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98 PART 2 | CAPT u Ring M ARke Ting insigh Ts In DIan-a Mer Icans The U. S. Indian-American population has exploded over the past decade, according to the 2010 Census, surpassing Filipinos as the nation's second-largest Asian population after Chinese. Affluent, well-educated, and consumer-oriented, Indian-Americans are attractive to marketers. Nationwide Insurance developed print and TV ads for them and other South Asians in the New York tristate area and San Francisco and Silicon Valley. Cadillac has run newspaper ads and local TV spots in Chicago and New York after seeing many Indian-Americans and South Asians in its showrooms. Zee TV was the first Hindi satellite channel and is the leading network serving the South Asian audience. Y et marketers must not overgeneralize—within each group are consumers quite different from each other. 30 Diversity also goes beyond ethnic and racial markets. More than 51 million U. S. consumers have disabilities, and they constitute a market for home delivery companies such as Internet grocer Peapod. educa Tional Grou Ps The population in any society falls into five educational groups: illiterates, high school dropouts, high school diplomas, college degrees, and professional degrees. More than two-thirds of the world's 793 million illiterate adults are found in only eight countries (Bangladesh, China, Egypt, Ethiopia, India, Indonesia, Nigeria, and Pakistan); of all illiterate adults in the world, two-thirds are women; extremely low literacy rates are concentrated in three regions—the Arab states, South and West Asia, and Sub-Saharan Africa—where around one-third of the men and half of all women are illiterate (2005 est. ). 31 The United States has one of the world's highest percentages of college-educated citizens. 32 As of March 2011, just over 30 percent of U. S. adults held at least a bachelor's degree, and 10. 9 percent held a graduate degree, up from 26. 2 percent and 8. 7 percent 10 years earlier. Half of 18-and 19-year-olds were enrolled in college in 2009, but not all college students are young. About 16 percent are 35 and older; they also make up 37 percent of part-time students. The large number of educated people in the United States drives strong demand for high-quality books, magazines, and travel and creates a supply of skills. household Pa TTerns The traditional U. S. household included a husband, wife, and children under 18 (sometimes with grandparents). By 2010, only 20 percent of U. S. households met this definition, down from about 25 percent a decade before and 43 percent in 1950. Married couples have dropped below half of all U. S. households for the first time (48 percent), far below the 78 percent of 1950. The median age at first marriage has also never been higher: 26. 5 for brides and 28. 7 for grooms. 33 The U. S. family has been steadily evolving toward less traditional forms. More people are divorcing, separating, choosing not to marry, or marrying later. Other types of households are single live-alones (27 percent), single-parent families (8 percent), childless married couples and empty nesters (32 percent), living with nonrelatives only (5 percent), and other family structures (8 percent). Indian-Americans are a fast growing minority segment with much appeal to marketers. Source: Ashok Sinha/Taxi | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
Colle CTing info RMAT ion And fo Re CAs Ting de MAnd | chapter 3 99 The biggest change for the decade was the jump in households headed by women without husbands—up 18 percent. Nontraditional households are growing more rapidly than traditional households. Academics and mar-keting experts estimate the gay and lesbian population at 4 percent to 8 percent of the total U. S. population, higher in urban areas. 34 Each type of household has distinctive needs and buying habits. The single, separated, widowed, and divorced may need smaller apartments; inexpensive and smaller appliances, furniture, and furnishings; and smaller-size food packages. Many non-traditional households feel advertising ignores families like theirs, suggesting an oppor-tunity for advertisers. 35 Even traditional households have changed. Boomer dads marry later than their fathers and grandfathers did, shop more, and are much more active in raising their kids. Bugaboo makes innovative baby strollers that speaks to modern parents. Bugaboo's iconic functional strollers have unique designs and functionalities such as adjustable suspension and an extendable handle bar perfect for taller dads. And before Dyson, the high-end vacuum company, appealed to U. S. dads' inner geek by focusing on the machine's revolutionary technology, men weren't even on the radar for vacuum cleaner sales. Now they make up 40 percent of Dyson's customers. 36 The e COn Om IC env Ir Onmen T Purchasing power depends on consumers' income, savings, debt, and credit availability as well as the price level. As the recent economic downturn vividly demonstrated, fluctuating purchasing power strongly affects business, especially for products geared to high-income and price-sensitive consumers. Marketers must understand con-sumer psychology and levels and distribution of income, savings, debt, and credit. consu Mer Psycholo Gy The recession that began in 2008 initiated new consumer spending patterns. Were these temporary adjustments or permanent changes?37 The middle class—the bread and butter of many firms—was hit hard by record declines in both wages and net worth. Some experts believed the recession had fundamentally shaken consumers' faith in the economy and their personal financial situations. “Mindless” spending would be out; willingness to comparison shop, haggle, and use discounts would become the norm. 38 Consumers at the time certainly seemed to believe so. In one survey, almost two-thirds said the recession's eco-nomic changes would be permanent; nearly one-third said they would spend less than before the recession. Others believed tighter spending was a short-term constraint and not a fundamental behavioral change; they predicted their spending would resume when the economy improved. 39 Identifying the more likely long-term scenario—especially for the coveted 18-to 34-year-old group—would help market-ers decide how to spend their money. Executives at Sainsbury, the third-largest UK chain of supermarkets, concluded that the recession had created a more risk-averse British consumer, sav-ing more, paying off debts instead of borrowing, and shopping in more cost-conscious ways. Even wealthy UK consumers traded down some to lower-cost items. As one retail executive said, “There's nobody who can afford not to try to save. ”40 inco Me dis Tribu Tion There are four types of industrial structures: subsistence economies like Papua New Guinea, with few opportunities for marketers; raw-material-exporting economies like Democratic Republic of Congo (copper) and Saudi Arabia (oil), with good markets for equipment, tools, supplies, and luxury goods for the rich; industrializing economies like India, Egypt, and the Philippines, where a new rich class and a growing middle class demand new types of goods; and industrial economies like Western Europe, with rich markets for all sorts of goods. Marketers often distinguish countries using five income-dis-tribution patterns: (1) very low incomes; (2) mostly low incomes; (3) very low, very high incomes; (4) low, medium, high incomes; and (5) mostly medium incomes. Consider the market for the Lamborghini, an automobile costing more than $150,000. The market would be very small in countries with type 1 or 2 income patterns. One of the largest single markets for the ultra-expensive The unique design of Bugaboo baby strollers are especially appeal-ing to modern parents. Source: Bugaboo International B. V. | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
100 PART 2 | CAPT u Ring M ARke Ting insigh Ts sports car Lamborghinis is Portugal (income pattern 3), one of the poorer countries in Western Europe, but with high enough income inequality that there are also wealthy families who can afford expensive cars. 41 inco Me, savin Gs, deb T, and credi T U. S. consumers have a high debt-to-income ratio, which slows expenditures on housing and large-ticket items. When credit became scarcer in the recession, especially for lower-income borrowers, consumer borrowing dropped for the first time in two decades. The financial meltdown that led to this contraction was due to overly liberal credit policies that allowed consumers to buy homes and other items they could not really afford. Marketers wanted every possible sale, banks wanted to earn interest on loans, and near financial ruin resulted. An economic issue of increasing importance is the migration of manufacturers and service jobs offshore. From India, Infosys provides outsourcing services for Cisco, Nordstrom, Microsoft, and others. The 35,000 employees the fast-growing $4. 2 billion company hires every year receive technical, team, and communication training in Infosys's $120 million facility outside Bangalore. 42 The S OCIOC ul Tural env Ir Onmen T From our sociocultural environment we absorb, almost unconsciously, a world view that defines our relationships to ourselves, others, organizations, society, nature, and the universe. Views of ourselves. Some “pleasure seekers” chase fun, change, and escape; others seek “self-realization. ” Some adopt more conservative behaviors and ambitions (see Table 3. 4 for favorite consumer leisure-time activities and how they have changed, or not, in recent years). Views of others. People are concerned about the homeless, crime and victims, and other social problems. At the same time, they seek those like themselves for long-lasting relationships, suggesting a growing market for social-support products and services such as health clubs, cruises, and religious activity as well as “social sur-rogates” like television, video games, and social networking sites. Views of organizations. After a wave of layoffs and corporate scandals, organizational loyalty has declined. Companies need new ways to win back consumer and employee confidence. They need to ensure they are good corporate citizens and that their consumer messages are honest. Views of society. Some people defend society (preservers), some run it (makers), some take what they can from it (takers), some want to change it (changers), some are looking for something deeper (seekers), and still others want to leave it (escapers). 43 Consumption patterns often reflect these social attitudes. Makers are high achievers who eat, dress, and live well. Changers usually live more frugally, drive smaller cars, and wear sim-pler clothes. Escapers and seekers are a major market for movies, music, surfing, and camping. Views of nature. Business has responded to increased awareness of nature's fragility and finiteness by making more green products, seeking their own new energy sources, and reducing their environmental footprint. Companies are also literally tapping into nature more by producing wider varieties of camping, hiking, boat-ing, and fishing gear such as boots, tents, backpacks, and accessories. Views of the universe. Most U. S. citizens are monotheistic, although religious conviction and practice have waned through the years or been redirected into an interest in evangelical movements or Eastern religions, mysticism, the occult, and the human potential movement. Other cultural characteristics of interest to marketers are core cultural values and subcultures. Let's look at both. High-priced Lamborghini sports cars have found success in relatively poorer countries by appealing to enough affluent buyers. Source: © Paul Best/Alamy | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
Colle CTing info RMAT ion And fo Re CAs Ting de MAnd | chapter 3 101 core cul Tural values Most people in the United States still believe in working, getting married, giving to charity, and being honest. Core beliefs and values are passed from parents to children and reinforced by social institutions—schools, churches, businesses, and governments. Secondary beliefs and values are more open to change. Believing in the institution of marriage is a core belief; believing people should marry early is a secondary belief. Marketers have some chance of changing secondary values but little chance of changing core values. The nonprofit organization Mothers Against Drunk Drivers (MADD) does not try to stop the sale of alcohol but promotes lower legal blood-alcohol levels for driving and limited operating hours for businesses that sell alcohol. Although core values are fairly persistent, cultural swings do take place. In the 1960s, hippies, the Beatles, Elvis Presley, and other cultural phenomena had a major impact on hairstyles, clothing, sexual norms, and life goals. Today's young people are influenced by new heroes and activities: music entertainer and mogul Jay-Z, singer Lady Gaga, and snowboarder and skateboarder Shaun White. subcul Tures Each society contains subcultures, groups with shared values, beliefs, preferences, and behaviors emerging from their special life experiences or circumstances. Marketers have always loved teenagers because they are trendsetters in fashion, music, entertainment, ideas, and attitudes. Attract someone as a teen, and you will likely keep the person as a customer later in life. Frito-Lay, which draws 15 percent of its sales from teens, noted a rise in chip snacking by grown-ups. “We think it's because we brought them in as teenagers, ” said Frito-Lay's marketing director. 44 The na Tural env Ir Onmen T In Western Europe, “green” parties have pressed for public action to reduce industrial pollution. In the United States, experts have documented ecological deterioration, and watchdog groups such as the Sierra Club and Friends of the Earth commit to political and social action. Table 3. 4 Favorite Leisure-Time Activities 1995 (via phone)2013 (via online) % % Reading 28 Watch TV 42 TV watching 25 Reading 37 Spending time with family/kids12 Spending time with families and friends18 Fishing 10 Watching/Going to movies 11 Gardening 9 Exercise/working out 10 Playing team sports 9 Playing video games and computer/ Internet games10 Going to movies 8 Walking/running/jogging 8 Walking 8 Gardening 7 Entertaining 7 Concerts/listening to/playing music 7 Golf 6 Hobby related activities 5 Sources: Harris Poll, “Favorite Leisure Activities” (via online), http://www. harrisinteractive. com/News Room/Harris Polls/tabid/447/mid/1508/ article Id/1345/ctl/ Read Custom%20Default/Default. aspx, Table 4, accessed July 2014; and Harris Poll, “Favorite Leisure-Time Activities” (Spontaneous, Unaided Responses, via phone), http://www. harrisinteractive. com/vault/Harris-Interactive-Poll-Research-Time-and-Leisure-2008-12. pdf, Table 1, accessed July 2014. | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
102 PART 2 | CAPT u Ring M ARke Ting insigh Ts Steel companies and public utilities have invested billions of dollars in pollution-control equipment and environ-mentally friendly fuels, making hybrid cars, low-flow toilets and showers, organic foods, and green office buildings everyday realities. Opportunities await those who can reconcile prosperity with environmental protection. Consider these solutions to concerns about air quality:45 Nearly a quarter of the carbon dioxide that makes up about 80 percent of all greenhouse gases comes from electrical power plants. Dublin-based Airtricity operates wind farms in the United States and the United Kingdom that offer cheaper and greener electricity. Transportation is second only to electricity generation as a contributor to global warming, accounting for roughly a fifth of carbon emissions. Vancouver-based Westport Innovations developed a conversion technol-ogy—high-pressure direct injection—that allows diesel engines to run on cleaner-burning liquid natural gas, reducing greenhouse emissions by a fourth. Due to millions of rural cooking fires, parts of Southern Asia suffer extremely poor air quality. A person cook-ing over an open wood or kerosene fire inhales the equivalent of two packs of cigarettes a day. Illinois-based Sun Ovens International makes family-sized and institutional solar ovens that use mirrors to redirect the sun's rays into an insulated box. Used in 130 countries, the oven both saves money and reduces greenhouse gas emissions. Today's youth are more likely to be influenced by contemporary music icons such as Jay-Z and Lady Gaga. Source: Associated Press Source: Associated Press Irish firm Airtricity is developing new wind farms as an alterna-tive energy source. Source: © David Cairns/Alamy | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
Colle CTing info RMAT ion And fo Re CAs Ting de MAnd | chapter 3 103 Corporate environmentalism recognizes the need to integrate environmental issues into the firm's strategic plans. Trends for marketers to be aware of include the shortage of raw materials, especially water; the increased cost of energy; increased pollution levels; and the changing role of governments. 46 (See also “Marketing Insight: The Green Marketing Revolution. ”) however, paying significantly more to be environmentally friendly was becoming a barrier for many consumers. Interestingly, although some marketers assume younger people are more concerned about the environment, some research suggests older consumers actually take their eco-responsibilities more seriously. Company Perspectives In the past, “green marketing” programs were not always entirely suc-cessful. Those that were persuaded consumers they were acting in their own and society's long-run interest at the same time by buying, for instance, organic foods that were healthier, tastier, and safer and energy-efficient appliances that cost less to run. Some green products have emphasized their natural benefits for years, like Tom's of Maine, Burt's Bees, Stonyfield Farm, and Seventh Generation. Products offering environmental benefits are becoming more mainstream. Part of the initial success of Clorox Green Works household cleaning products, launched in January 2008, was that it found the sweet spot where a target market wanting to take smaller steps toward a greener lifestyle met a green product with a very modest price premium and sold through a grassroots marketing program. The recession took its toll on some newly launched green prod-ucts, however, and Green Works and similar products from Arm & Hammer, Windex, Palmolive, and Hefty found sales stalling. Some con-sumers have also become more skeptical of green claims that are hard to verify. One challenge is the difficulty consumers have in experiencing or observing the environmental benefits of products, leading to accu-sations of “greenwashing” where products are not nearly so green or environmentally beneficial as their marketing might suggest. Some experts recommend avoiding “green marketing myopia” by focusing on consumer value positioning, understanding what consum-ers know and should know, and credible product claims. During tough economic times especially, having the right value proposition and mak-ing sure green products are seen as effective and affordable are critical. Sources: Jacquelyn A. Ottman, Edwin R. Stafford, and Cathy L. Hartman, “Avoiding Green Marketing Myopia,” Environment (June 2006), pp. 22-36; Jill Meredith Ginsberg and Paul N. Bloom, “Choosing the Right Green Marketing Strategy,” MIT Sloan Management Review (Fall 2004), pp. 79-84; Jacquelyn Ottman, Green Marketing: Opportunity for Innovation, 2nd ed. (New York: Book Surge Publishing, 2004); Jacquelyn Ottman, The New Rules of Green Marketing (San Francisco: Berrett-Koehler, 2012); Mark Dolliver, “Deflating a Myth,” Brandweek, May 12, 2008, pp. 30-31; Jeffrey M. Jones, “Worry about U. S. Water, Air Pollution at Historic Lows,” www. gallup. com, April 13, 2012; “The 2011 Green Brands Survey,” www . cohenwolfe. com, June 8, 2011; “Greendex 2012: Consumer Choice and the Environment—A Worldwide Tracking Survey,” www. nationalgeographic. com, July 2012; “Green Gets Real,” www. gfkamerica. com, accessed November 12, 2012; Stephanie Clifford and Andrew Martin, “As Consumers Cut Spending, 'Green' Products Lose Allure,” New York Times, April 21, 2011; Tiffany Hsu, “Skepticism Grows over Products Touted as Eco-Friendly,” Los Angeles Times, May 21, 2011. marketing insight The Green Marketing Revolution Both consumers and companies are changing the way they view envi-ronmental issues, as the following descriptions illustrate. Consumer Perspective Consumers have put their very real environmental concerns into words and actions, focusing on green products, corporate sustainability, and other environmental issues. Here are highlights of some notable studies. WPP Green Brands Study. The WPP Green Brands Study surveys 9,000 people in eight countries and evaluates 370 brands. In 2011 it found consumer interest in green products had expanded to auto, energy, and technology sectors in addition to personal care, food, and household products. Sixty percent of consumers stated they wanted to buy products from environmentally responsible companies. In developed countries such as the United States and United Kingdom, 20 percent were willing to spend more than 10 percent extra on a green product. Consumers in developing countries put even more value on green products: Ninety-five percent of Chinese consumers, for example, said they were willing to pay more for a green product. Greendex. A collaboration between National Geographic and environmental research consultants Globe Scan, Greendex is a sustainable consumption index of actual consumer behavior and material lifestyles across 17 countries. It defines environmentally friendly consumer behavior in terms of people's transportation patterns, household energy, resource use, and consumption of food and everyday goods and how well consumers minimize their environmental impact. The 2012 survey found the top-scoring consumers in developing countries: India, China, and Brazil in de-scending order. Developed countries scored lower, with U. S. con-sumers lowest, followed by Canadians, Japanese, and the French. Gallup. Gallup has consistently found U. S. consumers are most concerned about pollution of drinking water, rivers, lakes, and reser-voirs and maintenance of fresh water for household needs and least concerned about global warming. Overall, the 2012 survey showed all ratings at lower levels than their 2000 peak as more U. S. adults feel environmental conditions in the United States are improving. Gf K Roper. The 2012 Gf K Roper Green Gauge Study showed key aspects of “green” culture—from organic purchase to recyclability—have gone mainstream. U. S. consumers increas-ingly turn to digital devices to learn about the environment and share their green experiences. During slow economic recovery, | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
104 PART 2 | CAPT u Ring M ARke Ting insigh Ts The earth's raw materials consist of the infinite, the finite renewable, and the finite nonrenewable. Firms whose products require finite nonrenewable resources —oil, coal, platinum, zinc, silver—face substan-tial cost increases as depletion approaches. Firms that can develop substitute materials have an excellent opportunity. One finite nonrenewable resource, oil, has created serious problems for the world economy. As oil prices soar, companies search for practical means to harness solar, nuclear, wind, and other alternative energies. Some industrial activity will inevitably damage the natural environment, creating a large market for pollution-control solutions such as scrubbers, recycling centers, and landfill systems as well as for alternative ways to produce and package goods. Many poor nations are doing little about pollution, lacking the funds or the political will. It is in the richer nations' interest to help them control their pollution, but even richer nations today lack the necessary funds. The Te Chn Ol OGIC al env Ir Onmen T The essence of market capitalism is a dynamism that tolerates the creative destructiveness of technology as the price of progress. Transistors hurt the vacuum-tube industry; autos hurt the railroads. Television hurt newspa-pers; the Internet hurt them both. When old industries fight or ignore new technologies, they decline. Tower Records, Borders, and others had ample warning they would be hurt by Internet downloads; their failure to respond led to their liquidation. In some cases, innovation's long-run consequences are not fully foreseeable. Cell phones, video games, and the Internet allow people to stay in touch with each other and plugged in with current events but also reduce attention to traditional media as well as face-to-face social interaction as people listen to music or watch a movie on their cell phones. Marketers should monitor the following technology trends: the accelerating pace of change, unlimited opportu-nities for innovation, varying R&D budgets, and increased regulation of technological change. accelera Tin G Pace of chan Ge More ideas than ever are in the works, and the time between idea and implementation is shrinking. In the first two-and-a-half years of the i Pad's existence, Apple sold a staggering 97 million units worldwide. 47 In many markets, the next technological breakthrough seems right around the corner, unli Mi Ted o PPor Tuni Ties for innova Tion Consider just a few remarkable openings. Medical researchers hope to use stem cells for organ generation and hybrid positron emission tomography (PET) and magnetic resonance imaging (MRI) to dramatically improve diagnosis. Environmental researchers are exploring plasma arc waste disposal to harness lightning and turn garbage into glass or a gaseous energy source. They are Seventh Generation offers a range of household products for environmentally conscious consumers. Source: Andrew H. Walker/Getty Images | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
