January 30, 2015

Marketing and New Product Development - Kotler and Keller's Book Chapter Summary

Marketing Management Revision Article Series





The questions addressed in the chapter

1. What challenges does a company face in developing new products and services?
2. What organizational structures and processes are used to manage new product development?
3. What are the main stages in developing new products and services?
4. What is the best way to manage the new-product development process?
5. What factors affect the rate of diffusion and consumer adoption of newly launched products and services?







Marketing management plays a key role in the new-product-development process along with the research and development department and other related departments.

New Products

The consulting firm Booz, Allen & Hamilton has identified six categories of new products in terms of their newness to the company and the marketplace.
New-to-the-world products (Product new to the company and the market)
New product lines: New products that allow a company to enter an established market for the first time (the product is new to the company not the market)
Additions to existing product lines: New products that supplement a company’s established products lines (package sizes, flavors, and so on)
Improvements and revisions of existing products: New products that provide improve performance or greater perceived value and replace existing product (Improvements in features and benefits of a product)
Repositionings: Existing products that are targeted to new markets or market segments (to be called a new product there must be some changes in the existing product to suit the new segments targeted).
Cost reductions: New products that provide similar performance at lower cost to the company.
Kotler says only 10% of all new products are truly innovative and new to the world.
New product development in various categories mentioned above is very important for any organization because existing products are vulnerable to changing consumer needs and tastes, new technologies, shortened product life cycles, and increased domestic and foreign competition.  Organizations have to be on the lookout for new products.

Factors That Contribute to Success in New Product Marketing

Madique and Zirger found the following factors:
1. Deep understanding of the customer needs.
2. High performance to cost ratio of the product 
3. Being the early entrant into the market
4. Higher contribution margin
5. Larger amount of marketing expenditure
6. Strong top management support
7. Greater cross-functional teamwork among R&D, Engineering, Manufacturing, Purchasing, Marketing and Finance from the beginning

Effective Organizational Arrangements for New Product Development


An effective new product development organization starts with top management. The amount of money spent on R & D is an important top management decision related to new product development. Companies give the responsibility for new product development to product mangers, or new-product managers, or new-product committee, or new-product department, or new-product venture teams. In general product managers may not be able to devote adequate time to new products as they have to take care of existing products' marketing and selling issues.

Managing the New Product Development Process


Eight stages are involved in the new product development process.

1. Idea generation
2. Idea screening
3. Concept development and testing
4. Marketing strategy development
5. Business analysis
6. Product development
7. Market testing
8. Commercialization

Idea Generation

A number of creative idea generating techniques can help individuals and groups generate ideas. Some of them are:
  • Attribute listing
  • Forced relationships
  • Morphological analysis
  • Reverse assumption analysis
  • New contexts
  • Mind mapping
  • Need/Problem identification
  • Brain storming
  • Synectics

Idea Screening

The purpose of screening is to drop poor ideas as early as possible and allow only promising ideas for further stage in the new product development process.

There is likelihood of two opposite types of errors occurring in this process. One, the drop error, results in dismissing a good idea. The other, the go-error, results in moving a poor idea forward.
Poor ideas result in product failures. Three types of product-marketing failures can be categorized: Absolute product failure loses money even on variable cost. Partial product failure recovers variable cost and some fixed cost. Relative product failure yields a profit, means it recovers variable cost and fixed cost, but the profitability is less than the company's target rate of return.

Concept Development and Testing

A product concept is an elaborated version of the product idea and it is expressed in meaningful consumer terms so that consumer can visualize the product.

Example of a product concept based on the idea of powder to add to milk to increase the nutritional value and taste.

Product concept: Product is a powdered mixture added to milk to make an instant breakfast that gives the person all the day's needed nutrition along with good taste and high convenience. The product comes in three flavors (chocolate, vanilla, and strawberry) and individual packets, six to box, at $2.49 a box.

Concept testing involves an appropriate group of target consumers giving their reactions to the concept.  The questions are related to communicability and believability, need level and satisfaction, gap level with respect to other products claiming to satisfy the same need, perceived value, purchase intention, and purchasing frequency & occasion. Who are likely to buy the product has also to be determined during concept testing phase.

New Product - Will it Sell?



Conjoint Analysis

Consumer preferences for alternative product concepts are identified using conjoint analysis. Green and Wind have illustrated use of this approach in connection with developing a new spot-removing, carpet cleaning agent for home use.

New Product Marketing Strategy Development

After the concept is finalized, marketing strategy needs to crystallized. At this stage the marketing strategy is expressed in three parts.

The first part: It describes the target market's size, structure, and behavior. Product positioning is defined. The sales size, market share and profit goals are expressed.

The second part: The price and distribution strategy and the required marketing budget  for the first year are specified.

The third part: It describes marketing-mix strategy over time and evolution of sales and profit.

Business Analysis

At this stage, marketing department has finalized its market understanding and converted it into sales revenues and related marketing costs. The next stage is analysis of operating costs and profit analysis.

Product Development

If the business analysis clears the product, actual product development work is given to the research and development department. Up to now the product has existed only as a word description, a drawing, or at best a rapid prototype. In the next step a working prototype has to be prepared that incorporates all requirements of customers that were expressed as a reaction to product concept. When the prototypes are ready, they must be put through rigorous functional tests and customer tests. Alpha testing is testing the product within the firm. Beta testing is done with customers.

Test Marketing or Market Testing


Based on the consumer testing, if the management is satisfied with functional, psychological performance of the product, and the business analysis shows the required profit, it is time to dress up the product with a brand name and packaging and do market test with actual package offered to market. Production for market testing is done in pilot plants or as contract manufacture.

