of Retailers in the Distribution Channel

Retailing Defined

When marketers plan their distribution strategies, they must determine which channel is best suited to get their goods and services into the hands of consumers. A distribution channel is a set of businesses that move the product or service from the manufacturer to the end user or buyer.

 [link] outlines the most common types of distribution channels for consumer goods. These businesses, often called intermediaries, play important roles in the distribution of goods and services. Intermediaries are companies that act as liaisons between the buyer and seller. These companies can take on a variety of roles to facilitate the transfer of products and services from a manufacturer to the end user. The path that a product or service takes from seller to buyer, including the intermediaries, is called the distribution or marketing channel. The length of the channel—short or long—will depend on many factors, including the product itself.

The Functions of Retailing in the Distribution Channel

Retailing has many important functions in the distribution channel. Consider Target, a general-merchandise retailer with stores in all 50 states and the District of Columbia, as well as locations across the globe.

 Target offers a wide variety of consumer goods in each of its large brick-and-mortar locations. In addition to what we, as consumers, see when shopping at Target, there are many other important functions for Target and other retailers in the distribution channel (see [link]). Let’s look at these functions in detail.

Major Types of Retailers

Store Retailers

Retailers tend to be the easiest of the channel members to identify because we see them everywhere we go, both in person and online. A store retailer is a traditional brick-and-mortar establishment where products are displayed for customers to purchase. Store retailers can be categorized in many ways based on their strategy mix, which includes a combination of store hours, location, product assortment, and prices.

Non-store Retailers

Non-store retailers are those retailers that operate outside of the traditional brick-and-mortar location. There are six main types of non-store retailers, and we will examine each in the following sections.

Retailing Strategy Decisions

Retailing Strategy Decisions

Retail marketers and other retail business leaders need to determine which retail strategy will work best for the products they sell. Recall that retailers often buy in bulk, break down that bulk into smaller units, and sell to the end consumer. As you may also recall, *value* refers to a perceived worth of a product based on its service, price, and utility provided. As marketers are determining the optimal strategy for the products and services being offered, value again becomes an important factor.

Retail Pricing

Retailers will determine the price for their product based on many factors, including their cost to purchase the product, shipping, storing, and other overhead expenses associated with the business. For store retailers, overhead expense is typically much higher than it is for online retailers considering the brick-and-mortar location, decoration of the store, storage, employee salaries, shrinkage (loss due to spoilage and theft), and other factors. The goal of the retailer, just like any for-profit business, is to make money; therefore, retailers must consider not only their own cost of doing business, but what consumers are willing to pay for the products and services they sell.

Store Location

An age-old saying in retailing and real estate is that the three most important variables in choosing where to establish a business are location, location, and location. If consumers cannot find or easily access a store retailer, they will not spend their time looking but instead will take their business elsewhere.

Omnichannel Marketing

Omnichannel marketing refers to an integrated approach and cooperation by the various channels to ensure a consistent brand message to customers.

 Consider Starbucks and its mobile app. The Starbucks mobile rewards app is designed for customers to have a similar experience to that of walking inside the store or even visiting its website. Utilizing an omnichannel strategy provides many advantages to both the consumer and company that might be otherwise more difficult to achieve. Omnichannel marketing provides increased access to products and improved brand visibility and allows for more personalization. This provides customers with a consistent experience with the brand regardless of where they experience it.

Retailer Communication

Retailers communicate to both their consumers and other channel members. The communication to consumers must be clear and concise to let potential customers know exactly what is being offered. While retailers develop communication strategies to directly reach their consumers, they will also collaborate on communication strategies with channel partners. For example, a Target commercial may feature a sale on Kellogg’s cereal. The retailer and the manufacturer have worked together on a joint message for the consumer. Consider a second example. When you walk into a bookstore and see the latest release of a popular author’s book in the front of the store display, the bookstore and the publisher have collaborated on all elements of that display: signage, how the book story is conveyed, display setup, etc.

Merchandise

Coupled with location and price, the choice of retail strategy will largely depend on the type of merchandise being offered to the consumer. Merchandise is simply the goods that are being offered for sale by a retailer. For large superstores, merchandise can include hundreds or thousands of pieces of merchandise, while smaller specialty stores stock narrow but deep product lines.

Recent Trends in Retailing

Trends in Retailing

As consumer behavior changes and as technology advances, marketers must make changes to stay relevant in the minds of their target market. During the late 1800s, the department store began the transition away from small mom-and-pop stores. In the 1920s, the first supermarket opened. In the 1950s, door-to-door selling was in full swing. In the 1980s, infomercials became mainstream. In the 1990s, online shopping got its start. In the 2000s, traditional brick-and-mortar stores began online sales. The rise of social media began in 2007, which created new selling opportunities (see [link]). Then, in 2017, the United States saw a slight shift back toward traditional store retailers. But, alas, in 2020 as the COVID-19 pandemic arose, that shift reversed again to online. These are just a few examples of how retailing has evolved with the times in the last century. As consumers get busier with their work and social lives, retailers find new ways to create value with the products they are selling. Let’s take a deeper look at some of the more recent trends in retailing.