Colle CTing info RMAT ion And fo Re CAs Ting de MAnd | chapter 3 105 developing desalination methods to safely and economically remove salt from ocean water and make it drinkable. Neuroscientists are studying how to harness brain signals via electroencephalography (EEG) as well as how to construct a “thinking” DNA neural network that can answer questions correctly. 48 varyin G r&d bud Ge Ts The United States is the world leader in R&D, spending $436 billion in 2012. Its advantage in innovation comes from all sectors—government-funded research from the National Aeronautics and Space Administration (NASA) and National Institutes of Health (NIH); top academic institutions such as Johns Hopkins University, University of Michigan, and the University of Wisconsin; and corporations such as Merck, Pfizer, Intel, and Microsoft. A growing portion of U. S. R&D, however, goes to the development side, not research, raising concerns about whether the United States can maintain its lead in basic science. Too many companies seem to be putting their money into copying competitors' products with minor improvements. Other countries are not standing still either. China, Israel, and Finland all are beginning to spend a larger percentage of their GDP on R&D than the United States. 49 increased re Gula Tion of Technolo Gical chan Ge Government has expanded its agencies' powers to investigate and ban potentially unsafe products. Safety and health regulations have increased for food, automobiles, clothing, electrical appliances, and construction. Consider the Food and Drug Administration (FDA). 50 the FD a The FDA plays a critical public health role, overseeing a wide range of products. Here is its specific charge: FDA is responsible for protecting the public health by assuring the safety, efficacy and security of human and veterinary drugs, biological products, medical devices, our nation's food supply, cosmetics, and products that emit radiation. FDA is also responsible for advancing the public health by helping to speed innovations that make medicines more effective, safer, and more affordable and by helping the public get the accurate, science-based informa-tion they need to use medicines and foods to maintain and improve their health. FDA also has responsibility for regulating the manufacturing, marketing and distribution of tobacco products to protect the public health and to reduce tobacco use by minors. Finally, FDA plays a significant role in the Nation's counterterrorism capability. FDA fulfills this responsibil-ity by ensuring the security of the food supply and by fostering development of medical products to respond to deliberate and naturally emerging public health threats. The FDA's level of enforcement has varied some through the years, in part depending on the political administration. It can also vary by product or industry. Congress recently empowered the FDA to place new restrictions on the prescrib-ing, distribution, sale, and advertising of proposed new drugs. The FDA looks at the safety and efficacy of any proposed new drug, but also additional considerations such as the integrity of the global manufacturing chain that makes it, post-marketing studies as a condition of approval, and demonstrable superiority over existing therapies. The P Ol ITICal-le Gal env Ir Onmen T The political and legal environment consists of laws, government agencies, and pressure groups that influence organizations and individuals. Sometimes these create new business opportunities. Mandatory recycling laws boosted the recycling industry and launched dozens of new companies making products from recycled materials. On the other hand, overseas governments can impose laws or take actions that create uncertainty and even con-fusion for companies. Political instability in certain Middle Eastern and African nations has created much risk for oil firms and others. Two major trends are increased business legislation and the growth of special-interest groups. 51 increase d business le Gisla Tion Business legislation is intended to protect companies from unfair competition, protect consumers from unfair business practices, protect society from unbridled business behavior, | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
106 PART 2 | CAPT u Ring M ARke Ting insigh Ts and charge businesses with the social costs of their products or production processes. Each new law may also have the unintended effect of sapping initiative and slowing growth. The European Commission has established new laws covering competitive behavior, product standards, prod-uct liability, and commercial transactions for the 28 member nations of the European Union. The United States has many consumer protection laws covering competition, product safety and liability, fair trade and credit practices, and packaging and labeling, but many countries' laws are stronger. 52 Norway bans several forms of sales promotion—trading stamps, contests, and premiums—as inappropriate or unfair. Many countries throughout the world ban or severely restrict comparative advertising. Thailand requires food processors selling national brands to also market low-price brands so low-income consumers will be served. In India, food companies need special approval to launch duplicate brands, such as another cola drink or brand of rice. Gro WTh of s Pecial-in Teres T Grou Ps Political action committees (PACs) lobby government officials and pressure business executives to respect the rights of consumers, women, senior citizens, minorities, and gays and lesbians. Insurance companies directly or indirectly influence the design of smoke detectors; scientific groups affect the design of spray products. Many companies have established public affairs departments to deal with such special-interest groups. The consumerist movement organized citizens and government to strengthen the rights and powers of buy-ers in relationship to sellers. Consumerists have won the right to know the real cost of a loan, the true cost per standard unit of competing brands (unit pricing), the basic ingredients and true benefits of a product, and the nutritional quality and freshness of food. Privacy issues and identity theft will remain public policy hot buttons as long as consumers are willing to swap personal information for customized products—from marketers they trust. 53 Consumers worry that they will be robbed or cheated; that private information will be used against them; that they will be bombarded by solicita-tions; and that children will be targeted by ads. Online privacy greatly concerns consumers and regulators alike. Technology now enables firms to collect all kinds of information. 54 Make no mistake, your personal data isn't your own. When you update your Facebook page, “Like” some-thing on a website, apply for a credit card, click on an ad, listen to an MP3, or comment on a Y ou Tube video, you are feeding a huge and growing beast with an insatiable appetite for your personal data, a beast that always craves more. Virtually every piece of personal information that you provide online (and much that you provide offline) will end up being bought and sold, segmented, packaged, analyzed, repackaged, and sold again. “Marketing Insight: Watching Out for Big Brother” describes some of the data collection practices and privacy concerns that have arisen with widespread Internet adoption and use. Political unrest in the Middle East was a major cause for concern for many large multinational firms Source: © George Henton/Alamy | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
Colle CTing info RMAT ion And fo Re CAs Ting de MAnd | chapter 3 107 Forecasting and Demand Measurement Understanding the marketing environment and conducting marketing research (described in Chapter 4) can help to identify marketing opportunities. The company must then measure and forecast the size, growth, and profit potential of each new opportunity. Sales forecasts prepared by marketing are used by finance to raise cash for investment and operations; by manufacturing to establish capacity and output; by purchasing to acquire the right amount of supplies; and by human resources to hire the needed workers. If the forecast is off the mark, the com-pany will face excess or inadequate inventory. Because it's based on estimates of demand, managers need to define what they mean by market demand. Du Pont's Performance Materials group knew that even when Du Pont Tyvek had 70 percent of the $100 million market for air-barrier membranes, there was greater opportunity with more products and services to tap into the entire multi-billion-dollar U. S. home construction market. 55 Can online data profiling go too far? New parents are highly lucra-tive customers, but with birth records public, a slew of companies all discover them at the same time. To beat them to the punch, Target studied the buying histories of women who signed up for new-baby registries at the store and found many bought large amounts of vitamin supplements during their first trimester and unscented lotion around the start of their second trimester. Target then used these purchase markers to identify women of child-bearing age who were likely to be pregnant and sent them offers and coupons for baby products timed to the stages of pregnancy and later baby needs. When the practice became known, however, some criticized the company's tactics, which had occasionally been the means of letting family members know someone in the house was expecting. Target responded by including the offers with others unrelated to pregnancy, and sales in the pro-moted pregnancy-related categories soared. This episode vividly illustrates the power of database management in an Internet era, as well as the worries it can create among consum-ers. Politicians and government officials are discussing a “Do Not Track” option for consumers online (like the “Do Not Call” option for unsolicited phone calls). Although it is not clear how quickly legislation can be put into place, an online privacy bill that strengthens consumer rights seems inevitable. One member of the Federal Trade Commission, Julie Brill, feels data brokers should have to tell the public what data they collect, how they collect them, with whom they share them, and how they are used. Sources: Avi Goldfarb and Catherine Tucker, “Shifts in Privacy Concerns,” American Economic Review: Papers & Proceedings 102, no. 3 (2012), pp. 349-53; Avi Goldfarb and Catherine Tucker, “Online Display Advertising: Targeting and Obtrusiveness,” Marketing Science 30 (May-June 2011), pp. 389-404, plus com-mentaries and rejoinder; Alessandro Acquisti, Leslie John, and George Loewenstein, “The Impact of Relative Judgments on Concern about Privacy,” Journal of Marketing Research 49 (April 2012), pp. 160-74; Mark Sullivan, “Data Snatchers! The Booming Market for Your Online Identity,” PC World, June 26, 2012; Charles Duhigg, “How Companies Learn Your Secrets,” New York Times, February 16, 2012; Joshue Topolsky, “Online Tracking Is Shady—but It Doesn't Have to Be,” Washington Post, December 11, 2011; Natasha Singer, “You for Sale: Mapping, and Sharing, the Consumer Genome,” New York Times, June 16, 2012; Natasha Singer, “Consumer Data, but Not for Consumers,” New York Times, July 21, 2012; Doc Searls, “The Customer as a God,” Wall Street Journal, July 20, 2012. marketing insight Watching Out for Big Brother The explosion of digital data created by individuals online can nearly all be collected, bought, and sold by the personal data economy, including “advertisers, marketers, ad networks, data brokers, web-site publishers, social networks, and online tracking and targeting companies. ” Companies know or can find your age, race, gender, height, weight, marital status, education level, political affiliation, buying habits, hobbies, health, financial concerns, vacation dreams, and more. The thought of such widespread transparency worries con-sumers. Research shows more people, especially older consumers, are refusing to reveal private information online. At the same time, consumers are accepting more privacy intrusions every day, perhaps because they don't realize what information they are giving out, don't feel they have a choice, or don't think it will really matter. Many don't realize, for example, that buried in the fine print of their agreement to buy a new smart phone may be authorization to allow third-party services to track their every move. One such firm, Carrier IQ, received permission from any purchaser of an EVO 3D HTC smart phone to see every call made and when, where text messages were sent, and which Web sites were visited. Unfortunately, once data have been col-lected online, they can end up in unexpected places, resulting in spam or worse. Consumers increasingly want to know where, when, how, and why they are being watched online. Another data tracking firm is Acxion, which maintains a database on about 190 million U. S. individuals and 126 million households. Its 23,000 servers process 50 trillion data transactions a year as it attempts to assemble “360-degree views” of consumers from offline, online, and mobile sources. Its customers have included banks like Wells Fargo and HSBC, investment services like E*TRADE, automakers like Toyota and Ford, and department stores like Macy's. | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
108 PART 2 | CAPT u Ring M ARke Ting insigh Ts The mea Sure S Of marke T demand Companies can prepare as many as 90 different types of demand estimates for six different product levels, five space levels, and three time periods (see Figure 3. 1). Each serves a specific purpose. A company might forecast short-run demand to order raw materials, plan production, and borrow cash. It might forecast regional demand to decide whether to set up regional distribution. There are many productive ways to break down the market: The potential market is the set of consumers with a sufficient level of interest in a market offer. However, their interest is not enough to define a market unless they also have sufficient income and access to the product. The available market is the set of consumers who have interest, income, and access to a particular offer. The company or government may restrict sales to certain groups; a state might ban motorcycle sales to anyone under 21. Eligible adults constitute the qualified available market —the set of consumers who have interest, income, access, and qualifications for the market offer. Target was criticized by some for its over-zealous targeting of expecting mothers. Source: Bloomberg via Getty Images Space Level Product Level World U. S. A. Region Territory Customer All sales Industry sales Company sales Product line sales Product form sales Product item sales Short run Medium run Long run Time Level| Fig. 3. 1 | Ninety Types of Demand Measurement (6 × 5 × 3) | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
Colle CTing info RMAT ion And fo Re CAs Ting de MAnd | chapter 3 109 The target market is the part of the qualified available market the company decides to pursue. The company might concentrate its marketing and distribution effort on the East Coast. The penetrated market is the set of consumers who are buying the company's product. These definitions are a useful tool for market planning. If the company isn't satisfied with its current sales, it can try to attract a larger percentage of buyers from its target market. It can lower the qualifications for potential buy-ers. It can expand its available market by opening distribution elsewhere or lowering its price, or it can reposition itself in the minds of its customers. a v OC abular Y f Or demand mea Suremen T The major concepts in demand measurement are market demand and company demand. Within each, we distin-guish among a demand function, a sales forecast, and a potential. Marke T de Mand The marketer's first step in evaluating marketing opportunities is to estimate total market demand. Market demand for a product is the total volume that would be bought by a defined customer group in a defined geographical area in a defined time period in a defined marketing environment under a defined marketing program. Market demand is not a fixed number, but rather a function of the stated conditions. For this reason, we call it the market demand function. Its dependence on underlying conditions is illustrated in Figure 3. 2(a). The hori-zontal axis shows different possible levels of industry marketing expenditure in a given time period. The vertical axis shows the resulting demand level. The curve represents the estimated market demand associated with vary-ing levels of marketing expenditure. Some base sales—called the market minimum and labeled Q1 in the figure—would take place without any demand-stimulating expenditures. Higher marketing expenditures would yield higher levels of demand, first at an increasing rate, then at a decreasing rate. Take fruit juices. Given the indirect competition they face from other types of beverages, we would expect increased marketing expenditures to help fruit juice products stand out and increase demand and sales. Marketing expenditures beyond a certain level would not stimulate much further demand, suggesting an upper limit called the market potential and labeled Q2 in the figure. The distance between the market minimum and the market potential shows the overall marketing sensitivity of demand. We can think of two extreme types of markets, the expansible and the nonexpansible. An expansible market, such as the market for racquetball playing, is very much affected in size by the level of industry market-ing expenditures. In terms of Figure 3. 2(a), the distance between Q1 and Q2 is relatively large. A nonexpansible market —for example, the market for weekly trash or garbage removal—is not much affected by the level of marketing expenditures; the distance between Q1 and Q2 is relatively small. Organizations selling in a nonex-pansible market must accept the market's size—the level of primary demand for the product class—and direct their efforts toward winning a larger market share for their product, that is, a higher level of selective demand for their product. It pays to compare the current and potential levels of market demand. The result is the market-penetration index. A low index indicates substantial growth potential for all the firms. A high index suggests it will be (a) Marketing Demand as a Function of Industry Marketing Expenditure (assumes a particular marketing environment)(b) Marketing Demand as a Function of Industry Marketing Expenditure (two different environments assumed) Industry Marketing Expenditure Market Demand in the Specific Period Market Demand in the Specific Period Industry Marketing Expenditure Market potential (prosperity)Market potential, Q2 Market forecast, QF Market minimum, Q1Market potential (recession) Planned expenditure Prosperity Recession| Fig. 3. 2 | Market Demand Functions | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
110 PART 2 | CAPT u Ring M ARke Ting insigh Ts expensive to attract the few remaining prospects. Generally, price competition increases and margins fall when the market-penetration index is already high. Comparing current and potential market shares yields a firm's share-penetration index. If this index is low, the company can greatly expand its share. Holding it back could be low brand awareness, low availability, benefit deficiencies, or high price. A firm should calculate the share-penetration increases from removing each factor to see which investments produce the greatest improvement. 56 Remember that the market demand function is not a picture of market demand over time. Rather, it shows alternate current forecasts of market demand associated with possible levels of industry marketing effort. Marke T forecas T Only one level of industry marketing expenditure will actually occur. The market demand corresponding to this level is called the market forecast. Marke T Po Ten Tial The market forecast shows expected market demand, not maximum market demand. For the latter, we need to visualize the level of market demand resulting from a very high level of industry marketing expenditure, where further increases in marketing effort would have little effect. Market potential is the limit approached by market demand as industry marketing expenditures approach infinity for a given marketing environment. The phrase “for a given market environment” is crucial. Consider the market potential for automobiles. It's higher during prosperity than during a recession, as illustrated in Figure 3. 2(b). Market analysts distinguish between the position of the market demand function and movement along it. Companies cannot do any-thing about the position of the market demand function, which is determined by the marketing environment. However, they influence their particular location on the function when they decide how much to spend on marketing. Companies interested in market potential have a special interest in the product-penetration percentage, the percentage of ownership or use of a product or service in a population. The lower the product-penetration percentage, the higher the market potential, although this also assumes everyone will eventually be in the market for every product. co MPany de Mand Company demand is the company's estimated share of market demand at alternative levels of company marketing effort in a given time period. It depends on how the company's products, services, prices, and communications are perceived relative to the competitors'. Other things equal, the company's market share depends on the relative scale and effectiveness of its market expenditures. As noted previously, marketing model builders have developed sales response functions to measure how a company's sales are affected by its marketing expenditure level, marketing mix, and marketing effectiveness. 57 co MPany sales forecas T Once marketers have estimated company demand, their next task is to choose a level of marketing effort. The company sales forecast is the expected level of company sales based on a chosen marketing plan and an assumed marketing environment. We represent the company sales forecast graphically with sales on the vertical axis and marketing effort on the horizontal axis, as in Figure 3. 2. We often hear that the company should develop its marketing plan on the basis of its sales forecast. This forecast-to-plan sequence is valid if forecast means an estimate of national economic activity or if company demand is nonexpansible. The sequence is not valid, however, where market demand is expansible or where forecast means an estimate of company sales. The company sales forecast does not establish a basis for deciding what to spend on marketing. On the contrary, the sales forecast is the result of an assumed marketing expenditure plan. Two other concepts are important here. A sales quota is the sales goal set for a product line, company division, or sales representative. It is primarily a managerial device for defining and stimulating sales effort, often set slightly higher than estimated sales to stretch the sales force's effort. A sales budget is a conservative estimate of the expected volume of sales, primarily for making current purchasing, production, and cash flow decisions. It's based on the need to avoid excessive risk and is generally set slightly lower than the sales forecast. co MPany sales Po Ten Tial Company sales potential is the sales limit approached by company demand as company marketing effort increases relative to that of competitors. The absolute limit of company demand is, of course, the market potential. The two would be equal if the company captured 100 percent of the market. In most cases, company sales potential is less than the market potential, even when company marketing expenditures increase considerably. Each competitor has a hard core of loyal buyers unresponsive to other companies' efforts to woo them. | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