High investment/high-risk products, where the chance of failure is high must be market tested. The cost of the market tests will be an insignificant percentage of the total project cost (both production facilities and full marketing costs). Various types of market testing are:

Sales-wave research
Simulated test marketing
Controlled test marketing
Test Markets

 Commercialization

Based on marketing, if the company decides  to go for the manufacture and sale of the product, capacity decisions are to be made. The timing of the launch, the geography of the initial launch, the niche market within the target market and how to launch the product become important decisions.

In introduction of new products, substantial marketing cost is involved. To introduce a major new customer packaged good into the national market, $25 million to $100 million is needed to advertise, promote, and communicate the availability of new product in the first year. In the case of new food products, marketing expenditures are typically of the order of 57% of sales during the first year.

Consumer Adoption Process

Marketers need to understand the new product adoption process to build an effective strategy for developing market for the product. Adoption is an individual’s decision to become a regular user of a product. The adoption process is followed by loyalty process.

Stages in the adoption process

Rogers defines the innovation diffusion process as “the spread of a new idea from its source of invention or creation to its ultimate users or adopters.”

Adopters go through the following five stages:

Awareness
Interest
Evaluation
Trial
Adoption

New product marketer has to aim his effort at facilitating the movement of consumer through these stages. 


Factors influencing the Adoption Process


Marketers have identified the following characteristics of adoption process:
Differences in individual readiness to try new products,
The effect of personal influence,
Differing rates of adoption based on the characteristics of the innovation
Differences in organization


Differences in individual readiness to try new products,

Certain persons have innovativenss. It is defined as "the degree to which an individual is relatively earlier in adopting new ideas than the other members of his social system." In each product area, there are innovators and early adopters.

Kotler and Keller gave an idea of relative percentages of people in various adoption categories based on Everett Rogers book.

Innovators  2.5%
Early adopters  13.5%
Early majority  34%
Late majority 34%
Laggards  16%

Certain people have influence on others adopting an innovation. If such people promote a new product, faster adoption will take place.

Characteristics of  the Innovation


Relative advantage of the new product compared to existing products
Compatibility
Complexity
Divisibility
Communicability

Cost
Risk and uncertainty
Scientific credibility
Social approval

The new product marketers has to research and find out the role of all these factors in increasing the adoption of the product.

Organizations' Readiness to Adopt Innovations


Similar to individuals, certain organizations are more ready to try the new product.


References

 

Philip Kotler and Kevin Keller, Marketing Management, 13th Edition
Philip Kotler, Marketing Management, 9th Edition (Main text for revision and article)


Green, Paul and Yoram and Wind, "New Ways to Measure Consumers' Judgments," Harvard Business Review, July-August 1975, 107-17.

Modesto A. Maidique and Billie JO Zirger, " A Study of Success and Failure in Product Innovation: the Case of the U.S. Electronics Industry," IEEE Transactions on Engineering Management, November 1984, pp. 192-203
See Bibliography also

Bibliography

Determinants of New Industrial Product Performance: A Strategic Reexamination of the Empirical Literature by GARY L. LILIEN AND EUNSANG, 1989
New Product Successes in Japanese Consumer Goods Market,
Hotaka Katahira, Makoto Mizuno, and Yoram Wind, 1994, Wharton School Working Paper
New Product Diffusion Models in Marketing: An Assessment of Two Approaches by Malcolm Wright and Don Charlett, Marketing Bulletin, 1995
______________________________________________________________________________
Migration from Knol
All management knols are being collected in http://nraomtr.blogspot.com/ .





Marketing articles are available under the label http://nraomtr.blogspot.com/search/label/Marketing%20Management
Article on differentiating and positioning http://nraomtr.blogspot.com/2011/11/marketing-strategy-differentiating-and.html

Planned Revision schedule for marketing chapters is in February and March

_________________________________________________________________________________


Article Originally Posted by me in
http://knol.google.com/k/marketing-and-new-product-development



Updated 30 Jan 2015, 2 Dec 2011

January 29, 2015

Sales Force Management - Kotler and Keller Book Chapter Summary

Importance of Sales

The original and oldest form of direct marketing is the field sales call. Many business marketing organizations use field salespersons to contact purchasing staff of companies and present their products and offers to them. Similarly many consumer companies like insurance companies and stockbrokers employ field sales persons. Even in company owned outlets, there are salespeople to help consumers locate the right product and buy it.

US firms spend over a trillion dollars annually on sales forces and sales force materials-more than they spend on any other communication or promotion method. Nearly 12 percent of the total workforce work full-time in sales occupations.

Average cost of a sales call ranges from $200 to $300. Closing a sale typically requires four calls, hence the total cost can range from $800 to $1,200. Hence, companies are trying to increase the productivity of sales force through better selection, training, supervision, motivation and incentives.


Designing the Sales Force


Sales personnel are the company’s link to the customers. To the customer, sales person is the company. Salesperson gives information about the customer to the company. Any company’s survival and existence depends on the market and hence the sales force which maintains that link deserves the deepest thought in terms of setting objectives for it, strategy for it and structuring it.

The common term sales representative covers a broad range of positions. Kotler and Keller categorized the salesman jobs into six types.

1. Deliverer: Major task if the delivery of a product (milk, fuel etc.)
2. Order taker: This type of sales person takes the sales order from the customer and delivers himself or forwards the order to others in the organization.
3. Missionary: He educates the potential consumers about the benefits and features of the product.
4. Technician: He helps the client make the choices in complex technical products.
5. Demand Creator: This person approaches people who have a need but have not yet decided to buy and creates demand for the product he is selling.
6. Solution Vendor: Solution vendor is similar to technician, but he is dealing with a variety of products, a combination of which will provide the solution to a customer's problem. 