Wholesaling

Wholesaling Defined

Wholesaling is the business of buying goods in bulk at a discount from a manufacturer or other distribution channel member and selling them to retailers for a higher price. Wholesalers are often referred to as middlemen because they are the entity that links the producer to the retailer. Unlike retailers, wholesalers generally do not interact with customers or have physical locations for them to visit. Wholesalers engage in a variety of business practices including buying, storing, selling, and marketing.

Types of Wholesalers

In addition to the general importance noted above, each type of wholesaler plays a specific and integral role in getting products from a manufacturer to the end user. The decision of which type of wholesaler a retailer will utilize—or which type of wholesaling a wholesaler chooses—will largely depend on the type of product, the additional services needed, and often, the industry as a whole. The following section examines the types of merchant wholesalers (see [link]).

Recent Trends in Wholesaling

Growing Competition

Prior to 2019, most of us did not give much thought to the supply chain or its channel members. We went to the store and were welcomed with endless aisles of the products we were used to purchasing. However, when the COVID-19 pandemic hit, the entire country became more in tune with channel members. Wholesalers were not unaffected by the disruption that the pandemic caused channel members, and new trends are on the horizon for wholesalers. Let’s take a look at these recent trends that affect wholesaling.

The Impact of Global Dynamics on the Supply Chain

Globalization has been integrating global markets for the past several decades. And supply chains have had to adjust to keep up with these changes. With products available from around the world at lower costs and retailers demanding faster deliveries, many wholesalers have expanded their operations in response to the rise of the global economy. This comes with its own set of challenges, such as an expanded sales force and the need to understand other economies, cultures, and languages.

Regulatory Requirements and Complexity

With advancements in technology (and the need for consumer security) as well as the growing global economy, regulatory requirements also increase—and become more complex. Wholesalers must understand such requirements in order to conduct business legally. For example, wholesalers need a special license to distribute restricted goods, such as alcohol, controlled drugs, firearms, and pesticides. Depending on the type of transportation mode being used—such as tractor-trailers hauling containers—special licensing may need to be obtained.

Challenges of Technology Evolution

The advancement and increased use of technology has brought about both challenges and opportunities for wholesalers. Product traceability has become increasingly easier, for example. Orders are easier to make and track. However, technology is expensive and comes with a learning curve for new users. The increased demand of consumers and retail customers requires wholesalers to keep up with technological advancements to stay competitive.

Ethical Issues in Retailing and Wholesaling

Ethical Issues in Retailing

As with any business entity, ethical issues arise in both retailing and wholesaling. It can be easy to find oneself in an ethical dilemma while trying to meet consumer demands and stay competitive. There are several prominent ethical issues that arise specifically with retailing and wholesaling.

Ethical Issues in Wholesaling

Just as retailers may face the temptation to be unethical toward consumers, wholesalers often find themselves in an ethical dilemma with their retail customers. Two common ethical issues that arise in wholesaling surround fairness and pricing.

Sustainable Marketing: The New Paradigm

In the Spotlight

Sustainable Marketing

Environmental Sustainability

Consumers increasingly demand purpose over profits from the brands they work for, shop for, invest in, and allow within their communities. In fact, an IBM study on consumer behavior indicated that 57 percent of consumers would alter consumption habits to be more environmentally conscious, and nearly 80 percent of survey respondents indicated that sustainability is essential.

 Therefore, sustainability is a business imperative. As defined by Philip Kotler, Professor Emeritus at Northwestern University, “the concept of sustainable marketing holds that an organization should meet the needs of its present consumers without compromising the ability of future generations to fulfill their own needs.” In other words, products and services consumed today should not harm consumers of tomorrow.

Traditional Marketing versus Sustainable Marketing

Differences between Traditional and Sustainable Marketing

Traditional marketing takes a customer approach and focuses on product, price, place, and promotion for a target audience. Sustainable marketing takes a “stakeholder approach” and considers customers, shareholders, employees, vendors, interest groups, media, and the general public. These groups are interested in the brand’s sustainability agenda, which becomes the focus of the marketing effort.

The Benefits of Sustainable Marketing

Purpose-Driven Strategy

A purpose-driven strategy is when companies work to make a difference in their community through their decisions and support of environmental programs. There are numerous benefits to developing a purpose-driven business strategy, including enhanced brand recognition, reduced costs, improved effectiveness, easier regulatory compliance, waste minimization, and enhanced return on investment (ROI) (see [link]).

Enhanced Brand Recognition

Brands that incorporate purpose earn enhanced brand recognition for that work, which can become a competitive advantage and result in higher profitability. Patagonia is a prime example of a company known for its sustainability programs. Its founder, Yvon Chouinard, envisioned the company as a pillar of sustainability and set the stage for other companies to follow. Patagonia sells outdoor wear that is durable and designed around sustainability. The brand will repair its goods to avoid customers purchasing new ones when they reuse them. It also donates 1 percent of annual sales to good causes worldwide. Finally, Patagonia facilitates an Action Works website that connects interested parties with local environmental protection groups to promote activism.