Colle CTing info RMAT ion And fo Re CAs Ting de MAnd | chapter 3 111 51 Industry sector (information) 513 Industry subsector (broadcasting and telecommunications) 5133 Industry group (telecommunications) 51332 Industry (wireless telecommunications carriers, except satellite) 513321 National industry (U. S. paging)e STIma TIn G Curren T demand We are now ready to examine practical methods for estimating current market demand. Marketing executives want to estimate total market potential, area market potential, and total industry sales and market shares. To Tal Marke T Po Ten Tial Total market potential is the maximum sales available to all firms in an industry during a given period, under a given level of industry marketing effort and environmental conditions. A common way to estimate total market potential is to multiply the potential number of buyers by the average quantity each purchases and then by the price. If 100 million people buy books each year and the average book buyer buys three books a year at an average price of $20 each, then the total market potential for books is $6 billion (100 million × 3 × $20). The most difficult component to estimate is the number of buyers. We can always start with the total population in the nation, say, 314 million people. Next we eliminate groups that obviously would not buy the product. Assume illiterate people and children under 12 don't buy books and constitute 20 percent of the population. This means 80 percent of the population, or 251 million people, is in the potential pool. Further research might tell us that people of low income and low education rarely buy books, and they constitute more than 30 percent of the potential pool. Eliminating them, we arrive at a prospect pool of approximately 175. 7 million book buyers. We use this number to calculate total market potential. A variation on this method is the chain-ratio method, which multiplies a base number by several adjusting percentages. Suppose a brewery is interested in estimating the market potential for a new light beer especially designed to accompany food. It can make an estimate with the following calculation: Demand for the new light beer=Population *Average percentage of discretionary income spent on food Average percentage of amount spent on food that is spent on beverages* *Average percentage of amount spent on beverages that is spent on alcoholic beverages Expected percentage of amount spent on beer that will be spent on light beer area Marke T Po Ten Tial Because companies must allocate their marketing budget optimally among their best territories, they need to estimate the market potential of different cities, states, and nations. Two major methods are the market-buildup method, used primarily by business marketers, and the multiple-factor index method, used primarily by consumer marketers. Market-Buildup Method The market-buildup method calls for identifying all the potential buyers in each market and estimating their potential purchases. It produces accurate results if we have a list of all potential buyers and a good estimate of what each will buy. Unfortunately, this information is not always easy to gather. Consider a machine-tool company that wants to estimate the area market potential for its wood lathe in the Boston area. Its first step is to identify all potential buyers of wood lathes in the area, primarily manufacturing establishments that shape or ream wood as part of their operations. The company could compile a list from a directory of all manufacturing establishments in the area. Then it could estimate the number of lathes each industry might purchase, based on the number of lathes per thousand employees or per $1 million of sales in that industry. An efficient method of estimating area market potentials makes use of the North American Industry Classification System (NAICS), developed by the U. S. Bureau of the Census in conjunction with the Canadian and Mexican gov-ernments. 58 The NAICS classifies all manufacturing into 20 major industry sectors and further breaks each sector into a six-digit, hierarchical structure as follows. Personal discretionary income per capita* *Average percentage of amount spent on alcoholic beverages that is spent on beer* | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
112 PART 2 | CAPT u Ring M ARke Ting insigh Ts For each six-digit NAICS number, a company can purchase business directories that provide complete com-pany profiles of millions of establishments, subclassified by location, number of employees, annual sales, and net worth. To use the NAICS, the lathe manufacturer must first determine the six-digit NAICS codes that represent products whose manufacturers are likely to require lathe machines. To get a full picture of these, the company can (1) identify past customers' NAICS codes; (2) go through the NAICS manual and check off all the six-digit industries that might have an interest in lathes; and (3) mail questionnaires to a wide range of companies inquiring about their interest in wood lathes. The company's next task is to select an appropriate base for estimating the number of lathes each industry will use. Suppose customer industry sales are the most appropriate base. Once the company estimates the rate of lathe ownership relative to the customer industry's sales, it can compute the market potential. Multiple-Factor Index Method Like business marketers, consumer companies also need to estimate area market potentials, but because their customers are too numerous to list, they commonly use a straightforward index. A drug manufacturer might assume the market potential for drugs is directly related to population size. If the state of Virginia has 2. 55 percent of the U. S. population, Virginia might be a market for 2. 55 percent of total drugs sold. A single factor is rarely a complete indicator of sales opportunity. Regional drug sales are also influenced by per capita income and the number of physicians per 10,000 people. Thus, it makes sense to develop a multiple-factor index and assign each factor a specific weight. Suppose Virginia has 2. 00 percent of U. S. disposable per-sonal income, 1. 96 percent of U. S. retail sales, and 2. 28 percent of U. S. population, and the respective weights for these factors are 0. 5, 0. 3, and 0. 2. The buying-power index for Virginia is then 2. 04 [0. 5(2. 00) + 0. 3(1. 96) + 0. 2(2. 28)]. Thus, 2. 04 percent of the nation's drug sales (not 2. 28 percent) might be expected to take place in Virginia. The weights in the buying-power index are somewhat arbitrary, and companies can assign others if appro-priate. A manufacturer might adjust the market potential for additional factors, such as competitors' presence, local promotional costs, seasonal factors, and market idiosyncrasies. Many companies compute area indexes to allocate marketing resources. Suppose the drug company is review-ing the six cities listed in Table 3. 5. The first two columns show its percentage of U. S. brand and category sales in these six cities. Column 3 shows the brand development index (BDI), the index of brand sales to category sales. Seattle has a BDI of 114 because the brand is relatively more developed than the category in Seattle. Portland's BDI is 65, which means the brand is relatively underdeveloped there. Normally, the lower the BDI, the higher the market opportunity, in that there is room to grow the brand. Other marketers would argue instead that marketing funds should go into the brand's strongest markets, where it might be important to reinforce loyalty or more easily capture additional brand share. Investment decisions should be based on the potential to grow brand sales. Table 3. 5 Calculating the Brand Development Index (BDI) (a) Percent of U. S. Brand(b) Percent of U. S. Category BDI Territory Sales Sales (a ÷ b) × 100 Seattle 3. 09 2. 71 114 Portland 6. 74 10. 41 65 Boston 3. 49 3. 85 91 Toledo . 97 . 81 120 Chicago 1. 13 . 81 140 Baltimore 3. 12 3. 00 104 | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
Colle CTing info RMAT ion And fo Re CAs Ting de MAnd | chapter 3 113 Feeling it was underperforming in a high-potential market, Anheuser-Busch targeted the growing Hispanic population in Texas with a number of special marketing activities. Cross-promotions with Budweiser and Clamato tomato clam cocktail (to mix the popular Michiladas drink), sponsorship of the Esta Noche Toca concert series, and support of Latin music acts with three-on-three soccer tournaments helped drive higher sales. Anheuser-Busch later introduced Chelada with pre-mixed Budweiser or Bud Light and Clamato. 59 After the company decides on the city-by-city allocation of its budget, it can refine each allocation down to census tracts or zip+4 code centers. Census tracts are small, locally defined statistical areas in metropolitan areas and some other counties. They generally have stable boundaries and a population of about 4,000. Zip+4 code cen-ters (designed by the U. S. Postal Service) are a little larger than neighborhoods. Data on population size, median family income, and other characteristics are available for these geographical units. Using other sources such as loyalty card data, Mediabrands's Geomentum targets “hyper-local” sectors of zip codes, city blocks, and even individual households with ad messages delivered via interactive TV, zoned editions of newspapers, Y ellow Pages, outdoor media, and local Internet searches. 60 indus Try sales and Marke T shares Besides estimating total potential and area potential, a company needs to know the actual industry sales taking place in its market. This means identifying competitors and estimating their sales. The industry trade association will often collect and publish total industry sales, although it usually does not list individual company sales separately. With this information, however, each company can evaluate its own perfor-mance against the industry's. If a company's sales are increasing by 5 percent a year and industry sales are increas-ing by 10 percent, the company is losing its relative standing in the industry. Another way to estimate sales is to buy reports from a marketing research firm that audits total sales and brand sales. Nielsen Media Research audits retail sales in various supermarket and drugstore product categories. A com-pany can purchase this information and compare its performance to the total industry or any competitor to see whether it is gaining or losing share, overall or brand by brand. Because distributors typically will not supply infor-mation about how much of competitors' products they are selling, business-to-business marketers operate with less knowledge of their market share results. e STIma TIn G fu Ture demand The few products or services that lend themselves to easy forecasting generally enjoy an absolute level or a fairly constant trend and competition that is either nonexistent (public utilities) or stable (pure oligopolies). In most markets, in contrast, good forecasting is a key factor in success. Companies commonly prepare a macroeconomic forecast first, followed by an industry forecast, followed by a company sales forecast. The macroeconomic forecast projects inflation, unemployment, interest rates, Marketers can now target consumers right down to their zip code, neighborhood, or individual households. Source: © alexmisu/Shutterstock | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
114 PART 2 | CAPT u Ring M ARke Ting insigh Ts consumer spending, business investment, government expenditures, net exports, and other variables. The end result is a forecast of gross domestic product (GDP), which the firm uses, along with other environmental indicators, to forecast industry sales. The company derives its sales forecast by assuming it will win a certain market share. How do firms develop forecasts? They may create their own or buy forecasts from outside sources such as marketing research firms, which interview customers, distributors, and other knowledgeable parties. Specialized forecasting firms produce long-range forecasts of particular macroenvironmental components, such as popu-lation, natural resources, and technology. Examples are IHS Global Insight (a merger of Data Resources and Wharton Econometric Forecasting Associates), Forrester Research, and the Gartner Group. Futurist research firms such as the Institute for the Future, Hudson Institute, and the Futures Group produce speculative scenarios. All forecasts are built on one of three information bases: what people say, what people do, or what people have done. Using what people say requires surveying buyers' intentions, composites of sales force opinions, and expert opinion. Building a forecast on what people do means putting the product into a test market to measure buyer response. To use the final basis—what people have done—firms analyze records of past buying behavior or use time-series analysis or statistical demand analysis. survey of buyers' in Ten Tions Forecasting is the art of anticipating what buyers are likely to do under a given set of conditions. For major consumer durables such as appliances, research organizations conduct periodic surveys of consumer buying intentions, ask questions like Do you intend to buy an automobile within the next six months?, and put the answers on a purchase probability scale : 0. 00 0. 20 0. 40 0. 60 0. 80 1. 00 No Slight Fair Good High Certain chance possibility possibility possibility possibility Surveys also inquire into consumers' present and future personal finances and expectations about the economy. They combine bits of information into a consumer confidence measure (Conference Board) or a consumer senti-ment measure (Survey Research Center of the University of Michigan). For business buying, research firms can carry out buyer-intention surveys for plant, equipment, and materials, usually falling within a 10 percent margin of error. These surveys are useful in estimating demand for industrial products, consumer durables, product purchases where advanced planning is required, and new products. Their value increases to the extent that buyers are few, the cost of reaching them is low, and they have clear intentions they willingly disclose and implement. co MPosi Te of sales force o Pinions When interviewing buyers is impractical, the company may ask its sales representatives to estimate their future sales. Few companies use these estimates without making some adjustments, however. Sales representatives might be pessimistic or optimistic, they might not know how their company's marketing plans will influence future sales in their territory, and they might deliberately underestimate demand so the company will set a low sales quota. To encourage better estimating, the company could offer incentives or assistance, such as information about marketing plans or past forecasts compared with actual sales. Sales force forecasts do yield a number of benefits. Sales reps might have better insight into developing trends than any other group, and forecasting might give them greater confidence in their sales quotas and more incentive to achieve them. A “grassroots” forecasting procedure provides detailed estimates broken down by product, terri-tory, customer, and sales rep. ex Per T o Pinion Companies can also obtain forecasts from experts, including dealers, distributors, suppliers, marketing consultants, and trade associations. Dealer estimates are subject to the same strengths and weaknesses as sales force estimates. Many companies buy economic and industry forecasts from well-known economic-forecasting firms that have more data available and more forecasting expertise. Occasionally, companies will invite a group of experts to prepare a forecast. The experts exchange views and produce an estimate as a group ( group-discussion method ) or individually, in which case another analyst might combine the results into a single estimate ( pooling of individual estimates ). Further rounds of estimating and refin-ing follow (the Delphi method). 61 | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
Colle CTing info RMAT ion And fo Re CAs Ting de MAnd | chapter 3 115 Summary 1. To carry out their analysis, planning, implementation, and control responsibilities, marketing managers need a marketing information system (MIS) to assess infor-mation needs, develop the needed information, and dis-tribute it in a timely manner. 2. An MIS has three components: (a) an internal records system, which includes information about the order-to-payment cycle and sales information systems; (b) a marketing intelligence system, a set of procedures to obtain everyday information about the marketing en-vironment; and (c) a marketing research system that allows for the systematic design, collection, analysis, and reporting of data and findings relevant to a specific marketing situation. 3. Marketers find many opportunities by identifying trends (directions or sequences of events that have some momentum and durability) and megatrends (major social, economic, political, and technological changes that have long-lasting influence). 4. Within the rapidly changing global picture, marketers must monitor six major environmental forces: demo-graphic, economic, social-cultural, natural, technologi-cal, and political-legal. 5. In the demographic environment, marketers must be aware of worldwide population growth; changing mixes of age, ethnic composition, and educational levels; the rise of nontraditional families; and large geographic shifts in population. 6. In the economic arena, marketers need to focus on income distribution and levels of savings, debt, and credit availability. 7. In the social-cultural arena, marketers must understand people's views of themselves, others, organizations, society, nature, and the universe. Their products must correspond to society's core and secondary values and address the needs of different subcultures within a society. 8. Acknowledging the public's increased concern about the health of the natural environment, marketers are embrac-ing sustainability and green marketing programs. 9. In the technological arena, marketers should take account of the accelerating pace of technological change, opportunities for innovation, varying R&D budgets, and the increased governmental regulation brought about by technological change. 10. In the political-legal environment, marketers must work within the many laws regulating business practices and with various special-interest groups. 11. To estimate current demand, companies attempt to determine total market potential, area market potential, industry sales, and market share. To estimate future demand, companies survey buyers' intentions, solicit their sales force's input, gather expert opinions, analyze past sales, or engage in market testing. Mathematical models, advanced statistical techniques, and comput-erized data collection procedures are essential to all types of demand and sales forecasting. My Marketing Lab Go to mymktlab. com to complete the problems marked with this icon as well as for additional assisted-graded writing questions. Pas T-sales analysis Firms can develop sales forecasts on the basis of past sales. Time-series analysis breaks past time series into four components (trend, cycle, seasonal, and erratic) and projects them into the future. Exponential smoothing projects the next period's sales by combining an average of past sales and the most recent sales, giving more weight to the latter. Statistical demand analysis measures the impact of a set of causal factors (such as income, marketing expenditures, and price) on the sales level. Finally, econometric analysis builds sets of equations that describe a system and statistically derives the different parameters that make up the equations statistically. Marke T-Tes T Me Thod When buyers don't plan their purchases carefully or experts are unavailable or unreliable, a direct-market test can help forecast new-product sales or established product sales in a new distribution channel or territory. (We discuss market testing in detail in Chapter 15. ) | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
116 PART 2 | CAPT u Ring M ARke Ting insigh Ts Applications Marketing Debate Is Consumer Behavior More a Function of a Person's Age or Generation? How much do consumers change over time? Some market-ers who target certain age groups maintain that age differenc-es are critical and that the needs and wants of a 25-year-old in 2015 are not that different from those of a 25-year-old in 1980. Others argue that cohort and generation effects are critical and that marketing programs must therefore suit the times. Take a position: Age differences are fundamentally more important than cohort effects versus Cohort effects can dominate age differences. Marketing Discussion Age Targeting What brands and products do you feel successfully speak to you and effectively target your age group? Why? Which ones do not? What could they do better? Microsoft Windows and Office the must-have software of its time. The 1998 slogan “Where Do You Want to Go Today?” promoted not individual Microsoft products like Windows 98 but rather the company itself, communi-cating that Microsoft could help empower companies and consumers alike. During the mid-1990s, Microsoft entered the notori-ous “browser wars” as companies struggled to find their place during the Internet boom. Realizing what a good product Netscape had in its 1995 Navigator browser, Microsoft launched its own, Internet Explorer later the same year. By 1997, Explorer had grabbed 18 percent of the market. Over the next five years, Microsoft took three major steps to overtake Netscape. First, it bundled Internet Explorer with its Office product, which included Excel, Word, and Power Point. This meant that consumers who wanted MS Office automatically became Internet Explorer users as well. Second, Microsoft partnered with AOL, which opened the doors to 5 million new consum-ers almost overnight. Third, Microsoft used its deep pockets to ensure that Internet Explorer was available free, essentially “cutting off Netscape's air supply. ” By 2002, Netscape's market share had fallen to a meek 4 percent. Microsoft's fight to become the browser leader was not without controversy; some perceived that the company was monopolizing the industry. As a result, Microsoft faced antitrust charges in 1998 and numerous lawsuits based on its marketing tactics. Charges aside, the company's stock took off, peaking in 1999 at $60 per share. Microsoft continued to release new products, including Windows 2000 in 2000 and Windows XP in 2001. It also launched Xbox in 2001, marking its entrance into the multibillion-dollar gaming industry. Marketing Excellence >> Microsoft Microsoft is the world's most successful software com-pany. Bill Gates and Paul Allen founded it in 1975 with the original mission of having “a computer on every desk and in every home, running Microsoft software. ” Today, Microsoft is the fifth most valuable company in the world and has a brand value of $61. 2 billion. In the early 1980s, Microsoft developed the DOS operating system for IBM computers. The company lev-eraged this initial success to sell software to other manu-facturers, quickly becoming a major player in the industry. Initial advertising efforts communicated the company's range of products, from DOS to Excel and Windows, and unified them under the Microsoft brand. Microsoft went public in 1986 and grew tremen-dously over the next decade as the Windows operating system and Microsoft Office took off. In 1990, Microsoft launched Windows 3. 0, a completely revamped version of its operating system, including applications like File Manager and Program Manager that are still used today. It was an instant success; Microsoft sold more than 10 million copies of the software within two years, a phe-nomenal accomplishment in those days. In addition, Windows 3. 0 became the first operating system to be preinstalled on certain PCs, marking another major mile-stone for the industry and for Microsoft. Throughout the 1990s, Microsoft's communica-tion efforts convinced businesses not only that its software was the best choice but also that it should be upgraded frequently. Microsoft spent millions in magazine advertising and received endorsements from the top computer magazines in the industry, making | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