Sales Force Objectives


Typical objectives could be specified in customer coverage and product coverage. A company might want its sales persons to spend 80% of their time with current customers and 20% with prospects. The objective in terms of products could be that 85% of sales have to come from established products and 15% have to be from new products.

In recent years, the emphasis is shifting to customer satisfaction and profits. Advances in accounting systems are enabling companies to find out channel profitability and customer profitability. In a similar way, customer satisfaction surveys have become more frequent.

Sales Force Strategy


The company can use direct sales force or contractual sales force. Direct sales force consists of full or part-time paid employees who work for the company exclusively. Contract sales force consists of independent representatives, agents and brokers who are paid commission based on their sales.

The selling methods vary depending on the situation. In a simple case, sales occur through a sales person interacting with a buyer. In a more complicated way, a sales person may have to meet many persons to make a sale. In more complex way, sales team has to interact with a buyer group. Conference selling is involved when many complex things are to be explained to a large number of persons in the buying organization. Seminar selling occurs through educational seminars in which state-of-art developments are explained to the participants and the subsequent interaction initiates the sales.

Regardless of selling context, sales people will have one or more of the following specific tasks to perform:

Prospecting
Targeting
Communicating
Selling
Servicing
Information gathering
Allocating


Sales Force Structure


Strategy determines structure. An appropriate strategy for the organization is arrived at first and then any changes required for the existing structure are carried out so that the structure is capable of executing the strategy.

If the company sells one product line to one end using industry with customers in many locations, the company would use a territorial sales force structure.  If the company is selling many products to many types of customers, a product specialized or market specialized sales force structure may be more appropriate. The structure needs to be changed by established companies as they expand and economic conditions change.

Sales Force Compensation


To attract qualified and quality sales people, the company has to develop an attractive compensation package in comparison to the ‘going market price.” The compensation will have four components, a fixed amount, a variable amount, expense allowances and benefits. A popular rule is to have 70% as fixed and 30% as the remaining portion.

Recruiting and Training the Sales Force


At the stage of selection companies have to make sure they get the right persons that subscribe to the company’s objectives and values.

What makes a good sales representative?

Most customers say they want the sales persons to be honest, reliable, knowledgeable and helpful. Charles Garfield identified the following as traits of super achievers in sales. “Risk taking, powerful sense of mission, problem-solving bent, care for the customer and careful call planners.” According to Robert McMurry, an effect sales person is compulsive wooer, an individual who has a strong need to hold the affection of others and win them as friends. The additional trait identified by McMurry are, a high level of energy, abounding self confidence, a chronic hunger for money, a well-established habit of industry, and a state of mind that regards, each objection, resistance, or obstacle a challenge.

Training sales representatives

Sales training programs satisfy the following goals.

1. Sales representatives need to know and identify with the company.
2. Sales persons have to know the company’s products
3. Sales representatives need to know customers’ and competitors’ characteristics
4. Sales parsons have to trained in effective presentations and interaction with customers
5. Sales force has to know the field procedures and responsibilities.
6. Training in ethical decision making


 Source Text Books

Philip Kotler and Kevin Keller, Marketing Management, 12th Edition
Philip Kotler,   Marketing Management, 9th Edition     

For Further Study


Robert N. McMurry, “The Mystique of Supersalesmanship”, Harvard Business Review, March-April 1961.

David Mayer and Herbert M. Greenberg, “What makes a Good Salesman?”  Harvard Business Review, July-August 1964, pp.119-25.

Frank V. Cespedes, Stephen X. Doyle, and Robert J. Freedman, “Teamwork for Today’s Selling”, Harvard Business Review, March-April, 1989, pp. 44-54.

Rolph Anderson, Essentials of Personal Selling: The New professionalism, Prentice Hall, Englewood Cliffs, 1995.

Douglas J. Dalrymple, Sales Management: Concepts and Cases, John Wiley, New York, 1994.

_________________________________________________________________________________


Marketing articles are available under the label http://nraomtr.blogspot.com/search/label/Marketing%20Management
Article on differentiating and positioning http://nraomtr.blogspot.com/2011/11/marketing-strategy-differentiating-and.html

Planned Revision schedule for marketing chapters is in February and March
_________________________________________________________________________________



Updated on 29 Jan 2015, 2 Dec 2011

Article originally posted in
http://knol.google.com/k/   sales-force-management
Knol portfolio rank 69

Direct Marketing and Its Management - Kotler's Chapter - Topic Summary



Direct Marketing - Definition by Direct Marketing Association (DMA)


"Direct marketing is an interactive marketing system that uses one or more advertising media to effect a measurable response and/or transaction at any location."

The response of direct marketing is measurable as the marketing messages are sent to expected marketing decision makers and the messages are so designed that responses can be clearly identified.

Direct marketing messages are now being used to build relationships also. Examples would be sending birthday cards and information booklets.

Direct marketing is growing at higher rate than that of retail sales. Even in business-to-business to sales direct marketing is delivering results.

Direct marketing accounts for almost 48% of total advertising spending, and companies spend more than $161 billion on direct marketing per year accounting for 103% of GDP(2005 year).

Benefits Reported by Users


Consumers short of time and tired of traffic and parking headaches appreciate direct marketing.
Significant number of persons report benefits from direct marketing methods. Consumers report that home shopping is convenient and also allows them to compare catalogues and order. Even business buyers report that they can go through relevant literature and make better choices without tying up time in meeting salespeople.