 These sustainability activities are critical to ensuring that Patagonia is a brand with a purpose.

Reduced Costs

Sustainability practices often carry an up-front investment; however, over time, these costs typically return a cost reduction. A survey by Bain & Company indicates five times revenue growth among all brands scoring highest on sustainability.

 This is possible because sustainability programs mean reduced materials, recycling programs, and lower use of natural resources, which are all good for the planet and reduce production costs.

Improved Effectiveness

Sustainability practices can improve organization effectiveness. For example, investing in human capital is an area of importance because potential new employees consider purpose, well-being, culture, diversity, equity, and inclusion when deciding where to work. Mastercard is an organization that prioritizes its people, and it sees improved effectiveness as a result. Mastercard saw an average annual profit growth of nearly 19 percent in the 10 years it connected purpose to profits.

Easier Compliance with Regulators

In addition to returning value to shareholders, companies are also responsible for following international, national, and local laws. A sustainability agenda goes beyond companies’ legal obligations and extends to serving the world better. This strategy eases compliance by going above and beyond what is expected by government agencies. For example, the US Environmental Protection Agency (EPA) provides regulatory information by sector to provide businesses with clear regulatory compliance criteria.

Waste Minimization

Environmental measures can reduce waste, creating a healthier planet. Many organizations are focused on waste minimization to demonstrate a commitment to the Earth. For example, McDonald’s has set a waste minimization goal of having 100 percent guest packaging derived from renewable, recycled, or certified sources by 2025. This is impactful because single-use plastics are a known source of waste, particularly in the oceans where plastic outnumbers fish in some regions.

Enhanced Return on Investment

As with any business strategy, goals and metrics are also important with a sustainability strategy. Organizations expect a return on investment when resources are committed, even with sustainability work. Organizations can look at several factors to determine the financial return on sustainability efforts. They will evaluate the increased interest from investors, changes in brand value, and revenue. Additionally, organizations can consider the well-being of their employees, their impact on the planet, and their efforts to improve the world as another key measure of success (see [link]).

Sustainable Marketing Principles

Consumer-Oriented Marketing

Consumer-oriented marketing is a solution focused on a customer’s need. The product is designed to solve a problem, distributed for convenience, and promoted as a solution to the consumer’s needs. A consumer-oriented marketing strategy requires extensive marketing research to understand the consumer’s needs. Organizations then must design the four Ps around those needs. Finally, a consumer-oriented marketing strategy requires customer service and feedback to ensure that consumer needs are met. Zappos is known for having a customer-oriented marketing strategy. With its strategy, it focuses heavily on customer service and has assembled an extensive team that solves any issue a consumer may face with an order.

Customer-Value Marketing

Customer-value marketing seeks to provide the customer with maximum utility compared to competitors. Customers make a value exchange when purchasing a product, so they naturally ask themselves whether the cost is worth the value of the transaction. This does not mean that all customer-value products and services are inexpensive. In fact, the high price of a product might be an intentional choice by the company to attract a specific target audience. For example, Tiffany & Co. has created a luxury brand around its jewelry’s value to customers.

Innovative Marketing

Innovative marketing uses media as a method for capturing shoppers’ attention and converting them into customers. The ever-changing digital landscape offers myriad possibilities to engage an audience in an innovative marketing strategy. For example, Shedd Aquarium in Chicago took its penguins on a field trip to meet their aquatic roommates for a virtual event in 2020. During the field trip, the Aquarium broadcasted on social media and delighted animal lovers worldwide while promoting the aquarium.

Mission Marketing

Mission-driven marketing aligns purpose and brand. With mission-driven marketing, a company uses its core mission and purpose as the focus of its marketing strategies.

Societal Marketing

Societal marketing is most akin to the sustainability strategies discussed in this chapter. A societal marketing strategy fulfills social responsibility obligations while satisfying customer needs. Athleta, a Gap company, sells premium-priced performance apparel to female athletes. Its product is designed for a target audience of women in motion. Athleta launched a *Power of She* campaign to celebrate the diversity of women and serve as a societal marketing effort. Additionally, approximately 70 percent of Athleta’s apparel is manufactured from recycled and sustainable materials.

Purpose-Driven Marketing

Brand Purpose

Brands satisfy many people, from employees to investors, to customers, to suppliers, and to the communities that they serve. These parties ask for more than a good product at a fair price. They ask for a brand to stand for something more than the product or service being offered. Brand purpose is developed deep in the DNA of an organization and should be infused in everything the brand says and does.

Brands That Put Purpose First

The brands that put purpose at the center create ways for their customers to experience purpose. Dove was a pioneer in brand purpose when it developed its Campaign for Real Beauty. Marketing research uncovered that young girls were impacted by media’s standards of beauty. Dove took this insight and decided to tackle a systemic societal problem. This multi-decade campaign led to a celebration of all types of beauty, redefining how we think of women and impacting self-esteem. Customers could experience purpose because the Campaign for Real Beauty was all about them. The Campaign for Real Beauty was more than just advertising; it reflected who Dove wanted to be in the world.