Colle CTing info RMAT ion And fo Re CAs Ting de MAnd | chapter 3 117 After the recession came to an end, Microsoft's image and stock started to recover, thanks to the success of its retail stores, effective marketing, and a wide range of new product launches. Microsoft went after Google's domi-nant position in the search marketplace, for instance, with a search engine called Bing, and it entered the growing mobile industry with its Windows Phone mobile operat-ing system. The company's 2011 expansion into smart phones surprised many analysts, but Microsoft hoped the smart phone and Windows Phone mobile OS would forge a strong connection with its consumers around the world. It continued its innovation momentum in 2012 with the launch of Windows 8, Windows 8 Phone, and a computer called Surface Tablet. The tablet impressed consumers with a detachable keyboard that also served as its protective cover. Today, Microsoft offers a wide range of software, mobile, and home entertainment products. Its most prof-itable products continue to be Microsoft Windows and Microsoft Office, which bring in approximately 80 percent of its $86 billion in annual revenue. Questions 1. Evaluate Microsoft's product and marketing evolution over the years. What has the company done well, and where did it falter? 2. Evaluate Microsoft's recent expansions into areas such as search engines and smart phones. Do you think these are good areas of growth for Microsoft? Why or why not? Sources: Interbrand, “2014 Best Global Brands Report,” www. interbrand. com ; Stuart Elliot, “Microsoft Takes a User-Friendly Approach to Selling Its Image in a New Global Campaign,” New York Times, November 11, 1994; “Todd Bishop, “The Rest of the Motto,” Seattle Post Intelligencer, September 23, 2004; Devin Leonard, “Hey PC, Who Taught You to Fight Back?” New York Times, August 30, 2009; Suzanne Vranica and Robert A. Guth, “Microsoft Enlists Jerry Seinfeld in Its Ad Battle Against Apple,” Wall Street Journal, August 21, 2008, p. A1; Stuart Elliott, “Echoing the Campaign of a Rival, Microsoft Aims to Redefine 'I'm a PC,'” New York Times, September 18, 2008, p. C4; John Furguson, “From Cola Wars to Computer Wars—Microsoft Misses Again,” BN Branding, April 4, 2009; Microsoft press release, “Microsoft Retail Stores Maturation: Going Behind the Scenes,” November 8, 2012. Over the next several years, Microsoft's stock price tumbled by more than $40 a share as consumers waited for the next operating system to be released. During this time, Apple made a strong comeback with consumer-friendly products like Mac computers, i Pods, i Phones, and i Tunes. Apple also launched a successful market-ing campaign titled “Get a Mac” that featured a smart, creative, easygoing Mac character alongside a geeky, virus-prone, uptight PC character. Apple's campaign successfully converted many consumers and tarnished Microsoft's brand image. In 2007, Microsoft launched the Vista operating sys-tem to great expectations; however, it was plagued by bugs and problems and the company's stock and image continued to slide, helped by the worldwide recession of 2008-2009. In response, Microsoft created a campaign titled “Windows. Life Without Walls” to help turn its image around. Its new message—that computers with Microsoft software were more cost-effective than the competition— resonated well in the recession. Microsoft also launched a series of commercials that boasted, “I'm a PC” and fea-tured a wide variety of individuals who prided themselves on being PC owners, hoping to improve employee morale and customer loyalty. In 2009, Microsoft launched Windows 7, an improved operating system, with the campaign “Windows 7 was my idea. ” Four years later, it was operating more than 30 stores like Apple's across the United States and Canada. Jonathan Adashek, general manager of Communications Strategy, explained, “We've welcomed more than 15 mil-lion customers and counting so far, and have learned a lot from them. Having this direct connection to our cus-tomers has really helped us better understand their tech needs. ” Travis Walter, general manager of Microsoft's International and New Store Formats, agreed, “In person, you get a very different experience and it's one we've been very delighted to provide. When you see our tech-nology in person—when you can touch and feel it—a light goes off. ” was $10. 6 billion, a 5. 6 percent rise from the previous year, and the company employs nearly 25,000 people in 18 factories worldwide. The story of this remarkable company begins in 1946 with a small patisserie in Alba, Italy. There, Pietro Ferrero invented a 50 percent hazelnut, 50 percent cocoa confection. Because taxes on cacao beans were extremely high in post-World War II Italy, pure chocolate was not readily available. Alba was known for the produc-tion of hazelnuts, and Ferrero's cheaply produced pasta Marketing Excellence >> Ferrero Ferrero is an Italian confectionery company, privately owned by the Ferrero family. The Reputation Institute's 2014 survey ranked it as the 22nd “most reputable com-pany in the world”-Ferrero holds 8 percent of the world's chocolate market and is the leader in Western Europe with an 18. 9 percent share. Its revenue in fiscal year 2013 | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
118 PART 2 | CAPT u Ring M ARke Ting insigh Ts Indian consumers are very price sensitive. Within 10 years, Ferrero transformed the chocolate market with premium brands accounting for 27 percent of the market. Ferrero's main competitors in India are Cadbury, Nestle, Hersey, Lindt, and Mars. Ferro has around 6 percent of the Indian chocolate market and they are credited with making premium chocolate work in India. Ferrero launched Rocher in 2007 and Tic Tac and Kinder Joy two years later. In late 2011, the company set up its first factory which now produces 20 million packs of Tic Tacs per day along with 1 million Kinder Joy eggs. In 2013, a $60-million hazelnut development busi-ness was approved in New South Wales in Australia. Ferrero had been working on this for some time and the operation would see 1 million trees planted in two farms. The first commercial crop is expected in 2017 and the farms are expected to be in full production by 2021. This is seen as part of Ferrero's long-term commitment to Australia and will provide vital jobs in the region. At full production, the farms are expected to generate some 5000 tons of hazelnuts. The initiative should also help to convince other growers to reconsider hazelnuts as a cash crop. Potentially, the hazelnut export business is worth $170 million in Australia each year. Ferrero uses its marketing insights to promote sales. The company's 2010 promotion of Nutella included sponsorship of the Football Federation of Australia and the Socceroos, the Australian national soccer team, and was one of the biggest sponsorship exercises in the history of the brand. It also emphasized that Nutella was one of Australia's best-known and most-loved brands by associating it with a sport that most Australians enjoy. The sponsorship program resulted in an increase of Nutella's household penetration from 15. 1 to 16. 3 percent. Throughout 2013 there were persistent rumors that Nestlé was about to launch an audacious, and expen-sive, takeover of Ferrero. Ferrero consistently denied the rumors and Nestlé was surprisingly quiet about it. As the year went on, rather than being the subject of a takeover, it was Ferrero that was doing the taking over. In July they announced the takeover of Turkish hazelnut procurement, processing, and marketing firm Oltan Group. The Turkish business, based in the north of the country, was active in the main hazelnut growing regions. The company had five production facilities and generated annual sales in excess of $500 million. At a stroke, Ferrero had secured vital raw materials for its core products. gianduja block, made from readily available ingredients, suitably satisfied consumers' cravings for sweet foods. The product was a hit, and by 1951 the Ferrero fam-ily had decided to turn the pasta gianduja block into a creamy spread. By 1951 Ferrero was marketing this as Supercrema. In 1963, Pietro's son Michele, by then CEO, modified the recipe and marketed it as the immensely popular Nutella. Ferrero now sells more than 67,000 jars of Nutella a year in Italy alone. While it offers a limited product range, Ferrero's offerings are nonetheless con-sumable at all times of day, from breakfast (Nutella) to dessert (Ferrero Rocher) and any time in between (Kinder chocolates—Bueno and Surprise—and the ever-popular Tic Tac). The emphasis is on quality, and it is certainly part of the key to Ferrero's success. Ferrero began expanding into Europe in 1956 by setting up a factory in Germany, where chocolate was ex-tremely popular. This early understanding of global trends allowed the company to swiftly expand into French, Australian, Canadian, Asian, Puerto Rican, Ecuadorian, and finally the U. S. markets. In 1974, Ferrero established operations in Australia with the mission of delighting cus-tomers with unique products of the highest quality and integrity, and contributing to the well-being of employers, customers, and the company. The firm concentrates on meeting high standards; thus, it manufactures only in places where it is sure it can deliver consistently and establish a secure retail supply chain, meaning it will never let consumers down. Managing Director of Ferrero Australia, Craig Barker, launched a CSR report in late 2013 that highlighted Ferrero's commitment to maintaining excellence in quality, freshness, and innova-tion. The company seeks to promote a balanced diet and lifestyle, including regular physical exercise, and offering grade products at the same time. Ferrero's focus on consumers is accompanied by its emphasis on quality, integrity, product innovation, and passion. The company strives to understand mar-ket preferences. Ferrero Australia does extensive testing of its products in the Australian market before bringing them to market. First, it carries out internal taste testing to see whether consumers rate the product to the same high standards of the company. Then Ferrero conducts market testing in one state before going national. Ferrero test-marketed three products in the Kinder line in Victoria for two years before nationally marketing them. By under-standing the insights of the market, Ferrero has ensured constant growth since the 1940s. When Ferrero entered India in 2004, the country did not really have a ready market for premium chocolates. | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
Colle CTing info RMAT ion And fo Re CAs Ting de MAnd | chapter 3 119 Nutella's role in a healthy and well-balanced breakfast and pledging not to target children in its advertisements. Questions 1. Evaluate Ferrero Australia's decision to invest in the hazelnut farm. What are the key reasons for doing this? 2. How can Ferrero use new technology to market its products better? Sources: Klaus Kneale, “World's Most Reputable Companies,” www. forbes. com, May 6, 2009; Armorel Kenna, “Ferrero Won't Make Takeover Bid for Cadbury to Challenge Kraft,” www. bloomberg. com, January 25, 2010; Ferrero, www. ferrero. com. au; Flower Advisor, www. floweradvisor. com. Finally, Ferrero Australia has also engaged in many community programs, such as a food bank that dis-tributes food and grocery industry donations to welfare agencies to feed the hungry. It also supports Brainwave, a charity supporting pediatric neuroscience. The company introduced the pink Tic Tac in celebration of Pink Ribbon Month to support breast cancer research and awareness along with the National Breast Cancer Foundation (NBCF). Ferrero also supports forest conservation methods and the abolition of child labor. It purchases cacao only from suppliers who grow and process without using child labor, and it purchases palm oil only from countries and areas not known for deforestation. Ferrero has been combating the issue of childhood obesity since 2008 by emphasizing | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
120 In This Chapter, We Will Address the Following Questions 1. What is the scope of marketing research? (p. 121) 2. What steps are involved in conducting good marketing research? (p. 124) 3. What are the best metrics for measuring marketing productivity? (p. 137)Samsung uses marketing research to sharpen the launch of its new products. Source: ASSOCIATED PRESS My Marketing Lab™ Improve Y our Grade! Over 10 million students improved their results using the Pearson My Labs. Visit mymktlab. com for simulations, tutorials, and end-of-chapter problems. | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
121 In this chapter, we review the scope of marketing research and the steps involved in the marketing research process. We also consider how marketers can develop effective metrics for measuring marketing productivity. To make the best possible tactical decisions in the short run and strategic decisions in the long run, marketers need timely, accurate, and actionable information about consumers, competition, and their brands. Discovering a marketing insight and understanding its implications can often lead to a successful product launch or spur the growth of a brand. It is especially important to stay tuned in online. 1Conducting Marketing Research4 In launching its new Galaxy S III smart phone, Samsung faced a formidable opponent in Apple. To gain the upper hand, Samsung sifted through hundreds of thousands of tweets and online conver-sations to uncover recurring negative comments about the i Phone. One ad in its new campaign mocked Apple fanatics eagerly waiting in line for the latest i Phone model. With a tagline “The Next Big Thing Is Already Here,” the ad showcased features such as screen size and NFC file-swapping technology where Samsung had an advantage. It ended with the clever twist that the Samsung phone user in the line—whose phone had all the features the Apple users were hoping for—was just saving a spot for his parents. A huge hit online, the ad attracted millions of You Tube downloads. The TV ad was a follow-up to an earlier print ad contrasting a long list of Galaxy S III features with a much smaller list for the i Phone. It also poked fun at Apple and its Genius retail employees, adding the tagline “It Doesn't Take a Genius. ” The Scope of Marketing Research Marketing managers often commission formal marketing studies of specific problems and opportunities, like a market survey, a product-preference test, a sales forecast by region, or an advertising evaluation. It's the job of the marketing researcher to produce insight to help the marketing manager's decision making. Formally, the American Marketing Association says:2 Marketing research is the function that links the consumer, customer, and public to the marketer through information—information used to identify and define marketing opportunities and problems; generate, refine, and evaluate marketing actions; monitor marketing performance; and improve under-standing of marketing as a process. Marketing research specifies the information required to address these issues, designs the method for collecting information, manages and implements the data collection process, analyzes the results, and communicates the findings and their implications. Importance of market In G Ins IGhts Marketing research is all about generating insights. Marketing insights provide diagnostic information about how and why we observe certain effects in the marketplace and what that means to marketers. 3 | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
122 PART 2 | CAPT u Ring M ARke Ting insigh Ts Good marketing insights often form the basis of successful marketing programs. When an extensive consumer research study of U. S. retail shoppers by Walmart revealed that the store's key competitive advantages were the functional benefit of “offers low prices” and the emotional benefit of “makes me feel like a smart shopper,” its marketers used those insights to develop their “Save Money, Live Better” campaign. 4 When marketing research showed that consumers viewed Walgreens largely as a convenience store with a pharmacy in the back, the company took steps to reposition itself as a premium health care brand, putting more emphasis on its wellness offerings such as its walk-in clinics. 5 Gaining marketing insights is crucial for marketing success. To improve the marketing of its $3 billion Pantene hair care brand, Procter & Gamble conducted a deep dive into women's feelings about hair, using surveys with mood scales from psychology, high-resolution EEG research to measure brainwaves, and other methods. As a re-sult, the company reformulated Pantene products, redesigned packages, pared the line down from 14 “collections” to eight, and fine-tuned the ad campaign. 6 If marketers lack consumer insights, they often get in trouble. When Tropicana redesigned its orange juice packaging, dropping the iconic image of an orange skewered by a straw, it failed to adequately test for consumer reactions—with disastrous results. Sales dropped by 20 percent, and Tropicana reinstated the old package design after only a few months. 7 Who Does market In G research? Spending on marketing research topped $40. 2 billion globally in 2013, according to ESOMAR, the world asso-ciation of opinion and market research professionals. 8 Most large companies have their own marketing research departments, which often play crucial roles within the organization. Here is how Procter & Gamble describes its marketing research department. 9 Consumer & Market Knowledge (CMK) Department is P&G's key internal compass guiding and cham-pioning decisions related to brand and customer business development strategy based on in-depth analysis of consumers, shoppers and the retail trade. CMK leads analysis of market trends and consumer habits/motivations, shopper behavior, customer and competitive dynamics; designs and analyzes qualita-tive and quantitative consumer and shopper research studies as well as syndicated market data. CMK is an integral partner, involved in all the stages of the brand life cycle starting with design of a concept to final product development and through to the in-market launch driving business growth. CMK brings to life P&G stated global strategy “Consumer is Boss. ” Marketing research, however, is not limited to large companies with big budgets and marketing research de-partments. Often at much smaller companies, everyone carries out marketing research—including the customers. Small companies can also hire the services of a marketing research firm or conduct research in creative and afford-able ways, such as: 1. Engaging students or professors to design and carry out projects —AT&T, GE, Samsung, Shell Oil, and others have engaged in a “crowdcasting” exercise by sponsoring the Innovation Challenge, where top MBA students P&G employed a wide range of research techniques to completely overhaul its Pantene product line. Source: The Procter & Gamble Company | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
Condu CTing M ARke Ting Rese ARC h | chapter 4 123 compete in teams to address company problems. The students gain experience and visibility; the companies get fresh sets of eyes to solve problems at a fraction of what consultants would charge. 10 The nonprofit United Way uses graduate students and interns as critical marketing research resources to collect and consolidate marketplace data and set up larger research projects. 11 2. Using the Internet —A company can collect considerable information at little cost by examining competitors' Web sites, monitoring chat rooms and blogs, and accessing published data. Social media monitoring tools from companies like Radian6, Attensity, and Lithium keep firms on top of online buzz. Home water filtration company Aquasana uses tools from Net Base to collect what people are saying about Brita and other com-petitors on Twitter, Facebook, news sites, blogs, message boards, and any other place there are relevant online conversations. 12 3. Checking out rivals —Many small businesses, such as restaurants, hotels, or specialty retailers, routinely visit competitors to learn about changes they have made. Tom Stemberg, who founded the office supply superstore Staples, made weekly unannounced visits to his own stores, competitors' stores, and other stores outside his category, always focused on “what the store was doing right” to get ideas for improving Staples. 13 4. Tapping into marketing partner expertise —Marketing research firms, ad agencies, distributors, and other marketing partners may be able to share relevant market knowledge they have accumulated. Partners target-ing small or medium-sized businesses may be especially helpful. For example, to promote more shipping to China, UPS conducted several in-depth surveys of the Chinese market to portray its complexities but also its opportunities for even small and medium-sized businesses. 14 5. Tapping into employee creativity and wisdom —No one may come into more contact with customers and understand a company's products, services, and brands better than its employees. Software maker Intuit puts employees into four- to six-person “two pizza” teams—called that because it takes only two pizzas to feed them. They observe customers in all walks of life and try to identify problems Intuit might be able to solve. Intuit takes all the employees' proposed solutions and experiments with them, building products behind the ideas that seem to work best. 15 Most companies use a combination of resources to study their industries, competitors, audiences, and channel strategies. They normally budget marketing research at 1 percent to 2 percent of company sales and spend a large percentage of that on the services of outside firms. Marketing research firms fall into three categories: 1. Syndicated-service research firms —These firms gather consumer and trade information, which they sell for a fee. Examples include the Nielsen Company, Kantar Group, Westat, and IRI. 2. Custom marketing research firms —These firms are hired to carry out specific projects. They design the study and report the findings. 3. Specialty-line marketing research firms —These firms provide specialized research services. The best example is the field-service firm, which sells field interviewing services to other firms. overcom In G Barr Iers to the Use of market In G research In spite of the rapid growth of marketing research, many companies still fail to use it sufficiently or correctly. They may not understand what it is capable of or provide the researcher the right problem definition and The founder of Staples made weekly visits to stores of all kinds for insights and inspiration. Source: picture alliance/Frank Duenzl/Newscom | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