The growth of next-day delivery via FedEx, Airborne, and UPS has made delivery fast and easy.

Sellers are reporting benefits. Sellers can buy targets mailing lists like recently married people, people who had a child birth recently, people who bought a home recently etc. They can customize and personalize messages. Direct marketing can be so designed that the message reach the prospects at the right moment and hence read by more-interested persons. The cost effective approaches can be determined among the direct marketing approaches.  Direct marketing approach becomes less visible to competitors.

Direct Marketing Channels


Direct Mail
Catalog Marketing
Telemarketing
Newspaper Advertisements with offers
Radio Ads with offers
TV Ads with offers
Home shopping TV channels

Direct Mail


In direct marketing, an offer, announcement, reminder or other item is sent to an individual customer. Highly selective mailing lists are used for the purpose. Letters, flyers, foldouts, CDs, DVDs, and computer discs and pen drives are sent through direct mail and parcel services. Although the cost per thousand people is higher than mass media, the people reached are better selected participants,  But direct mail is already a saturated channel as the response rates are falling in recently in financial services industry as compared to earlier days.

In the design of direct-mail campaigns or programs, marketers have to decide on their objectives, target markets, and prospects, offer elements, means of testing the campaigns and measures of campaign success.

Objectives

In the case of expected orders, a response rate of 2% is normally considered good. The response rate is determined by the product category, price and the nature of offer. Direct mail can also be used to produce prospect leads, strengthen customer relationships.

Direct Mail Offer Elements

The direct mail offer strategy has five elements - the product, the offer, the medium, the distribution method, and the creative strategy. All can be tested. The mail itself has five components: the outside envelope, sales letter, circular, reply form, and reply envelope.

Some important findings of researchers related to direct mail communications.

1. The envelope should contain an illustration, and it must have a catchy reason to open it such as the announcement of a contest or benefit. Sometimes a nonstandard shape or size of envelope also attracts the attention.
2. The sales letter has to be brief on a good quality paper. It must start with a personal salutation and a headline in bold type. It should be signed by someone whose title is important. Computer-typed or printed letters are getting better response compared to printed letters. A pithy P.S. also increases response rate.
3. A colorful brochure or circular with detailed explanation of the offer accompanying the letter increases the response rate and offsets the increased cost.
4. The mailers must have a toll-free number for giving clarifications and bookings and a supporting website from which coupons etc. can be printed.
5. A postage free-reply envelope dramatically increases response rate.

Once again it is important to stress that all can be test marketed.

Direct marketing has effect on awareness, intention to buy and word of mouth apart from the actually buy order.

Direct marketers can calculate life time value of customers and campaign break-even response rate can be determined.


References

Marketing Management, 13th Edition, Philip Kotler and Kevin Lane Keller

Planned Revision schedule for marketing chapters is in February and March

Updated 29.1.2015, 11.6.2014,19.3.2013, 2.12.2011

Kotler's Book Chapter
http://www.pearsoned.ca/highered/showcase/kotler/pdf/9780132473958_ch17.pdf


Business Firm and Society - The External Environment, Social Responsibility and Ethics - Review Notes


Koontz and O'Donnell - Principles of Management Book Chapter


Managers of business firms or organizations in other walks of life are operating in pluralistic societies in which many groups represent various interests.

Enterprises do not live unto themselves alone. They are interlocking institutions that man has found it beneficial to organize to serve his needs. The family came into existence, then tribe, government, army, education, religion etc. slowly came into existence. The proliferation of institutions and enterprises has proceeded down to our day, where they often exist in bewildering confusion.

No ideal situation exists. People or individuals vary from stupid to the genius, from the passive to the  aggressive, from kind to the cruel, from the slothful to the energetic, from the cunning to the artless, from the humble to the proud. In an ideal society, the individuals would in concert determine when and which institutions and enterprises they would create to better serve themselves. But in practice many institutions and enterprises which have been created to serve them are the products of aggressive leaders-the few who care for many. They may not create always with care motive, they may do it for self-aggrandizement also.

The Historical Function of Business

Koontz and O'Donnell cite the explanation by economists. Economics conceives a business to be any activity that is concerned with the production (or purchase) for sale of scarce goods and services.The purpose of economic activity is always the same: it is to employ human and natural resources, and the man made capital equipment and components in the production of goods and services which the ultimate consumers want. Thus the purpose of business is to satisfy the economic wants of people, and since resources are scarce, their efficient use is a moral requirement.

Economic Organization of the Society or Country

The typical organizational patterns include free enterprise, socialism, communism, and the welfare state.

The Business of Business

There is no doubt whatever that the function of business is to make economic goods and services available for consumption. But it is not enough to produce economic goods; the first duty of business is to produce them efficiently.

Efficiency in resource employment is undoubtedly best achieved through free enterprise. It is the business of state to make sure through legislation and regulation that the private economy does not fail in its function to efficiently utilize resources to maximize the satisfaction of consumer wants for economic goods and services. The states are not able to do it by means of a monolithic bureaucracy as per the available experience.


External Environment and Stakeholders

Capital

Labor

Price Levels

Government policies

Technology
The term technology refers to the sum total of the knowledge we have of ways to do things.

Customers

Society

Social attitudes, beliefs, and values


Business Ethics

The practice of ethics is one of the social responsibilities of business. Unethical conduct is highly publicized whenever it is found, but most of the "sharp practices" remain hidden within the organizations or their networks.

Morals are customs with a high degree of social acceptance.

Business and professional codes

Koontz and O'Donnell note that widespread tendency of business groups and professional people to adopt codes of conduct has scope to further ethical practices and development of science of ethics. Examples of codes of conduct include those of medical, legal and accounting professions.

Purpose of declaring codes of conduct

The usual reasons are two. In the first place, it is considered that the publication of a code of ethics will improve the confidence of the customer, client, patient, or voter in the quality of service he may expect. A second reason is to assure standard practices in the relationships between members themselves. McGuire pointed out two additional reasons. They can be used as a crutch by the weak to refuse to do unethical acts. They also help in detection of unethical behavior in competitors and employees.


Businessmen have an obligation to all others in society to use scarce resources efficiently and, in so doing, to make certain that every decision stands firmly upon the applicable moral customs and any generally accepted ethical principles.


Updated 29 Jan 2015, 12 December 2011 

January 28, 2015

Integrated Marketing Communication - Kotler and Keller Chapter Summary





Marketing communications are the means by which firms attempt to inform, persuade and remind consumers about products and brands they sell.

Consumers can learn about the product and who makes the product. The communications also help in linking the product or brand to other people, places, events, brands, experiences, feelings and things.

The communication process required mass media and the media is providing challenges to marketers. In 1960, companies could reach 80% U.S. women with an advertisement in three TV networks: NBC, ABS and CBS. But now TV channels have proliferated,  viewers have means to skip the advertisements, home entertainment like vides,  CDs and DVDs, and alternative media like websites and blogs have come into existence.

The other challenge to marketers is that too many business firms are communicating and an average city dweller is exposed to 3000 to 5000 messages a day.

Marketing Communication Mix

Eight major modes of communications were described Kotler and Keller in their 13th Edition.

1. Advertising
2. Sales promotion
3. events and experiences
4. Public relations and publicity
5. Direct marketing
6. Interactive marketing
7. Word of mouth marketing
8. Personal selling

Apart from the above many aspects of company's products, production facilities and personnel also act as communications.

Marketing communications contribute to brand equity through creating brand awareness, brand image, brand responses, and brand relationships.

Integrated Marketing Communications

American Association of Advertising Agencies defines integrated marketing communications as concept of marketing communications that recognizes the value of a comprehensive plan. The comprehensive plan evaluates the strategic role of each communication medium, channel or discipline and combines them to provide clarity, consistency, and maximum impact through the seamless integration of messages.

To provide integrated marketing communication support media companies and advertising agencies are expanding their capabilities to offer multiplatform exposure to the messages of companies.

A multi-media use example is by Citibank. It used mail, coupon, 800 number, outbound telemarketing and print advertising to market home equity loans, The campaign gave 15% extra accounts compared to mail alone. Giving a website address in a print advertisement is also given as multi-media use.

As already stated, while in the earlier days different agencies specialised in different media channels now, more integrated agencies are coming up. These agencies are changing their names from advertising agencies to communication companies and promising clients to improve their overall communications effectiveness. An example of successful integrated marketing communications is IBM's use of Ogilvy. The result is integrated and more-effective marketing communications at a much lower total communications cost.

Integrated marketing communications can produce stronger message consistency and create greater sales impact through increased brand equity. The companies are now giving someone responsibility to unify the company's brand images and messages as they come through thousands of company activities.


Planned Revision schedule for marketing chapters is in February and March

Marketing Communication: Channels and Promotion Tools



_________________________________________________________________________________

"Marketing communications are the means by which firms attempt to inform, persuade, and remind consumers - directly, or indirectly - about the products and brands that they sell." (Kotler and Keller)

Personal and nonpersonal communication channels can be used for marketing communications. Within both of them there are many subchannels. The marketing communications mix is presented as mix of eight major modes or types of communication alternatives by Kotler and Keller in the 13 Edition.
1. Advertising
2. Sales promotion
3. Events and experiences
4. Public relations and publicity
5. Direct marketing
6. Interactive marketing
7. Word-of-mouth marketing
8. Personal selling
Advertisement - Is the only Way?

Personal Communication Channels

Personal communication is communication between two or more persons with a specific person communication with others. The message emanates from a specific person. It can be done face to face, or by a person to audience, over telephone, or through post or couriers or through emails or through mobile messages.

The personal communications in the case of marketing can also be categorized as communications from advocate, expert and social contacts. The company salespersons’ communication to customers is communication from advocates of the product.


An independent expert communicating to prospective buyers about the merits of the product is classified as expert communication. A neighbor saying good things about a brand is social channel of communication.

Companies take various steps to stimulate personal communications about their products and brands.

1. They identify influential individuals and devote extra effort on them.
2. Create opinion leaders by supplying possible opinion leaders with the product on attractive terms.
3. Use influential or believable people in testimonial advertising.
4. Develop word of mouth publicity by requesting satisfied clients to promote their product among their friends.
5. Establish online discussion groups and communities

Nonpersonal Communication Channels


They include media, atmospheres, and events.

Media channels include print media (newspaper, magazines, souvenirs, proceedings of conferences), broadcast media (radio, television), display media (billboards, signs, posters) and electronic media (audiotape, videotape, videodisk, CD-ROM).

Atmosphere is what firms create in their office environment. The office interiors and exteriors have a meaning to the potential buyers.

Events are occurrences designed to communicate particular messages to target audiences or audiences. Company arranged news conferences, opening ceremonies of various kinds, and sponsorships of various events come under event communications channels.

Communication through mass media stimulates personal communication channels.

The Promotional Tools


The characteristics of various promotional tools are as follows:

Advertising


Advertising is a public mode of communication. Because it is communicated simultaneously to large number of people and people know that the same communication is going to many people, they feel their motives for buying are understood by the advertiser.