124 PART 2 | CAPT u Ring M ARke Ting insigh Ts information from which to work. They may also have unrealistic expectations about what researchers can offer. Failure to use mar-keting research properly has led to numerous gaffes, including the following historic one. 16 Star War S In the 1970s, a successful marketing research executive left General Foods to try a daring gambit: bringing market research to Hollywood, to give film studios access to the same research that had spurred General Foods's success. A major film studio handed him a science fiction film proposal and asked him to research and predict its success or failure. His views would inform the studio's decision about whether to back the film. The research executive concluded the film would fail. For one, he argued, Watergate had made the United States less trusting of institutions and, as a result, its citizens in the 1970s prized realism and authenticity over science fiction. This particular film also had the word “ war” in its title; the executive reasoned that viewers, suffering post-Vietnam hangover, would stay away in droves. The film was Star Wars, which eventually grossed more than $4. 3 billion in box office re-ceipts alone. What this researcher delivered was information, not insight. He failed to study the script itself, to see that it was a fundamentally hu-man story—of love, conflict, loss, and redemption—that happened to play out against the backdrop of space. The Marketing Research Process To take advantage of all the resources and practices available, good marketers adopt a formal marketing research process that follows the six steps shown in Figure 4. 1. We illustrate these steps in the following situation. 17 American Airlines (AA) was one of the first companies to install phone handsets on its planes. Now it's reviewing many new ideas, especially to cater to its first-class passengers on very long flights, mainly businesspeople whose high-priced tickets pay most of the freight. Among these ideas are: (1) ultra high-speed Wi-Fi service, (2) 124 channels of high-definition satellite cable TV, and (3) a 250-CD audio system that lets each passenger create a customized in-flight playlist. The marketing research manager was assigned to investigate how first-class passengers would rate these services, specifically ultra high-speed Wi-Fi, and how much extra they would be willing to pay. One source estimates revenues of $70 million from Wi-Fi access over 10 years if enough first-class passengers paid $25. AA could thus recover its costs in a reasonable time, given that making the connection available would cost $90,000 per plane. step 1: Def Ine the pro Blem, the Dec Is Ion alternat Ives, an D the research o Bject Ives Marketing managers must be careful not to define the problem too broadly or too narrowly for the marketing researcher. A marketing manager who says “Find out everything you can about first-class air travelers' needs” will collect a lot of unnecessary information. One who says “Find out whether enough passengers aboard a B777 fly-ing direct between Chicago and Tokyo would pay $25 for ultra high-speed Wi-Fi service so we can break even in one year on the cost of offering this service” is taking too narrow a view of the problem. Poorly conceived marketing research almost doomed the box office blockbuster Star Wars. Source: Charles Sturge/Alamy Images | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
Condu CTing M ARke Ting Rese ARC h | chapter 4 125 The marketing researcher might ask, “Why does Wi-Fi have to be priced at $25 as opposed to $15, $35, or some other price? Why does American have to break even on the service, especially if it attracts new cus-tomers?” Another relevant question is, “How important is it to be first in the market, and how long can the company sustain its lead?” The marketing manager and marketing researcher agreed to define the problem as follows: “Will offer-ing ultra high-speed Wi-Fi service create enough incremental preference and profit to justify its cost against other service enhancements American might make?” To help design the research, management should first spell out the decisions it might face and then work backward. Suppose management outlines these decisions: (1) Should American offer ultra high-speed Wi-Fi service? (2) If so, should it offer it to first-class only or include business class and possibly economy class? (3) What price(s) should be charged? (4) On what types of planes and lengths of trips should the service be offered? Now management and marketing researchers are ready to set specific research objectives: (1) What types of first-class passengers would respond most to ultra high-speed Wi-Fi service? (2) How many are likely to use it at different price levels? (3) How many might choose American because of this new service? (4) How much long-term goodwill will this service add to American's image? (5) How important is ultra high-speed Wi-Fi service to first-class passengers relative to other services, such as a power plug or enhanced entertainment? Not all research can be this specific. Some is exploratory —its goal is to identify the problem and to sug-gest possible solutions. Some is descriptive —it seeks to quantify demand, such as how many first-class pas-sengers would purchase ultra high-speed Wi-Fi service at $25. Some research is causal —its purpose is to test a cause-and-effect relationship. step 2: Develop the research plan In the second stage of marketing research we develop the most efficient plan for gathering the needed in-formation and discover what that will cost. Suppose American made a prior estimate that launching ultra high-speed Wi-Fi service would yield a long-term profit of $50,000. If the manager believes the market-ing research will lead to an improved pricing and promotional plan and a long-term profit of $90,000, he should be willing to spend up to $40,000 on this research. If the research will cost more than $40,000, it's not worth doing. To design a research plan, we need to make decisions about the data sources, research approaches, re-search instruments, sampling plan, and contact methods. Data Source S The researcher can gather secondary data, primary data, or both. Secondary data are data that were collected for another purpose and already exist somewhere. Primary data are data freshly gathered for a specific purpose or project. Researchers usually start their investigation by examining some of the rich variety of low-cost and readily avail-able secondary data to see whether they can partly or wholly solve the problem without collecting costly primary data. For instance, auto advertisers looking to get a better return on their online car ads might purchase a copy of a J. D. Power and Associates survey that gives insights into who buys specific brands and where advertisers can find them online. Develop the research plan Collect the information Define the problem and research objectives Analyze the information Present the findings Make the decision | Fig. 4. 1 | The Marketing Research Process To help make a decision to offer ultra high-speed Wi-Fi service on its flights, an airline would want to carefully conduct consumer research. Source: Associated Press | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
126 PART 2 | CAPT u Ring M ARke Ting insigh Ts When the needed data don't exist or are dated or unreliable, the researcher will need to collect primary data. Most marketing research projects do include some primary-data collection. re Search approache S Marketers collect primary data in five main ways: through observation, focus groups, surveys, behavioral data, and experiments. Observational Research Researchers can gather fresh data by observing unobtrusively as customers shop or consume products. Sometimes they equip consumers with pagers and instruct them to write down or text what they're doing whenever prompted, or they hold informal interview sessions at a café or bar. 18 Photographs and videos can also provide a wealth of detailed information. Although privacy concerns have been expressed, some retailers are linking security cameras with software to record shopper behavior in stores. In its 1,000 retail stores, T-Mobile can track how people move around, how long they stand in front of displays, and which phones they pick up and for how long. 19 Ethnographic research uses concepts and tools from anthropology and other social science disciplines to provide deep cultural understanding of how people live and work. 20 The goal is to immerse the researcher into consumers' lives to uncover unarticulated desires that might not surface in any other form of research. 21 Fujitsu Laboratories, Herman Miller, Steelcase, and Xerox have embraced ethnographic research to design breakthrough products. Technology companies like IBM, Microsoft, and Hewlett-Packard use anthropologists and ethnologists working alongside systems engineers and software developers. 22 Any type of firm can benefit from the deep consumer insights of ethnographic research. To boost sagging sales for its Orville Redenbacher popcorn, Con Agra spent nine months observing families at home and studying weekly diaries of how they felt about various snacks. Researchers found a key insight: the essence of popcorn was that it was a “facilitator of interaction. ” Four nationwide TV ads followed with the tagline “Spending Time Together: That's the Power of Orville Redenbacher. ”23 Ethnographic research isn't limited to consumer products. UK-based Smith & Nephew, a global medical tech-nology business, used extensive international ethnographic research with patients and clinicians to understand the physical and emotional toll of wounds, developing ALLEVYN Life, a new wound-management dressing, in the process. 24 In a business-to-business setting, a sharper focus on end users helped propel Thomson Reuters to greater financial heights. 25 th OMSO n reuter S Just before it acquired Reuters, global information services giant Thomson Corporation embarked on extensive research to better understand its ultimate customers. Thomson sold to businesses and professionals in the financial, legal, tax and accounting, scientific, and health care sectors, and it wanted to know how individual brokers and investment bankers used its data, research, and other resources to make day-to-day investment decisions for clients. Segmenting the market by its end users, rather than by its corporate purchasers, and studying the way they viewed Thomson versus competitors allowed the firm to identify market segments that offered growth opportunities. Thomson then conducted surveys and “day in the life” ethnographic research on how end users did their jobs. Using an approach called “three minutes,” researchers combined observation with detailed interviews to understand what end users were doing three minutes before and after they used one of Thomson's products. Insights from the research helped the company develop new products and make acquisitions that led to significantly higher revenue and profits in the year that followed. The American Airlines researchers might meander around first-class lounges to hear how travelers talk about different carriers and their features or sit next to passengers on planes. They can fly on competitors' planes to observe in-flight service. Focus Group Research A focus group is a gathering of 6 to 10 people carefully selected for demographic, psychographic, or other considerations and convened to discuss various topics at length for a small payment. A professional moderator asks questions and probes based on the marketing managers' agenda; the goal is to uncover consumers' real motivations and the reasons they say and do certain things. Sessions are typically recorded, and marketing managers often observe from behind two-way mirrors. To allow more in-depth discussion, focus groups are trending smaller in size. 26 Focus group research is a useful exploratory step, but researchers must avoid generalizing to the whole market because the sample is too small and is not drawn randomly. Some marketers feel this research setting is too con-trived and prefer less artificial means. “Marketing Memo: Conducting Informative Focus Groups” has some practi-cal tips to improve the quality of focus groups. | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
Condu CTing M ARke Ting Rese ARC h | chapter 4 127 In the American Airlines research, the moderator might start with a broad question, such as “How do you feel about first-class air travel?” Questions then move to how people view the different airlines, different existing ser-vices, different proposed services, and, specifically, ultra high-speed Wi-Fi service. Focus groups allow marketers to hone in on issues not easily addressed by surveys. The key to using them successfully is to thoughtfully listen and carefully observe, leaving assumptions and biases behind. Although useful insights can emerge, questions also arise about focus groups' validity. Some researchers believe consumers are so bombarded with ads, they unconsciously (or perhaps cynically) parrot back what they've heard instead of what they really think. It's always possible participants are trying to main-tain their self-image and public persona, engage in “groupthink,” or satisfy a need to identify with other members. They may be unwilling to acknowledge—or even recognize—their behavior patterns and motivations, and one highly opinionated person can drown out the rest of the group. Getting the right participants is crucial, but groups can be expensive too ($3,000 to $5,000 per group). It can be difficult to generalize the results, even from multiple focus groups. For example, within the United States, findings often vary from region to region. One firm specializing in focus group research claimed Minneapolis was the best city to get a sample of fairly well-educated people who were honest and forthcoming. Many marketers interpret focus groups in New York and other northeastern cities carefully because people there tend to be highly critical and generally don't report that they like much. Participants must feel relaxed and be strongly motivated to be truthful. Physical surroundings can be crucial. At one agency an executive noted, “We wondered why people always seemed grumpy and negative—people were resistant to any idea we showed them. ” Finally in one session a fight broke out between participants. The problem was the room itself: cramped, stifling, forbidding. “It was a cross between a hospital room and a police interrogation room. ” To fix the problem, the agency gave the room a makeover. Other firms adapt the room to fit the topic—such as designing it to look like a playroom when speaking to children. To increase interactivity among focus group members, some researchers assign pre-session homework such as diaries, photography, and videography. Online focus groups may cost less than a quarter of an in-person focus group. They are also less intrusive, allow geographically diverse subjects to par-ticipate, and yield fast results. Proponents of traditional groups maintain that in-person sessions immerse marketers in the research process, offer a close-up look at people's emotional and physical reactions, and ensure that sensitive materials are not leaked. In-person, marketers can also adjust the flow of discus-sion and delve deeply into more complex topics. Regardless of the form it takes, the focus group is still, as one marketing executive noted, “the most cost-effective, quickest, dirtiest way to get information in rapid time on an idea. ” Wharton's Americus Reed might have said it best: “A focus group is like a chain saw. If you know what you're doing, it's very useful and effective. If you don't, you could lose a limb. ” Sources: Sarah Jeffrey Kasner, “Fistfights and Feng Shui,” Boston Globe, July 21, 2001; Linda Tischler, “Every Move You Make,” Fast Company, April 2004, pp. 73-75; Dennis Rook, “Out-of-Focus Groups,” Marketing Research 15, no. 2 (Summer 2003), p. 11; Piet Levy, “In with the Old, In Spite of the New,” Marketing News, May 30, 2009, p. 19; Piet Levy, “10 Minutes with... Robert J. Morais,” Marketing News, May 30, 2011; William Boateng, “Evaluating the Efficacy of Focus Group Discussion (FGD) in Qualitative Social Research,” International Journal of Business and Social Science 3 (April 2012), pp. 54-57; Demetrius Madrigal and Bryan Mc Clain, “Do's and Don'ts for Focus Groups,” www. uxmatters. com, July 4, 2011. Conducting Informative Focus Groups marketing memo Marketers can unobtrusively observe focus groups behind two-way mirrors to gain qualitative insights from consumers. Source: Spencer Grant/Getty Images | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
128 PART 2 | CAPT u Ring M ARke Ting insigh Ts Survey Research Companies undertake surveys to assess people's knowledge, beliefs, preferences, and satisfaction and to measure these magnitudes in the general population. A company such as American Airlines might prepare its own survey instrument, or it might add questions to an omnibus survey that carries the questions of several companies at a much lower cost. It can also pose questions to an ongoing consumer panel run by itself or another company. It may do a mall intercept study by having researchers approach people in a shopping mall and ask them questions. Or it might add a survey request at the end of calls to its customer service department. However they conduct their surveys—online, by phone, or in person—companies must feel the information they're getting from the mounds of data makes it all worthwhile. San Francisco-based Wells Fargo bank collects more than 50,000 customer surveys each month through its bank branches. It has used customers' comments to begin more stringent new wait-time standards designed to improve customer satisfaction. Of course, companies may risk creating “survey burnout” and seeing response rates plummet. Keeping a survey short and simple is one key to drawing participants. Offering incentives is another. Walmart, Rite Aid, Petco, and Staples include an invitation to fill out a survey on the cash register receipt with a chance to win a prize. 27 Behavioral Research Customers leave traces of their purchasing behavior in store scanning data, catalog purchases, and customer databases. Marketers can learn much by analyzing these data. Actual purchases reflect consumers' preferences and often are more reliable than statements they offer to market researchers. For example, grocery shopping data show that high-income people don't necessarily buy the more expensive brands, contrary to what they might state in interviews, and many low-income people buy some expensive brands. As Chapter 3 described, there is a wealth of online data to collect from consumers. Clearly, American Airlines can learn many useful things about its passengers by analyzing ticket purchase records and online behavior. The most scientifically valid research is experimental research, designed to capture cause-and-effect relation-ships by eliminating competing explanations of the findings. If the experiment is well designed and executed, research and marketing managers can have confidence in the conclusions. Experiments call for selecting matched groups of subjects, subjecting them to different treatments, controlling extraneous variables, and checking whether observed response differences are statistically significant. If we can eliminate or control extraneous factors, we can relate the observed effects to the variations in the treatments or stimuli. American Airlines might introduce ultra high-speed Wi-Fi service on one of its regular flights from Chicago to Tokyo and charge $25 one week and $15 the next week. If the plane carried approximately the same number of first-class passengers each week and the particular weeks made no difference, the airline could relate any signifi-cant difference in the number of passengers using the service to the price charged. re Search In Strument S Marketing researchers have a choice of three main research instruments in collecting primary data: questionnaires, qualitative measures, and technological devices. Questionnaires A questionnaire consists of a set of questions presented to respondents. Because of its flexibility, it is by far the most common instrument used to collect primary data. The form, wording, and sequence of the questions can all influence the responses, so testing and de-bugging are necessary. Closed-end questions specify all the possible answers, and the responses are easier to interpret and tabulate. Open-end questions allow respondents to answer in their own words. They are especially useful in exploratory research, where the researcher is looking for insight into how people think rather than measuring how many think a certain way. Table 4. 1 provides examples of both types of questions; also see “Marketing Memo: Questionnaire Dos and Don'ts. ” Wells Fargo conducts thousands of consumer surveys to improve its banking services. Source: Jonathan Alpeyrie/Polaris/Newscom | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
Condu CTing M ARke Ting Rese ARC h | chapter 4 129 table 4. 1 Types of Questions Name Description Example A. Closed-End Questions Dichotomous A question with two possible answers In arranging this trip, did you personally phone American? Yes No Multiple choice A question with three or more answers With whom are you traveling on this flight? No one Children only Spouse Business associates/friends/relatives Spouse and children An organized tour group Likert scale A statement with which the respon-dent shows the amount of agreement/ disagreement Small airlines generally give better service than large ones. Strongly Disagree Neither Agree Strongly disagree agree nor agree disagree 1_____ 2_____ 3_____ 4_____ 5_____ Semantic differential A scale connecting two bipolar words. The respondent selects the point that represents his or her opinion. I find American Airlines... Large _____________________________________ Small Experienced ___________________________ Inexperienced Modern ______________________________ Old-fashioned Importance scale A scale that rates the importance of some attribute Airline in-flight service to me is Extremely Very Somewhat Not very Not at all important important important important important 1_____ 2_____ 3_____ 4_____ 5_____ Rating scale A scale that rates some attribute from “poor” to “excellent”American in-flight service is Excellent Very Good Good Fair Poor 1_____ 2_____ 3_____ 4_____ 5_____ Intention-to-buy scale A scale that describes the respondent's intention to buy If ultra high-speed Wi-Fi service were available on a long flight, I would Definitely Probably Not sure Probably Definitely buy buy not buy not buy 1_____ 2_____ 3_____ 4_____ 5_____ B. Open-End Questions Completely unstructured A question that respondents can answer in an almost unlimited number of ways What is your opinion of American Airlines? Word association Words are presented, one at a time, and respondents mention the first word that comes to mind. What is the first word that comes to your mind when you hear the following? Airline_________________________________ American_________________________________ Travel_________________________________ Sentence completion An incomplete sentence is presented and respondents complete the sentence. When I choose an airline, the most important consideration in my decision is _________________________________. Story completion An incomplete story is presented, and respondents are asked to complete it. “I flew American a few days ago. I noticed that the exterior and interior of the plane had very bright colors. This aroused in me the following thoughts and feelings.... ” Now complete the story. Picture A picture of two characters is pre-sented, with one making a statement. Respondents are asked to identify with the other and fill in the empty balloon. Thematic Apperception Test (TAT)A picture is presented and respondents are asked to make up a story about what they think is happening or may happen in the picture. | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
130 PART 2 | CAPT u Ring M ARke Ting insigh Ts Qualitative Measures Some marketers prefer qualitative methods for gauging consumer opinion because they feel consumers' actions don't always match their answers to survey questions. Qualitative research techniques are relatively indirect and unstructured measurement approaches, limited only by the marketing researcher's creativity, that permit a range of responses. They can be an especially useful first step in exploring consumers' perceptions because respondents may be less guarded and reveal more about themselves in the process. Qualitative research does have its drawbacks. The samples are often very small, and results may not generalize to broader populations. And different researchers examining the same qualitative results may draw very different conclusions. Nevertheless, there is increasing interest in using qualitative methods. “Marketing Insight: Getting into the Heads of Consumers” describes the pioneering ZMET approach. Other popular methods include:28 1. Word associations. To identify the range of possible brand associations, ask subjects what words come to mind when they hear the brand's name. “What does the Timex name mean to you? Tell me what comes to mind when you think of Timex watches. ” 2. Projective techniques. Give people an incomplete or ambiguous stimulus and ask them to complete or explain it. In “bubble exercises” empty bubbles, like those in cartoons, appear in scenes of people buying or using cer-tain products or services. Subjects fill in the bubble, indicating what they believe is happening or being said. In comparison tasks people compare brands to people, countries, animals, activities, cars, nationalities, or even other brands. 3. Visualization. Visualization requires people to create a collage from magazine photos or drawings to depict their perceptions. 4. Brand personification. Ask “If the brand were to come alive as a person, what would it be like, what would it do, where would it live, what would it wear, who would it talk to if it went to a party (and what would it talk about)?” For example, the John Deere brand might make someone think of a rugged Midwestern male who is hardworking and trustworthy. 5. Laddering. A series of increasingly specific “why” questions can reveal consumer motivation and deeper goals. Ask why someone wants to buy a Nokia cell phone. “They look well built” (attribute). “Why is it im-portant that the phone be well built?” “It suggests Nokia is reliable” (a functional benefit). “Why is reliability important?” “Because my colleagues or family can be sure to reach me” (an emotional benefit). “Why must you be available to them at all times?” “I can help them if they're in trouble” (a core value). The brand makes this person feel like a Good Samaritan, ready to help others. 1. Ensure that questions are without bias. Don't lead the respondent into an answer. 2. Make the questions as simple as possible. Questions that include multiple ideas or two questions in one will confuse respondents. 3. Make the questions specific. Sometimes it's advisable to add memory cues. For example, be specific with time periods. 4. Avoid jargon or shorthand. Avoid trade jargon, acronyms, and initials not in everyday use. 5. Steer clear of sophisticated or uncommon words. Use only words in common speech. 6. Avoid ambiguous words. Words such as usually or frequently have no specific meaning. 7. Avoid questions with a negative in them. It is better to say, “Do you ever... ?” than “Do you never... ?” 8. Avoid hypothetical questions. It's difficult to answer questions about imaginary situations. Answers aren't necessarily reliable. 9. Do not use words that could be misheard. This is especially important when administering the interview over the telephone. “What is your opinion of sects?” could yield interesting but not necessarily relevant answers. 10. Desensitize questions by using response bands. To ask people their age or ask companies about employee turnover rates, offer a range of response bands instead of precise numbers. 11. Ensure that fixed responses do not overlap. Categories used in fixed-response questions should be distinct and not overlap. 12. Allow for the answer “other” in fixed-response questions. Precoded answers should always allow for a response other than those listed. Source: Adapted from Paul Hague and Peter Jackson, Market Research: A Guide to Planning, Methodology, and Evaluation (London: Kogan Page, 1999). See also Hans Baumgartner and Jan-Benedict E. M. Steenkamp, “Response Styles in Marketing Research: A Cross-National Investigation,” Journal of Marketing Research (May 2001), pp. 143-56; Bert Weijters and Hans Baumgartner, “Misreponse to Reverse and Negated Items in Surveys: A Review,” Journal of Marketing Research 49 (October 2012), pp. 737-47. Marketing Questionnaire Dos And Don'ts marketing memo | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
Condu CTing M ARke Ting Rese ARC h | chapter 4 131 Getting into the Heads of Consumers Former Harvard Business School marketing professor Gerald Zaltman, with colleagues, developed an in-depth methodology to uncover what consumers think and feel about products, services, brands, and other things. The basic assumption behind the Zaltman Metaphor Elicitation Technique (ZMET) is that most thoughts and feelings are unconscious and shaped by a set of universal deep metaphors, basic orientations toward the world that shape everything consumers think, hear, say, or do. According to Zaltman, there are seven main metaphors: 1. Balance: justice equilibrium and the interplay of elements; 2. Transformation: changes in substance and circumstance; 3. Journey: the meeting of past, present, and future; 4. Container: inclusion, exclusion, and other boundaries; 5. Connection: the need to relate to oneself and others; 6. Resource: acquisitions and their consequences; and 7. Control: sense of mastery, vulnerability, and well-being. The ZMET technique works by first asking participants in advance to select a minimum of 12 images from their own sources (magazines, catalogs, family photo albums) to represent their thoughts and feelings about the research topic. In a one-on-one interview, the study admin-istrator uses advanced interview techniques to explore the images with the participant and reveal hidden meanings. Finally, the participants use a computer program to create a collage with these images that communicates their subconscious thoughts and feelings about the topic. The results often significantly influence marketing actions, as the following two examples illustrate: In a ZMET study about pantyhose for marketers at Du Pont, some respondents' pictures showed fence posts encased in plastic wrap or steel bands strangling trees, suggesting that pantyhose are tight and inconvenient. But another picture showed tall flowers in a vase, suggesting the product made a woman feel thin, tall, and sexy. The “love-hate” relationship in these and other pictures sug-gested a more complicated product relationship than the Du Pont marketers had assumed. Although many older consumers told Danish hearing aid company Oticon that cost was the reason they were postponing purchase, a ZMET analysis revealed the bigger problem was fear of being seen as old or flawed. Oticon responded by creating Delta, a line of stylish new hearing aids that came in flashy colors such as sunset orange, racing green, or cabernet red. ZMET has also been applied to help design the new Children's Hospital in Pittsburgh, PA, remake the classic soup labels for Campbell, and improve letters to prospective undergraduate applicants for the University of North Carolina at Chapel Hill. Sources: Gerald Zaltman and Lindsay Zaltman, Marketing Metaphoria: What Deep Metaphors Reveal about the Minds of Consumers (Boston: Harvard Business School Press, 2008); Glenn L. Christensen and Jerry C. Olson, “Mapping Consumers' Mental Models with ZMET,” Psychology & Marketing 19 (June 2002), pp. 477-502; Emily Eakin, “Penetrating the Mind by Metaphor,” New York Times, February 23, 2002; Anne Eisenberg, “The Hearing Aid as Fashion Statement,” New York Times, September 24, 2006; Mackenzie Carpenter, “The New Children's Hospital: Design Elements Combine to Put Patients, Parents at Ease,” Pittsburgh Post-Gazette, April 26, 2009; Jennifer Williams, “Campbell's Soup Neuromarketing Redux: There's Chunks of Real Science in That Recipe,” Fast Company, February 22, 2010; Jay Matthews, “Admissions Office Probes Applicants' Scary Depths,” Washington Post, July 22, 2010. marketing insight Marketers don't have to choose between qualitative and quantitative measures. Many use both, recognizing that their pros and cons can offset each other. For example, companies can recruit someone from an online panel to participate in an in-home product use test by capturing his or her reactions and intentions with a video diary and an online survey. 29 A ZMET qualitative research study helped the University of North Carolina at Chapel Hill improve its undergraduate admission efforts. Source: ©UNC-Chapel Hill | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
132 PART 2 | CAPT u Ring M ARke Ting insigh Ts Technological Devices Galvanometers can measure the interest or emotions aroused by exposure to a specific ad or picture. The tachistoscope flashes an ad to a subject with an exposure interval that may range from less than one hundredth of a second to several seconds. After each exposure, the respondent describes everything he or she recalls. Many advances in visual technology techniques studying the eyes and face have benefited marketing researchers and managers alike. 30 Studying the eye S and Face A number of increasingly cost-effective methods to study the eyes and faces of consumers have been developed in recent years with diverse applications. Packaged goods companies such as P&G, Unilever, and Kimberly-Clark combine 3-D computer simulations of product and packaging de-signs with store layouts and use eye-tracking technology to see where consumer eyes land first, how long they linger on a given item, and so on. After doing such tests, Unilever changed the shape of its Axe body wash container, the look of the logo, and the in-store display. In the International Finance Center Mall in Seoul, Korea, two cameras and a motion detec-tor are placed above the LCD touch screens at each of the 26 information kiosks. Facial recognition software estimates users' age and gender, and interactive ads targeting the appropriate demographic then appear. Similar applications are being developed for digital sidewalk billboards in New York, Los Angeles, and San Francisco. Facial recognition cameras and software are being tested to identify and reward participating loyal U. S. customers of retailers and restaurants via opt-in smart phone updates. In one commercial application, Scene Tap uses cameras with facial detection software to post information about how full a bar is, as well as the average age and gender profile of the crowd, to help bar hoppers pick their next destination. Technology now lets marketers use skin sensors, brain wave scanners, and full-body scanners to get con-sumer responses. 31 For example, biometric-tracking wrist sensors can measure electrodermal activity, or skin conductance, to note changes in sweat levels, body temperature and movement, and so on. 32 “Marketing Insight: Understanding Brain Science” provides a glimpse into some of the new marketing research frontiers in studying the brain. 33 Technology has replaced the diaries that participants in media surveys used to keep. Audiometers attached to television sets in participating homes now record when the set is on and to which channel it is tuned. Electronic devices can record the number of radio programs a person is exposed to during the day or, using Global Positioning System (GPS) technology, how many billboards a person may walk or drive by during a day. Sampl Ing plan After choosing the research approach and instruments, the marketing researcher must design a sampling plan. This calls for three decisions: 1. Sampling unit: Whom should we survey? In the American Airlines survey, should the sampling unit consist of only first-class business travelers, only first-class vacation travelers, or both? Should it include travelers under age 18? Both traveler and spouse? With the sampling unit chosen, marketers must next develop a sam-pling frame so everyone in the target population has an equal or known chance of being sampled. 2. Sample size: How many people should we survey? Large samples give more reliable results, but it's not necessary to sample the entire target population to achieve reliable results. Samples of less than 1 percent of a population can often provide good reliability, with a credible sam-pling procedure. 3. Sampling procedure: How should we choose the respondents? Probability sampling allows marketers to calculate confidence limits for sampling error and makes the sample more representa-tive. Thus, after choosing the sample, marketers could conclude that “the interval five to seven trips per year has 95 chances in 100 of containing the true number of trips taken annually by first-class passengers flying between Chicago and Tokyo. ” contact metho DS Now the marketing researcher must decide how to contact the subjects: by mail, by telephone, in person, or online. Mail Contacts The mail questionnaire is one way to reach people who would not give personal interviews or whose responses might Using sophisticated equipment and methods, neuroscience researchers are studying how brain activity is affected by consumer marketing. Source: ERICH SCHLEGEL/The New York Times | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
Condu CTing M ARke Ting Rese ARC h | chapter 4 133 be biased or distorted by the interviewers. Mail questionnaires require simple and clearly worded questions. Unfortunately, responses are usually few or slow. Telephone Contacts Telephone interviewing is a good method for gathering information quickly; the interviewer is also able to clarify questions if respondents do not understand them. Interviews must be brief and not too personal. Although the response rate has typically been higher than for mailed questionnaires, telephone interviewing in the United States is getting more difficult because of consumers' growing antipathy toward telemarketers. In late 2003, Congress passed legislation allowing the Federal Trade Commission to restrict telemarketing calls through its “Do Not Call” registry. By mid-2010, consumers had registered more than 200 million phone numbers. Marketing research firms are exempt from the ruling, but the increasingly widespread resistance to telemarketing undoubtedly reduces the effectiveness of telephone surveys in the United States. In other parts of the world, such restrictive legislation does not exist. Because mobile phone penetration in Africa had risen from just 1 in 50 people in 2000 to almost eighty percent of the population by 2014, marketers use cell phones there to convene focus groups in rural areas and to interact via text. 34 Personal Contacts Personal interviewing is the most versatile method. The interviewer can ask more questions and record additional observations about the respondent, such as dress and body language. Personal interviewing is also the most expensive method, is subject to interviewer bias, and requires more planning and supervision. In arranged interviews, marketers contact respondents for an appointment and often offer a small payment or Understanding Brain Science As an alternative to traditional consumer research, some researchers have begun to develop sophisticated techniques from neuroscience that monitor brain activity to better gauge consumer responses to marketing. The term neuromarketing describes brain research on the effect of marketing stimuli. Firms are using EEG (electroencepha-lograph) technology to correlate brand activity with physiological cues such as skin temperature or eye movement and thus gauge how people react to ads. Researchers studying the brain have found different results from conventional research methods. One group of researchers at UCLA used functional magnetic resonance imaging (f MRI) to find that the Super Bowl ads for which subjects displayed the highest brain activity were different from the ads with the highest stated preferences. Other research found little effect from product placement unless the products in question played an integral role in the storyline. Several studies have found higher correlations with brain wave research and behavior than with surveys. One study found that brain waves better predicted music purchases than stated music prefer-ences. One major finding from neurological consumer research is that many purchase decisions appear to be characterized “as a largely unconscious habitual process, as distinct from the rational, conscious, information-processing model of economists and traditional marketing textbooks. ” Even basic decisions, such as the purchase of gasoline, seem to be influenced by brain activity at the subrational level. A group of researchers in England used EEG to monitor cognitive functions related to memory recall and attentiveness for 12 different re-gions of the brain as subjects were exposed to advertising. Brain wave activity in different regions indicated different emotional responses. For example, heightened activity in the left prefrontal cortex is characteristic of an “approach” response to an ad and indicates an attraction to the stimulus. In contrast, a spike in brain activity in the right prefrontal cortex is indicative of a strong revulsion to the stimulus. In yet another part of the brain, the degree of memory formation activity correlates with purchase intent. Other research has shown that people activate different regions of the brain in assessing the personality traits of other people than they do when assessing brands. Although it may offer different insights from conventional tech-niques, neurological research can still be fairly expensive and has not been universally accepted. Given the complexity of the human brain, many researchers caution that it should not form the sole basis for marketing decisions. The measurement devices to capture brain activity can also be highly obtrusive, using skull caps studded with electrodes or creating artificial exposure conditions. Others question whether neurological research really offers unam-biguous implications for marketing strategy. Brian Knutson, a professor of neuroscience and psychology at Stanford University, compares the use of EEG to “standing outside a baseball stadium and listening to the crowd to figure out what happened. ” Other critics worry that if the methods do become successful, they will only lead to more marketing manipulation by companies. Despite controversy, marketers' endless pursuit of deeper insights about consumers' response to marketing virtually guarantees continued interest in neuromarketing. Sources: Carolyn Yoon, Angela H. Gutchess, Fred Feinberg, and Thad A. Polk, “A Functional Magnetic Resonance Imaging Study of Neural Dissociations be-tween Brand and Person Judgments,” Journal of Consumer Research 33 (June 2006), pp. 31-40; Martin Lindstrom, Buyology: Truth and Lies about Why We Buy (New York: Doubleday, 2008); Brian Sternberg, “How Couch Potatoes Watch TV Could Hold Clues for Advertisers,” Boston Globe, September 6, 2009, pp. G1, G3; Kevin Randall, “Neuromarketing Hope and Hype: 5 Brands Conducting Brain Research,” Fast Company, September 15, 2009; Todd Essig, “The Future of Focus Groups: My Brain Knows What You Like,” Forbes, April 28, 2012; Carmen Nobel, “Neuromarketing: Tapping into the 'Pleasure Center' of Consumers,” Forbes, February 1, 2013. marketing insight | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
134 PART 2 | CAPT u Ring M ARke Ting insigh Ts incentive. In intercept interviews, researchers stop people at a shopping mall or busy street corner and request an interview on the spot. Intercept interviews must be quick, and they run the risk of including nonprobability samples. Online Contacts The Internet offers many ways to do research. A company can embed a questionnaire on its Web site and offer an incentive for answering, or it can place a banner on a frequently visited site, inviting people to answer questions and possibly win a prize. Online product testing can provide information much faster than traditional new-product marketing research techniques. Marketers can also host a real-time consumer panel or virtual focus group or sponsor a chat room, bulletin board, or blog where they introduce questions from time to time. They can ask customers to brainstorm or have the company's Twitter followers rate an idea. Insights from Kraft-sponsored online communities helped the com-pany develop its popular line of 100-calorie snacks. 35 Del Monte tapped its 400-member, handpicked online community called “I Love My Dog” when it was consider-ing a new breakfast treat for dogs. The consensus request was for something with a bacon-and-egg taste and an extra dose of vitamins and minerals. Working with the online community throughout product development, the company introduced fortified “Snausages Breakfast Bites” in half the time usually required to launch a new product. 36 Online research was a $2. 4 billion dollar business in 2011. A host of new online survey providers have entered the market, such as Survey Monkey, Survey-Gizmo, Qualtrics, and Google Consumer Surveys. Founded in 1999, Survey Monkey has over 15 million registered users. Members can create surveys to quickly post on blogs, Websites, Facebook, or Twitter. 37 Like any survey, however, online surveys need to ask the right people the right questions on the right topic. Other means to use the Internet as a research tool including tracking how customers clickstream through the company's Web site and move to other sites. Marketers can post different prices, headlines, and product features on separate Web sites or at different times to compare their relative effectiveness. Researchers like Bluefin Labs monitor all relevant Twitter tweets, Facebook posts, and broadcast television stories to provide companies with real-time trend analysis. 38 Firms like Survey Monkey make it easy to conduct online consumer surveys. Source: Survey Monkey | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
Condu CTing M ARke Ting Rese ARC h | chapter 4 135 Yet, as popular as online research methods are, smart companies use them to augment rather than replace more traditional methods. Like any method, online research has pros and cons. Here are some advantages: Online research is inexpensive. A typical online survey can cost 20 percent to 50 percent less than a conven-tional survey, and return rates can be as high as 50 percent. Online research is expansive. There are essentially no geographical boundaries, allowing marketers to con-sider a wide range of possible respondents. Online research is fast. The survey can automatically direct respondents to applicable questions, store data, and transmit results immediately. Responses tend to be honest and thoughtful. People may be more relaxed and candid when they can answer on their own time and respond privately without feeling judged, especially on sensitive topics (such as “how often do you bathe or shower?”). 39 Online research is versatile. Virtual reality software lets visitors inspect 3-D models of products such as cam-eras, cars, and medical equipment and manipulate product characteristics. Online community blogs allow customer participants to interact with each other. Some disadvantages include: Samples can be small and skewed. Some 28 percent of U. S. households still lacked broadband Internet access in 2014; the percentage is higher among lower-income groups, in rural areas, and in most parts of Asia, Latin America, and Central and Eastern Europe, where socioeconomic and education levels also differ. 40 Although Internet access will increase, online market researchers must find creative ways to reach population segments on the other side of the “digital divide. ” Combining offline sources with online findings and providing tem-porary Internet access at locations such as malls and recreation centers are options. Some research firms use statistical models to fill in the gaps left by offline consumer segments. Online panels and communities can suffer excessive turnover. Members may become bored and flee or, worse, stay but participate halfheartedly. Panel and community organizers can raise recruiting standards, downplay incentives, and monitor participation and engagement levels. A constant flow of new features, events, and activities can keep members interested and engaged. Online market research can suffer technological problems and inconsistencies. Because browser software varies, the designer's final product may look very different on the research subject's screen. Online researchers have also begun to use text messaging in various ways—to conduct a chat with a respondent, to probe more deeply with a member of an online focus group, or to direct respondents to a Web site. Text messag-ing is also a useful way to get teenagers to open up on topics. step 3: collect the Informat Ion The data collection phase of marketing research is generally the most expensive and error-prone. Some respon-dents will be away from home, offline, or otherwise inaccessible; they must be contacted again or replaced. Others will refuse to cooperate or will give biased or dishonest answers. Internationally, one of the biggest obstacles to collecting information is the need to achieve consistency. 41 Latin American respondents may be uncomfortable with the impersonal nature of the Internet and need interactive ele-ments in a survey so they feel they're talking to a real person. Respondents in Asia, on the other hand, may feel more pressure to conform and may not be as forthcoming in focus groups as online. Sometimes the solution may be as simple as ensuring the right language is used. step 4: anal Yze the Informat Ion The next-to-last step in the process is to extract findings by tabulating the data and developing summary measures. The researchers now compute averages and measures of dispersion for the major variables and apply some ad-vanced statistical techniques and decision models in the hope of discovering additional findings. They may test dif-ferent hypotheses and theories, applying sensitivity analysis to test assumptions and the strength of the conclusions. step 5: present the f In DIn Gs As the last step, the researcher presents the findings. Researchers are increasingly asked to play a proactive, con-sulting role in translating data and information into insights and recommendations for management. “Marketing Insight: Bringing Marketing Research to Life with Personas” describes an approach that some researchers are us-ing to maximize the impact of their consumer research findings. | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