Advertising messages can be repeated number of times. Buyers also can compare advertisements of various companies selling the same product. The media offers the facility to add color, sound etc. to the message and dramatize the message. But advertising cannot have dialogue with the people. People may not see and pay attention to the advertisement.

Advertising is an efficient way to reach geographically dispersed potential buyers at a low cost per exposure.

Advertising has two recent variants. Advertorials are offer editorial content and while it is paid for by the advertiser and it will be difficult for the reader to easily make out that it is an advertisement. Similarly infomercials are TV programs that are meant for promoting the products of the company. They discuss the working of the product, benefits of the products, and user experience etc. and they may beam the message to buy the product and the address to be contacted.

Sales promotion


Sales promotion tools like coupons, contests, premiums, and the like act as communication medium and also promote sales.

They gain attention and provide information that may lead the consumer to the product. They include a distinct invitation to the consumer to do the transaction in a short period of time.

Public relations and publicity


News stories and feature articles are more authentic and credible than advertisements to readers. The articles act as testimonials. The message gets through to the potential buyers as news and they may not turn away from it as they turn away from the advertisements.

Personal selling


Personal selling as a communicative channel involves a live, immediate, and interactive relationship between persons. Personal selling leads to relationships. The listener feels obligated to respond to the salesman at least with a polite “thank you.”

Direct Marketing


The alternatives are direct mail, Email, and telemarketing. In these cases the message is addressed to a specific person. The message can be customized. Even though mailing folders and email are normally standardized to gain efficiency. The message can be up to date.  In case of telemarketing, message can be altered depending on the response. In the case of other alternatives subsequent communication can be altered depending on the response. 


Events and Experiences


They include sponsorships of sports, arts, entertainment and cause events as well as activities that create novel interactions of consumers with product or brand. An example of experience can be providing airconditioned bus ride to potential consumers to make them excited about buying an airconditioner. Another example is internet companies providing internet at airports for free use by travellers.


Philip Kotler, Marketing Management (Main text for revision and article)



Recent Book on Marketing Communication.




Advertising Promotion and Other Aspects of Integrated Marketing Communications

Terence Shimp, J. Craig Andrews
Cengage Learning, 16-Jan-2013 -  752 pages



Table of Contents

PART I: THE PRACTICE AND ENVIRONMENT OF INTEGRATED MARKETING COMMUNICATIONS (I.M.C.).
1. An Overview of Integrated Marketing Communications.
2. Enhancing Brand Equity and Accountability.
3. Brand Adoption, Brand Naming and Intellectual Property Issues.
4. Environmental, Regulatory and Ethical Issues.

PART II: FUNDAMENTAL I.M.C. PLANNING BACKGROUND AND DECISIONS.
5. Segmentation and Targeting in I.M.C.
6. The Communications Process and Consumer Behavior.
7. The Role of Persuasion in I.M.C.
8. I.M.C. Objective Setting and Budgeting.

PART III: ADVERTISING MANAGEMENT AND NEW MEDIA CHOICES.
9. An Overview of Advertising Management.
10. Effective and Creative Ad Messages.
11. Endorsers and Message Appeals in Advertising.
12. Traditional Ad Media.
13. Online Advertising.
14. Social Media.
15. Direct Advertising and Other Media.
16. Media Planning and Analysis.
17. Measuring Ad Message Effectiveness.

PART IV: SALES PROMOTION MANAGEMENT.
18. Sales Promotion Overview and the Role of Trade Promotion.
19. Consumer Sales Promotion: Sampling and Couponing.
20. Consumer Sales Promotion: Premiums and other Promotions.

PART V: OTHER I.M.C. TOOLS.
21. Public Relations, Buzz Marketing, and Sponsorships.
22. Packaging, POP Communications, and Signage.
23. Personal Selling.




MBA Core Management Knowledge - One Year Revision Schedule







________________________________________________________________________
Migration from Knol

Marketing articles are available under the label http://nraomtr.blogspot.com/search/label/Marketing%20Management
Article on differentiating and positioning http://nraomtr.blogspot.com/2011/11/marketing-strategy-differentiating-and.html

Planned Revision schedule for marketing chapters is in February and March
____________________________________________________________________________

Related Articles


Marketing Management Article Series Directory



______________________________________________________________________________



Article originally posted in
http://knol.google.com/k/marketing-communication-channels-and-promotion-tools

Updated 28 Jan 2015, 17 Dec 2014, 9 June 2014


January 17, 2015

Analysis of Consumer Markets - Kotler's Book Chapter Summary

Firms need to research the consumer market to find answers to the questions:

1. Who constitutes the market? (occupants)
2. What the market buys? (objects)
3. Why the market buys? (objectives)
4. Who participates in the buying?
5. How the market buys? (operations)
6. When the market buys? (occasions)
7. Where the market buys? (outlets)


Consumer analysis can be applied at several levels. It can be used to analyze not only a single consumer but also groups of consumers that make up a target market—a larger group of consumers made up of all the purchasers of a product in an industry—or an entire society. Marketing strategies can be applied at all of these levels and analysis is to be done at all levels. ,





Why Consumer Analysis?


Consumer research and analysis should be key activities for developing marketing strategies. Consumer research includes many types of studies, such as test marketing, advertising pretests, sales promotion effects, analysis of sales and market share data, pricing experiments, traffic and shopping patterns, surveys, and many others.

 A logical sequence is to first research and analyze what consumers think, feel, and do relative to a company’s offerings and those of competitors. In addition, an analysis of consumer environments is called for to see what factors are currently influencing them and what changes are occurring. Based on this research and analysis, a marketing strategy is developed that involves setting objectives, specifying an appropriate target market, and developing a marketing mix (product, promotion, price, place) to influence it. After the target market has been selected based on careful analysis of key differences in groups of consumers, marketing strategies involve placing stimuli in the environment that hopefully will become part of the target market’s environment and ultimately influence its members’ behavior.