136 PART 2 | CAPT u Ring M ARke Ting insigh Ts The main survey findings for the American Airlines case showed that: 1. Passengers would use ultra high-speed Wi-Fi service primarily to stay connected and receive and send large documents and e-mails. Some would also surf the Web to download videos and songs. They would charge the cost back to their employers. 2. At $25, about 5 of 10 first-class passengers would use Wi-Fi service during a flight; at $15, about 6 would. Thus, a fee of $15 would produce less revenue ($90 = 6 × $15) than $25 ($125 = 5 × $25). Assuming the same flight takes place 365 days a year, American could collect $45,625 (= $125 × 365) annually. Given an invest-ment of $90,000 per plane, it would take two years for each to break even. 3. Offering ultra high-speed Wi-Fi service would strengthen American Airlines' image as an innovative and pro-gressive carrier and earn it some new passengers and customer goodwill. step 6: make the Dec Is Ion The American Airlines managers who commissioned the research need to weigh the evidence. If their confidence in the findings is low, they may decide against introducing ultra high-speed Wi-Fi service. If they are predisposed to launching it, the findings support their inclination. They may even decide to study the issue further and do more research. The decision is theirs, but rigorously done research provides them with insight into the problem (see Table 4. 2). 42 Some organizations use marketing decision support systems to help their marketing managers make better decisions. MIT's John Little defined a marketing decision support system (MDSS) as a coordinated collection of data, systems, tools, and techniques, with supporting software and hardware, by which an organization gathers and interprets relevant information from business and environment and turns it into a basis for marketing ac-tion. 44 Once a year, Marketing News lists hundreds of current marketing and sales software programs that assist Bringing Marketing Research to Life with Personas To bring all their acquired information and insights to life, some re-searchers are employing personas. Personas are detailed profiles of one, or perhaps a few, hypothetical target consumers, imagined in terms of demographic, psychographic, geographic, or other descriptive at-titudinal or behavioral information. Photos, images, names, or short bios help convey how the target customer looks, acts, and feels so marketers can incorporate a well-defined target-customer point of view in all their marketing decision making. Many software companies, Microsoft in particular, have used personas to help improve user interfaces and ex-periences, and marketers have broadened the application. For example: Unilever's biggest and most successful hair-care launch, for Sunsilk, was aided by insights into the target consumer the company dubbed “Katie. ” The Katie persona outlined the 20-something female's hair-care needs, but also her perceptions and attitudes and the way she dealt with her everyday “dramas. ” Specialty tool and equipment maker Campbell Hausfeld relied on the many retailers it supplied, including Home Depot and Lowe's, to help it keep in touch with consumers. After developing eight consumer profiles, including a female do-it-yourselfer and an elderly consumer, the firm was able to successfully launch new products such as drills that weighed less or that included a level for picture hanging. Although personas provide vivid information to aid marketing decision making, it's important not to overgeneralize. Any target market may have a range of consumers who vary along a number of key dimen-sions, so researchers sometimes employ two to six personas. Using quantitative, qualitative, and observational research, Best Buy devel-oped five customer personas to guide the redesign and relaunch of Geek Squad. com, its national computer-support service: “Jill”—a suburban mom who uses her computer daily and de-pends on the Geek Squad as on a landscaper or plumber. “Charlie”—a 50-plus male who is curious about technology but needs an unintimidating guide. “Daryl”—a technologically savvy hands-on experimenter who oc-casionally needs a helping hand. “Luis”—a time-pressed small business owner whose primary goal is to complete tasks as expediently as possible. “Nick”—a prospective Geek Squad agent who views the site criti-cally and needs to be challenged. To satisfy Charlie, a prominent 911 button was added to the upper right-hand corner in case a crisis arose, but to satisfy Nick, Best Buy created a whole channel devoted to geek information. Sources: Dale Buss, “Reflections of Reality,” Point, June 2006, pp. 10-11; Todd Wasserman, “Unilever, Whirlpool Get Personal with Personas,” Brandweek, September 18, 2006, p. 13; Daniel B. Honigman, “Persona-fication,” Marketing News, April 1, 2008, p. 8; Lisa Sanders, “Major Marketers Get Wise to the Power of Assigning Personas,” Advertising Age, April 9, 2007, p. 36; Paul Murray, “Who Are They?,” www. chiefmarketer. com, June/July 2010, pp. 53-54; Lauren Sorenson, “6 Core Benefits of Well-Defined Marketing Personas,” www. blog. hotspot. com, December 13, 2011. marketing insight | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
Condu CTing M ARke Ting Rese ARC h | chapter 4 137 in designing marketing research studies, segmenting markets, setting prices and advertising budgets, analyzing media, and planning sales force activity. 45 Measuring Marketing Productivity Although we can easily quantify marketing expenses and investments as inputs in the short run, the resulting outputs such as broader brand awareness, enhanced brand image, greater customer loyalty, and improved new product prospects may take months or years to manifest themselves. Meanwhile internal changes within the or-ganization and external changes in the marketing environment may coincide with the marketing expenditures, making it hard to isolate its effects. 46 Nevertheless, marketing research must assess the efficiency and effectiveness of marketing activities. Two complementary approaches to measuring marketing productivity are: (1) marketing metrics to assess marketing effects and (2) marketing-mix modeling to estimate causal relationships and measure how marketing activity af-fects outcomes. Marketing dashboards are a structured way to disseminate the insights gleaned from these two approaches. market In G metr Ics Marketers employ a wide variety of measures to assess marketing effects. 47 Marketing metrics is the set of mea-sures that helps marketers quantify, compare, and interpret their performance. 48 The CMO of Mary Kay cosmetics would focus on four long-term brand strength metrics—market aware-ness, consideration, trial, and 12-month beauty consultant productivity—as well as a number of short-term program-specific metrics like ad impressions, Web site traffic, and purchase conversion. The VP of marketing at Virgin America would look at a broad set of online metrics—cost per acquisition, cost per click, and cost per thousand page impressions (CPM). She would also look at total dollars driven by natural and paid search and online display advertising as well as tracking results and other metrics from the offline world. table 4. 2 The Seven Characteristics of Good Marketing Research 1. Scientific method Effective marketing research uses the principles of the scientific method: careful observation, formulation of hypotheses, prediction, and testing. 2. Research creativity In an award-winning research study to reposition Cheetos snacks, researchers dressed up in a brand mascot Chester Cheetah suit and walked around the streets of San Francisco. The response the character encountered led to the realization that even adults loved the fun and playfulness of Cheetos. The resulting repositioning led to a double-digit sales increase despite a tough business environment. 43 3. Multiple methods Marketing researchers shy away from overreliance on any one method. They also recognize the value of using two or three methods to increase confidence in the results. 4. Interdependence of models and data Marketing researchers recognize that data are interpreted from underlying models that guide the type of information sought. 5. Value and cost of information Marketing researchers show concern for estimating the value of information against its cost. Costs are typically easy to determine, but the value of research is harder to quantify. It depends on the reliability and validity of the findings and management's willingness to accept and act on those findings. 6. Healthy skepticism Marketing researchers show a healthy skepticism toward glib assumptions made by managers about how a market works. They are alert to the problems caused by “marketing myths. ” 7. Ethical marketing Marketing research benefits both the sponsoring company and its customers. The misuse of marketing research can harm or annoy consumers, increasing resentment at what consumers regard as an invasion of their privacy or a disguised sales pitch. | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
138 PART 2 | CAPT u Ring M ARke Ting insigh Ts Marketers choose one or more measures based on the particular issues or problems they face. Mindbody, a web-based business management software provider for the wellness and beauty industries worldwide, tracks numerous online analytics including landing page conversions, click through rates for online ads and rankings on Google search. In addition, MINDBODY monitors the following online metrics on a weekly basis: 1) Website analytics, details on site navigation and online interaction; 2) Social media pres-ence, different demographic and geographic responses to social media channels across different markets; and 3) Permission marketing statistics, measures of interactions and engagement with consumers from auto e-mails. “Marketing Memo: Measuring Social Media ROI” offers some insight into the thorny issue of mea-suring social media effects. An advocate of simple, relevant marketing metrics, the University of Virginia's Paul Farris draws an analogy to the way Boeing 747 jet pilots select information from the vast array of instruments in the cockpit:49 Aircraft pilots have protocols. When they are sitting on the tarmac warming their engines waiting to take off, they are looking at certain things. When they are taxiing, they look at others. When they are in flight, they look at still others. There is a sequence of knowing when to pay attention to which metrics, which lets them have their cake and eat it too, in terms of the simplicity and complexity trade-off. London Business School's Tim Ambler believes firms can split evaluation of marketing performance into two parts: (1) short-term results and (2) changes in brand equity. 50 Short-term results often reflect profit-and-loss concerns as shown by sales turnover, shareholder value, or some combination of the two. Brand-equity measures could include customer awareness, attitudes, and behaviors; market share; relative price premium; number of complaints; distribution and availability; total number of customers; perceived quality, and loyalty and retention. 51 Companies can also monitor an extensive set of internal metrics, such as innovation. For example, 3M tracks the proportion of sales resulting from its recent innovations. Ambler also recommends developing employee mea-sures and metrics, arguing that “end users are the ultimate customers, but your own staff are your first; you need to measure the health of the internal market. ” Table 4. 3 summarizes a list of popular internal and external marketing metrics from Ambler's survey in the United Kingdom. 52 Software provider MINDBODY uses a wide variety of online statistics to monitor its brand and assess marketing effects. Source: MINDBODY | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
Condu CTing M ARke Ting Rese ARC h | chapter 4 139 Industry expenditures on social media campaigns are expected to double in the next four years, but many marketers do not know what they are getting in return for their dollars. When Audi ran the first Super Bowl ad to feature a Twitter hashtag in 2011, it had no idea how much the high engagement of its Facebook fan base translated into sales of more cars. One report showed that 50 percent of Fortune 1000 companies did not benchmark or measure the payback of their social CRM projects. Initially, the focus of measuring social media effects was on easily observed quantities like the number of Facebook “likes” and Twitter tweets per week. These did not always correlate with marketing or business success, so researchers began digging deeper. Assessing social media value is not an easy task. Some marketing pundits compare social media to a phone: How would you assess the ROI of all the different calls you make? Josh Bernoff, Forrester Research's acclaimed digital marketing guru, sees short-term and long-term benefits of social media in four categories: 1. Short-term financial benefits, such as increased revenue or decreased costs. On the revenue side, when Net Shops. com added ratings and reviews to its site, sales increased 26 percent within six months. On the cost side, National Instruments, makers of sophisticated technical engineering products, found members of its user community answered 46 percent of other users' questions, saving NI its typical $10 service cost per call. Similarly, AT&T's revamped online community saved the firm 16 percent in telephone customer support in one month. 2. Short-term overall digital benefits. When Swanson Health Products improved the visibility of its product reviews, they became more accessible to search engines, and traffic to its product pages rose 163 percent. Online videos, communities, blogs, and Twitter can similarly boost search performance. 3. Long-term brand lift. Social media can improve long-term brand performance measures. When P&G created a Facebook page to support ski jumper Lindsey Van, it solicited 40,000 signatures on a petition to make ski jumping an Olympic sport. Surveys of participating Facebook users found an 8 percent to 11 percent increase in brand preference and purchase intent. 4. Long-term risk avoidance. Dealing with a crisis can cost a firm millions of dollars over time. It is better to avoid or avert a crisis before it creates any brand damage. Firms such as Mc Donald's and AT&T have customer service teams who monitor Tweets about their products or services to nip any al-leged problems in the bud. Forrester social media analyst Zach Hofer-Shall believes mining actionable insights and measurable feedback from social media requires: (1) the right people to interpret the data, (2) a business purpose to drive strategy, (3) the best social listening platform for achieving goals, and (4) a formalized process for analyzing data and taking action. The easiest way to create and measure social media's payoff is to include a contest, sweepstake, or promotion. Silicon Valley ad agency Wildfire created a promotion for Jamba Juice where the value of a “lucky coupon” was revealed only in-store. Tens of thousands of customers entered. The promotion was suc-cessful, but social media results can still be unpredictable. V. Kumar and his colleagues suggest a seven-step process to social media success with several helpful indices that could be developed for each step: 1. Monitor the conversations. 2. Identify influential individuals. 3. Identify the factors they share. 4. Locate potential influencers who have relevant interests. 5. Recruit those influencers. 6. Incentivize them to spread positive word of mouth. 7. Reap the rewards. Research has also shown that our use of social media differs in significant ways. People tend to be more positive in one-way communica-tions (such as blogs and Twitter) than in two-way forums where they share and discuss brand or product experiences with others. Sources: “ROI Lacking in Social CRM,” www. warc. com. May 4, 2012; Josh Bernoff, “A Balanced Perspective on Social ROI,” Marketing News, February 28, 2011; Piet Levy, “10 Minutes with ... Zach Hofer-Shall,” Marketing News, September 15, 2011; Frahad Manjoo, “Does Social Media Have a Return on Investment?,” Fast Company, July/August 2011; David A. Schweidel, Wendy W. Moe, and Chris Boudreaux, “Social Media Intelligence: Measuring Brand Sentiment from Online Conversation,” MSI Report 12-100 (Cambridge, MA: Marketing Science Institute), 2012. Measuring social media ROI marketing memo P&G's online campaign to support ski jumper Lindsay Van produced benefits for its Secret deodorant brand too. Source: Getty Images | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
140 PART 2 | CAPT u Ring M ARke Ting insigh Ts market In G-m Ix mo Del In G Marketing accountability also means that marketers must more precisely estimate the effects of different mar-keting investments. Marketing-mix models analyze data from a variety of sources, such as retailer scanner data, company shipment data, pricing, media, and promotion spending data, to understand more precisely the effects of specific marketing activities. 53 To deepen understanding, marketers can conduct multivariate analyses, such as regression analysis, to sort through how each marketing element influences marketing outcomes such as brand sales or market share. Especially popular with packaged-goods marketers such as Procter & Gamble, Clorox, and Colgate, the findings from marketing-mix modeling help allocate or reallocate expenditures. Analyses explore which part of ad budgets are wasted, what optimal spending levels are, and what minimum investment levels should be. Although marketing-mix modeling helps to isolate effects, it is less effective at assessing how different market-ing elements work in combination. Wharton's Dave Reibstein also notes three other shortcomings:54 Marketing-mix modeling focuses on incremental growth instead of baseline sales or long-term effects. The integration of important metrics such as customer satisfaction, awareness, and brand equity into marketing-mix modeling is limited. Marketing-mix modeling generally fails to incorporate metrics related to competitors, the trade, or the sales force (the average business spends far more on the sales force and trade promotion than on advertising or consumer promotion). market In G Dash Boar Ds Firms are also employing organizational processes and systems to make sure they maximize the value of all these different metrics. Management can assemble a summary set of relevant internal and external measures in a marketing dashboard for synthesis and interpretation. Marketing dashboards are like the instrument panel in a car or plane, visually displaying real-time indicators to ensure proper functioning. Formally, marketing dashboards are “a concise set of interconnected performance drivers to be viewed in common throughout the organization. ”55 Dashboards are only as good as the information on which they're based, but sophisticated visualization tools are helping bring data alive. Color-coding, symbols, and different types of charts, tables, and gauges are easy to use and effective. Some companies are also appointing marketing controllers to review budget items and expenses. Increasingly, these controllers use business intelligence software to create digital versions of marketing dashboards that aggregate data from internal and external sources. table 4. 3 Sample Marketing Metrics I. External II. Internal Awareness Awareness of goals Market share (volume or value) Commitment to goals Relative price (market share value/volume) Active innovation support Number of complaints (level of dissatisfaction) Resource adequacy Consumer satisfaction Staffing/skill levels Distribution/availability Desire to learn Total number of customers Willingness to change Perceived quality/esteem Freedom to fail Loyalty/retention Autonomy Relative perceived quality Relative employee satisfaction Source: Tim Ambler, “What Does Marketing Success Look Like?,” Marketing Management (Spring 2001), pp. 13-18. | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
Condu CTing M ARke Ting Rese ARC h | chapter 4 141 As input to the marketing dashboard, companies should include two key market-based scorecards that reflect performance and provide possible early warning signals. A customer-performance scorecard records how well the company is doing year after year on such customer-based measures as those shown in Table 4. 4. Management should set target goals for each measure and take action when results get out of bounds. A stakeholder-performance scorecard tracks the satisfaction of various constituencies who have a critical interest in and impact on the company's performance: employees, suppliers, banks, distributors, retailers, and stockholders. Again, management should take action when one or more groups register increased or above-norm levels of dissatisfaction. 56 table 4. 4 Sample Customer-Performance Scorecard Measures Percentage of new customers to average number of customers Percentage of lost customers to average number of customers Percentage of win-back customers to average number of customers Percentage of customers falling into very dissatisfied, dissatisfied, neutral, satisfied, and very satisfied categories Percentage of customers who say they would repurchase the product Percentage of customers who say they would recommend the product to others Percentage of target market customers who have brand awareness or recall Percentage of customers who say that the company's product is the most preferred in its category Percentage of customers who correctly identify the brand's intended positioning and differentiation Average perception of company's product quality relative to chief competitor Average perception of company's service quality relative to chief competitor Marketing consultant Pat La Pointe sees marketing dashboards as providing all the up-to-the-minute information necessary to run the business operations for a company—such as sales versus forecast, distribution channel effectiveness, brand equity evolution, and human capital development. According to La Pointe, an effective dashboard will focus thinking, improve internal communications, and reveal where marketing investments are paying off and where they aren't. La Pointe observes four common measurement “pathways” marketers pursue today (see Figure 4. 2). The customer metrics pathway looks at how prospects become customers, from awareness to preference to trial to repeat purchase, or some less linear model. This area also examines how the customer experience contributes to the perception of value and competitive advantage. The unit metrics pathway reflects what marketers know about sales of product/service units—how much is sold by product line and/or by geography; the marketing cost per unit sold as an efficiency yardstick; and where and how margin is optimized in terms of characteristics of the product line or distribution channel. The cash-flow metrics pathway focuses on how well marketing expenditures are achieving short-term returns. Program and campaign ROI models measure the immediate impact or net present value of profits expected from a given investment. The brand metrics pathway tracks the development of the longer-term impact of marketing through brand equity measures that assess both the percep-tual health of the brand from customer and prospective customer perspectives and the overall financial health of the brand. La Pointe feels a marketing dashboard can present insights from all the pathways in a graphically related view that helps management see subtle links between them. Tabs can allow the user to toggle easily between different “families” of metrics organized by customer, product, experience, brand, channels, efficiency, organizational development, or macroenvironmental factors. Each tab presents the three or four most insightful metrics, with data filtered by busi-ness unit, geography, or customer segment based on the users' needs. (See Figure 4. 3 for a sample brand metrics page. ) Ideally, over time the number of metrics on the dashboard will be reduced to a few key drivers. Meanwhile, the process of developing and refining the marketing dashboard will undoubtedly raise and resolve many key questions about the business. Source: Adapted from Pat La Pointe, Marketing by the Dashboard Light, Association of National Advertisers, 2005, www. Marketing NPV. com. Designing Effective Marketing Dashboards marketing memo | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