Consumer research and analysis should not end when a strategy has been implemented, however. Rather, research should continue to investigate the effects of the strategy and whether it could be made more effective. Thus, marketing strategy should involve a continuous process of researching and analyzing consumers and developing, implementing, and continuously improving strategies.

Marketing Strategy


 From a consumer analysis point of view, a marketing strategy is a set of stimuli placed in consumers’ environments designed to influence their affect, cognition, and behavior. These stimuli include such things as products, brands, packaging advertisements, coupons, stores, credit cards, price tags, salespeople’s communications, and, in some cases, sounds (music), smells (perfume), and other sensory cues.

 Wheel of Consumer Analysis:  The basis for consumer analysis is presented as a wheel.  It is a wheel because it is constantly rotating with changes in consumers and in marketing strategy. Marketing strategy is treated as the hub of the wheel because it is a central marketing activity and is designed by marketing organizations to influence consumers. Around the marketing strategy are the consumer affect and cognition, consumer behavior and consumer environment.


CONSUMER AFFECT AND COGNITION
Consumer affect and cognition refer to two types of mental responses consumers exhibit toward stimuli and events in their environment. Affect refers to their feelings about stimuli and events, such as whether they like or dislike a product. Cognition refers to their thinking, such as their beliefs about a particular product.

CONSUMER BEHAVIOR
Consumer behavior refers to the physical actions of consumers that can be directly observed and measured by others. It is also called overt behavior to distinguish it from mental activities, such as thinking, that cannot be observed directly.

 Behavior is critical for marketing strategy because only through behavior can sales be made and profits earned. Although many marketing strategies are designed to influence consumers’ affect and cognition, these strategies must ultimately result in Overt Consumer Behavior to have value for the company. Thus, it is critical for marketers to analyze, understand, and influence overt behavior.


CONSUMER ENVIRONMENT
The consumer environment refers to everything external to consumers that influences what they think, feel, and do. It includes social stimuli, such as the actions of others in cultures, subcultures, social classes, Reference Groups, and families, that influence consumers. It also includes other physical stimuli, such as stores, products, advertisements, and signs, that can change consumers’ thoughts, feelings, and actions.

 The consumer environment is important to marketing because it is the medium in which stimuli are placed to influence consumers. For example, marketers run commercials during TV shows that their target markets watch to inform, persuade, and remind them to buy certain products and brands. Marketers can send free samples, coupons, catalogs, and advertisements by mail to get them into consumers’ environments. Stores are located close to populated areas to get them in the proximity of consumers. Web sites become part of a consumer’s environment if they are contacted.



 Clearly, marketing strategies should be designed not only to influence consumers but also to be influenced by them. For example, if research shows that consumers are disgusted (affect and cognition) with  advertisements for a product, the company may want to change its ads to better appeal to the market. If research shows that consumers in the target market do not shop (behavior) in stores where a company’s product is featured, the distribution strategy may have to be changed. If research shows that consumers want to be able to get information from a company’s Web site (environment) and none exists, the company may want to create one. Thus, marketing strategies should be developed, implemented, and changed based on consumer research and analysis.

 Levels of Consumer Analysis

 As noted, consumer research and analysis can be conducted at several different levels. The Wheel of Consumer Analysis is a flexible tool that can aid in understanding different societies, industries, market segments, or individual consumers. It can be used fruitfully by both marketing strategists  to understand the dynamics that shape each of these levels.

Consumers are the focal point in the development of successful marketing strategies. Marketing strategies both influence and are influenced by consumers’ affect and cognition, behavior, and environment. Analysis of consumer in the three areas should help marketers develop informed answers to questions about marketing strategies such as the following:

1. What are some effective ways to segment markets?
2. How can products be effectively positioned?
3. What are the relationships between product strategies and consumers?
4. What are the relationships between promotion strategies and consumers?
5. What are the relationships between channels of distribution and consumers?
6. What are the relationships between pricing strategies and consumers?
7. What consumer variables affect the success of a marketing strategy?
8. How can a firm develop brand-loyal consumers?
9. What is the role of consumer satisfaction in developing successful market offerings?
10. How does nonstore consumer behavior differ from behavior in stores?

SOCIETIES
Changes in what a society believes and how its members behave can be analyzed with the Wheel of Consumer Analysis. For example, a recent change in our society involves greater concern with health and fitness. How did this change occur? Surely, consumers were always concerned with living long, happy lives. A growing body of medical research indicated people could be healthier and live longer if they ate properly and exercised regularly. This research may have changed attitudes of some consumers about their eating and exercise habits. As these consumers, particularly those on the West Coast, changed their attitudes and began living more healthful lifestyles, many other consumers copied these beliefs and behavior patterns. In addition, healthy, well-toned people are considered more attractive in our society. This belief may have accelerated the health and fitness movement. Also, because a variety of health-related industries, such as health foods, exercise equipment, and sports apparel, developed and promoted proper eating habits and regular exercise, consumers were increasingly exposed to the concept and benefits of an active lifestyle.


INDUSTRIES
The Wheel of Consumer Analysis can be used to analyze the relationships of a company and its competitors with consumers in specific industries. For example, consider the effects of health concerns on the beer industry. Lite beer from Miller took advantage of the health movement and created the market for reduced-calorie beer. Miller Brewing Company became the light-beer market leader by being the first to offer a product that was consistent with a change occurring in society, and it also, through developing and marketing the product, helped accelerate the change. Thus, a change in consumer beliefs and behavior concerning calorie intake influenced a marketing strategy to introduce and spread the change in consumer beliefs and behaviors. The success of the product influenced competitors to also offer light beers, further changing demand for this product category.

 However, another change in this industry is the concern with responsible drinking, which decreases demand for alcohol products in general. This change has led to the development and marketing of nonalcoholic beers and, for many consumers, abstinence from any alcoholic beverages. Consumer groups such as Mothers Against Drunk Driving and Students Against Drunk Driving have also influenced many members of society to reduce their alcohol consumption. Although being drunk and boisterous was considered acceptable behavior some years ago, many consumers no longer find it so. Similarly, smoking was at one time considered a sign of maturity and “coolness,” whereas today fewer and fewer public places tolerate smoking.

 At the industry level, changes in consumer cognition, affect, and behavior can threaten existing products and can also offer opportunities to develop products more consistent with new values and behaviors. Successful marketing strategies depend on analyzing consumer–product relationships not only for the company’s products but for those of competitors, and creating an advantage over competitive offerings.

MARKET SEGMENTS
The Wheel of Consumer Analysis can be used to analyze groups of consumers who have some similarity in cognition, affect, behavior, and environment. Successful firms in an industry usually divide the total market into segments and try to appeal most strongly to one or more of them. For example, the emphasis on health encouraged many consumers to become involved in sports. However, specific shoes designed to play each sport effectively were not always available. Today consumers can find many varieties and styles of shoes for running, bicycling, soccer, basketball, and other sports. These shoes vary in design, features, and price ranges to appeal to groups of consumers that are similar in some ways.



INDIVIDUAL CONSUMERS
Finally, the Wheel of Consumer Analysis can be used to analyze the consumption history, a single purchase, or some aspect of a purchase for a specific consumer. Lands’ End, a catalog marketer, carefully analyzes individual consumers in terms of their previous purchasing history. The company can then target individual consumers with specialty catalogs of the types of merchandise previously bought.



More Detailed Analysis Consumer Behavior


A consumer's buying behavior is influenced by cultural, social, and personal factors.

Cultural Factors

Cultural factors exert the broadest and deepest influence.

Culture is the fundamental determinant of a person's wants and consuming behavior. A culture includes behavior, values and assumptions. Culture is generally thought be associated with societies.  A child growing up in the United States is exposed to the following values: achievement and success, activity, efficiency and practicality, progress, material comfort, individualism, freedom, external comfort, humanitarianism, and youthfulness. Product offerings and marketing and selling practices have to be different or must have appropriate variations for different cultures.

Culture of a society is not monolithic and there will be subcultures. Subcultures in USA are based on nationalities, religions, racial groups, social classes and geographic regions. When people following a  subculture are large in number and affluent, companies often use them as target market segments  and design specialized products and marketing programs to serve them.

Subculture also emerge due to social classes. In USA, seven social classes are described in a classic study. 1. :Lower lowers  2. Upper lowers  3, Working class  4. Middle class  5. Upper middle class  6. Lower uppers  7. Upper uppers.

Persons within each class tend to be more alike in dress, speech patterns, transport facilities and entertainment avenues used.

Social Factors

Group Membership: Groups in which a person is a member have an influence on his consuming behavior. People are members of primary groups like family, friendship groups, neighbors, coworkers where interaction is very frequent. They also participate in many secondary where interaction is less frequent. People also have aspirational groups in which they are not members but want to be members. Similarly, they have dissociative groups which they disapprove.

Groups have opinion leaders and marketers have to influence opinion leaders to influence the members of the groups.

Importance of the family can be gauged by a finding that says as much as 47% of American household spending in 2005 amounting to more than $700 billion is influenced by children under 14. The influence is direct where the child demands the products and brands and indirect where parents try to buy what they think their children like or want.

Personal Factors

The personal factors that have an influence on consumption patterns and behavior

Age and Stage in the Life Cycle

Occupation and Economic Circumstances

Personality and Self Concept

Lifestyle and Values


A new life style of Health and Sustainability has emerged in recent days. It has been named LOHAS. Within this life style there are five segments.

Sustainable Economy
Healthy Lifestyles
Ecological Lifestyles
Alternative Health Care
Personal Development


Key Psychological Associated Consumption Behavior

Motivation: Theories of Freud, Maslow, and Herzberg.

Freud: Unconscious motives for behavior
Maslow: Hierarchy of needs
Herzberg: Dissatisfiers and Motivators

Perception

Perception is the process by which we select, organize,and interpret information inputs to create a meaningful picture of the world. People can emerge with different perceptions of the same object because of three perceptional processes; selective attention, selective distortion, and selective retention.  Subliminal perception is also a concept of interest.

Learning

Learning induces changes in behavior of people and hence it changesin consumption behavior and consumer behavior. Learning theorists proposed that learning is produced through the interplay of drives, stimuli, cues, responses, and reinforcement. Classical conditioning and operant (instrumental) conditioning are two classical approaches to learning.

Memory

A brand has to go into memory people so that it forms part of the awareness set. Hence marketer have to understand the process of memory development. Marketing has to be way of making sure consumers have to the right types of product and service experiences to create the right brand knowledge structures and maintain them in memory.



Sources:

Marketing Management by Kotler, Philip (9th Edition),
Marketing Management by Kotler, Philip and Kevin Keller, 13th Edition

http://answers.mheducation.com/marketing/consumer-behavior/consumer-analysis


Planned Revision schedule for marketing chapters is in February and March

Updated  17 Jan 2015, 3 Dec 2011