142 PART 2 | CAPT u Ring M ARke Ting insigh Ts Technically Sound But Ad-hoc Efforts Across Multiple Measurement Silos Customer Metrics Unit Metrics Cash-Flow Metrics 100s of Reports but Very Little Knowledge Integration or Learning Synthesis Brand Metrics Equity Drivers Financial Valuation Program and Campaign ROI Initiative P ortfolio Optimization Media Mix Models Hierarchy of Effects Satisfaction/ Experience Attitude/Behavior Segment Migration Marketing Cost per Unit Margin Optimization Product/Categor y Sales Brand Imager y & Attributes| Fig. 4. 2 | Marketing Measure Pathway | Fig. 4. 3 | Example of a Marketing Dashboard Source: Adapted from Patrick La Pointe, Marketing by the Dashboard Light—How to Get More Insight, Foresight, and Accountability from Your Marketing Investments. © 2005, Patrick La Pointe. Some executives worry that they'll miss the big picture if they focus too much on a set of numbers on a dash-board. Some critics are concerned about privacy and the pressure the technique places on employees. But most experts feel the rewards offset the risks. “Marketing Memo: Designing Effective Marketing Dashboards” provides practical advice about the development of these marketing tools. | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
Condu CTing M ARke Ting Rese ARC h | chapter 4 143 My Marketing Lab go to mymktlab. com to complete the problems marked with this icon as well as for additional assisted-graded writing questions. Applications Marketing Debate What Is the Best Type of Marketing Research? Many market researchers have their favorite research approaches or techniques, though different researchers often have different preferences. Some researchers maintain that the only way to really learn about consumers or brands is through in-depth, qualitative research. Others contend that the only legitimate and defensible form of marketing research uses quantitative measures. Take a position: The best marketing research is quan-titative in nature versus The best marketing research is qualitative in nature. Marketing Discussion Survey Quality When was the last time you participated in a survey? How helpful do you think the information you provided was? How could the research have been done differently to make it more effective?focus group, survey, behavioral data, or experimental) and research instruments (questionnaire, qualitative measures, or technological devices). In addition, they must decide on a sampling plan and contact methods (by mail, by phone, in person, or online). 5. Two complementary approaches to measuring marketing productivity are: (1) marketing metrics to assess marketing effects and (2) marketing-mix modeling to estimate causal relationships and measure how mar-keting activity affects outcomes. Marketing dashboards are a structured way to disseminate the insights gleaned from these two approaches within the organization. 6. Assessing the ROI of social media is challenging but requires a range of short-term and long-term financial and brand-related measures. Although Facebook “likes” and Twitter tweets provide some sense of the engage-ment for a brand, a more complete set of measures is typically needed to get a more accurate picture of social media or other online activities. Summary 1. Companies can conduct their own marketing research or hire other companies to do it for them. Some of ways companies can creatively and affordably conduct research include: engage students or professors to design and carry out projects; use the Internet; check out rivals; tap into marketing partner expertise; and tap into employee creativity and wisdom. 2. Good marketing research is characterized by the sci-entific method, creativity, multiple research methods, accurate model building, cost-benefit analysis, healthy skepticism, and an ethical focus. 3. The marketing research process consists of defining the problem, decision alternatives, and research objectives; developing the research plan; collecting the informa-tion; analyzing the information; presenting the findings to management; and making the decision. 4. In conducting research, firms must decide whether to collect their own data or use data that already exist. They must also choose a research approach (observational, | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
144 PART 2 | CAPT u Ring M ARke Ting insigh Ts use, and even dispose of products. For example, one method shadows consumers, takes pictures or videos of them during product purchase or use occasions, and conducts in-depth interviews with them to further evaluate their experiences. IDEO uses another method called behavioral mapping and maintains a photo-graphic log of people within a certain area like an airline departure lounge, a hospital waiting room, or a food court to gauge how the experience can be improved. Participants keep a “camera journal” in which they record their visual impressions of a given product or category. IDEO also invites consumers to use storytell-ing techniques and share personal narratives, videos, skits, or even animations about their experiences with a product or service. IDEO's human-centered approach runs counter to the prevailing wisdom of many high-tech firms that focus more on their own capabilities when designing products. David Blakely, head of IDEO's technology group, explained, “Tech companies design from the inside out, whereas we design from the outside in so that we can put customers first. ” Ultimately, the com-pany designs products that consumers want and value because they offer a superior experience and solve a problem. Recent product innovations include a heart defibrillator that talks with instructions during an emer-gency and a renovated version of the classic wooden classroom chair. Marriott hired IDEO to help make its Courtyard by Marriott hotels more appealing to younger guests. IDEO Marketing Excellence >> IDEO IDEO is the largest and one of the most influential design consultancy firms in the United States. The company has created many recognizable design icons of the technol-ogy age, including the first laptop computer, the first mouse for Apple, the Palm V PDA, and the Ti Vo digital video recorder. Beyond its high-tech wizardry, the com-pany has designed revolutionary household items such as the Swiffer Sweeper and Crest's stand-up toothpaste tube, both for Procter & Gamble. IDEO's diverse roster of clients includes AT&T, Bank of America, Ford Motor Company, Pepsi Co, Nike, Marriott, Caterpillar, Eli Lilly, Lufthansa, Prada, and the Mayo Clinic. IDEO's success is predicated on an approach called “design thinking”—an innovative method that incorpo-rates behavior into design. It's an unconventional way of problem solving and starts by forming teams of indi-viduals with various backgrounds and experiences. Team members range from anthropologists and journalists to MBAs and engineers. IDEO's belief is that if you bring together a diverse group with these talents, they will build upon each other's ideas and come up a solution that one mind cannot reach alone. Next, IDEO uses different methods of behavioral research and observation to get into the mind of the consumer. This helps IDEO uncover deep insights and understand how consumers purchase, interact with, | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
Condu CTing M ARke Ting Rese ARC h | chapter 4 145 IDEO's novel consumer-led approach to design has generated countless success stories and awards for the firm and its clients. Its work has also served as inspiration for the creation of Stanford University's design school— The Hasso Plattner Institute of Design—where stu-dents work on problem solving centered around design thinking. The most important result for IDEO is that its designs solve a usability problem for clients. The company goes broad and deep to achieve this goal. Since its founding, it has been issued thousands of patents and generated hundreds of millions in revenues. Questions 1. Why has IDEO been so successful? 2. What is the most difficult challenge it faces in con-ducting its research and designing its products? 3. In the end, IDEO creates great solutions for companies that then receive all the credit. Should IDEO try to cre-ate more brand awareness for itself? Why or why not? Sources: Lisa Chamberlain, “Going Off the Beaten Path for New Design Ideas,” New York Times, March 12, 2006; Chris Taylor, “School of Bright Ideas,” Time, March 6, 2005, p. A8; Scott Morrison, “Sharp Focus Gives Design Group the Edge,” Financial Times, February 17, 2005, p. 8; Bruce Nussbaum, “The Power of Design,” Business Week, May 17, 2004, p. 86; Teressa Iezzi, “Innovate, but Do It for Consumers,” Advertising Age, September 11, 2006; Barbara De Lollis, “Marriott Perks Up Courtyard with Edgier, More Social Style,” USA Today, April 1, 2008; Tim Brown, “Change by Design,” Business Week, October 5, 2009, pp. 54-56; 60 Minutes, January 6, 2013. conducted interviews and observed guests in the hotel's lounges, lobbies, and restaurants. Its research revealed that younger guests were turned off by the lack of ac-tivity in the hotel's public places, the lack of technology offered, and poor food options. As a result, Courtyard by Marriott updated its furniture and decor to be more comfortable and inviting. The hotel added advanced technology options throughout its lobbies and lounges, such as flat-screen TVs and free Wi-Fi. Marriott converted its breakfast buffets to 24/7 coffee-shop-style cafés, where guests could quickly grab a gourmet coffee drink and healthy bite to eat anytime. Courtyard even created new outdoor hangout spots with sound speakers and fire pits. After the renovations, the chain changed its tagline to “Courtyard. It's a New Stay. ” Prototyping takes place throughout IDEO's design process so individuals can physically test out the prod-uct, experience it, and improve upon it during each level of development. IDEO encourages its clients, even senior executives, to participate in the research so they get a sense of the actual consumer experience with their product or service. For example, when it created a prototype for Apple's first mouse, Steve Jobs didn't like the sound it made when it moved around on a desk and insisted that IDEO find a way to reduce the noise. The design firm overcame this huge technical obstacle and successfully rubber-coated the steel ball without interfer-ing with its function. | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
146 PART 2 | CAPT u Ring M ARke Ting insigh Ts From 1995 to 1997, Intuit's stock tumbled 72 percent and the company was forced to refocus its strategic ef-forts. It turned to the growing power of the Internet, online banking capabilities, and valuable insight from extensive consumer research to develop new products. This new strategic focus and emphasis on consumer research helped improve the company's stock value and market position in the early 2000s. In 2007, Scott Cook wanted the company to focus even more intently on innovation. As a result, he adopted an up-and-coming approach to product development called design thinking. Design thinking is an unconven-tional way of problem solving that incorporates extensive consumer observation and research with trial and error and ongoing product prototyping. Today, Intuit spends a significant amount of time and money—approximately 20 percent of net revenues—on consumer research each year. This research helps Intuit understand exactly how customers use and feel about their products and keep abreast of technology, consumer needs, and competition. Field research helps Intuit uncover insight in a variety of ways. During a Site Visit, Intuit researchers visit the individual's home or office to observe exactly how products are used, what works well, what frustrates users, and how products can be improved upon. A Lab Study invites consumers to one of Intuit's research labs to test and experiment with Intuit's new products and ideas. During a Remote Study, consumers are interviewed over the phone and often asked to view new design concepts over the Internet. Intuit also conducts an ongoing extensive research study with the Institute for the Future to learn more about the future trends affecting small businesses. The company uses what it learns to improve versions of its products each year and better understand the next generation of financial and tax software. Marketing Excellence >> Intuit Intuit develops and sells financial and tax solution software for consumers and small and medium-sized businesses. The company was founded in 1983 by a former Procter & Gamble employee, Scott Cook, and a Stanford University programmer, Tom Proulx, after Cook realized there must be a better way to automate his bill-paying process. For almost 30 years, Intuit's mission has been to “revolutionize people's lives by solving their important business and financial manage-ment problems. ” Intuit launched its first product, Quicken, in 1984 but almost went out of business twice during its first few years. In order to survive, Intuit changed its distribution strategy and sold its software to banks. After some favor-able reviews in the trade journals and an effective print advertising campaign that featured a 1-800 number, the company got its first break. By 1988, Quicken was the best-selling finance product on the market. In 1992, Intuit launched Quick Books, a bookkeeping and payroll soft-ware product for small businesses, and went public the following year. Intuit grew quickly in the early 1990s, thanks to the success of Quicken, Quick Books, and Turbo Tax, its tax preparation software program. Intuit's products did something for small businesses that more complicated accounting packages didn't: They solved finance and tax problems in a simple, easy-to-use manner. Intuit had recognized correctly that simplicity was the key, not in-depth accounting analysis. By 1995, the firm held a 70 percent market share, and Microsoft tried to purchase it for $2 billion. The Justice Department, however, blocked the deal as anticompetitive, and the buyout collapsed. | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
Condu CTing M ARke Ting Rese ARC h | chapter 4 147 communications tools for small businesses. In 2009, Intuit won a rare fight against Microsoft when the software giant discontinued its Money product line after an 18-year battle with Quicken. And the company's expansion into mobile solutions has encouraged younger consumers to adopt its finance and tax software. Intuit now has more than 50 mobile applications, and more than 45 million customers have used its cloud-based services in the past five years. As Intuit expands globally, it is developing new prod-ucts for consumers worldwide. In India, for example, Intuit launched Fasal, a service that gives hundreds of thousands of farmers up-to-date marketing information to help them get the best price for their crops. Intuit earned $4. 51 billion in revenue for fiscal year 2014, primarily from Quicken, Quick Books, and Turbo Tax sales. Questions 1. Why are consumer research and design thinking so critical to Intuit's success? 2. What are the challenges Intuit faces in the near future? 3. How important are Intuit's products for mobile devices? Sources: Intuit, 2012 Annual Report ; Karen E. Klein, “The Face of Entrepreneurship in 2017,” Business Week, January 31, 2007; Intuit, “Intuit Study: Next-Gen Artisans Fuel New Entrepreneurial Economy,” February 13, 2008; Michael Bush, “How PR Chiefs Have Shifted Toward Center of Marketing Departments,” Advertising Age, September 21, 2009; Jon Swartz, “More Marketers Use Social Networking to Reach Customers,” USA Today, August 28, 2009; Mark Johnson and Joe Sinfield, “Focusing on Consumer Needs Is Not Enough,” Advertising Age, April 28, 2008; “Intuit CEO Sees Growth in Mobile, Global Markets,” Associated Press, September 23, 2009; Sarah Needleman, “How I Built It: For Intuit Co-Founder, the Numbers Add Up,” Wall Street Journal, August 18, 2011, p. B4; Rachel Emma Siverman, “Companies Change Their Way of Thinking,” Wall Street Journal, June 7, 2012; Robin Goldwyn Blumenthal, “Intuit: Lots More Than Quicken,” Wall Street Journal, September 30, 2012. Intuit's in-depth research recently led to innovative new products and services. For example, employees watched younger consumers get frustrated using an Intuit tax software program because they couldn't take pictures of their tax forms and complete their taxes via their mobile device. This frustration and Intuit's keen empathy for the consumer led to the development of a tax app called Snap Tax. Launched in 2010, it has since been downloaded more than a million times. Demand for Intuit's products is seasonal, and its marketing efforts are typically concentrated around tax preparation time—November through April. During that time, Intuit develops promotions with original equipment manufacturers (OEMs) and major retailers via direct mail, Web marketing, print, radio, and television. While Intuit's marketing campaigns have evolved over the years, positive word of mouth and exceptional customer service have been its most effective market-ing tools since its early days. Harry Pforzheimer, chief communications officer and marketing leader, explained, “It's a little harder to measure but when you know that roughly eight out of 10 customers bought your prod-uct because of word-of-mouth that's a pretty powerful tool... So engaging with our customers directly is part of our DNA and communicating with customers on a timely basis is critical. And that timely basis now is instantaneous. ” Intuit has expanded globally through new product and service offerings and through strategic acquisitions. Its purchase of Mint. com, for example, added value by giving consumers another tool to analyze their spend-ing against a budget. Intuit also acquired Demandforce, which added the ability to provide online marketing and | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
148 In This Chapter, We Will Address the Following Questions 1. What are customer value, satisfaction, and loyalty, and how can companies deliver them? (p. 149) 2. What is the lifetime value of customers, and how can marketers maximize it? (p. 158) 3. How can companies attract and retain the right customers and cultivate strong customer relationships and communities? (p. 164) 4. How do customers' new capabilities affect the way companies conduct their marketing? (p. 168)Pandora has created strong customer loyalty with its innovative online music discovery and recommendation services. Source: Bloomberg via Getty Images My Marketing Lab™ Improve Y our Grade! Over 10 million students improved their results using the Pearson My Labs. Visit mymktlab. com for simulations, tutorials, and end-of-chapter problems. Connecting with Customers Part 3 Chapter 5 Creating Long-Term Loyalty Relationships Chapter 6 Analyzing Consumer Markets Chapter 7 Analyzing Business Markets Chapter 8 Tapping Into Global Markets | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
149 Successful marketers are those who carefully culti-vate customer satisfaction and loyalty. In this chapter, we spell out the different ways they can go about winning customers and beating competitors. Although their enhanced capabilities can help companies earn strong customer loyalty, increased consumer capabilities pose challenges. Regardless, marketers must connect with customers—in-forming, engaging, and maybe even energizing them in the process. Customer-centered companies are adept at building customer relationships, not just products; they are skilled in market engineering, not just product en-gineering. Technology plays an increasing role for many companies and industries, offering new ways to satisfy customer needs and build loyalty. The music industry is a dramatic example. 1Creating Long-Term Loyalty Relationships5 Building Customer Value, Satisfaction, and Loyalty Managers who believe the customer is the company's only true “profit center” consider the traditional organiza-tion chart in Figure 5. 1(a)—a pyramid with the president at the top, management in the middle, and frontline people and customers at the bottom—obsolete. 2Perhaps no industry has been more thoroughly transformed than the music industry. Technologi-cal advances have changed the way consumers purchase, listen to, and share music, and music- streaming services are in a virtual arms race for their loyalty. Internet radio company Pandora has staked a claim to be the market leader with its innovative automated music discovery and recommen-dation service, the Music Genome Project, which has helped attract more than 200 million registered users. Based on a listener's musical selection, Pandora recommends other musical selections of a similar well-defined genre. Listener feedback to those recommendations and more than 400 different musical attributes judged by profes-sional music lovers who pass a rigorous test are combined and analyzed to suggest future songs. Pandora launched its smart-phone app in 2008, making its service available truly “anywhere, anytime” and enriching the opportunity to provide feedback and buy music that makes it highly involving to listeners. Advertisers are able to target Pandora's audiences by key demographics and traits such as gender, birth year, zip code location, type of music, and time of day. Pandora faces steep competition, however, from Spotify, i Heart Radio, and Slacker, each of which has unique features that may drive customer preference and loyalty. | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
150 PART 3 | Conne CTing Wi Th Cus Tome Rs Successful marketing companies invert the chart to look like Figure 5. 1(b). At the top are customers; next in importance are frontline people who meet, serve, and satisfy them; under them are the middle managers, whose job is to support the frontline people so they can serve customers well; and at the base is top management, whose job is to hire and support good middle managers. We have added customers along the sides of Figure 5. 1(b) to indicate that managers at every level must be personally engaged in knowing, meeting, and serv-ing customers. Some companies have been founded on the customer-on-top business model, and customer advocacy has been their strategy—and competitive advantage—all along. With the rise of digital technologies, in-creasingly informed consumers expect companies to do more than connect with them, more than satisfy them, and even more than delight them. They expect companies to listen and respond to them. When Office Depot added customer reviews to its Web site, revenue and sales conversion increased significantly. The company also incorporated review-related terms in its paid search advertising campaign. As a result of these efforts, Web site revenue and the number of new buyers visiting the site both increased by more than 150 percent. 3 Customer-Per Ce Ived value Consumers are better educated and better informed than ever, and they have the tools to verify compa-nies' claims and seek out superior alternatives. Even the best-run companies have to be careful not to take customers for granted, as Dell found out. 4 De LL Dell rode to success by offering low-priced computers, logistical efficiency, and after-sales service. The firm's maniacal focus on low costs has been a key ingredient in its success. When it shifted its customer- service call centers to India and the Philippines to cut costs, however, understaffing frequently led to 30-minute waits for customers. Almost half the calls required at least one transfer. To discourage customer calls, Dell even re-moved its toll-free service number from its Web site. With customer satisfaction slipping, while competitors matched its product quality and prices and offered better service, Dell's market share and stock price both declined sharply. Dell ended up hiring more North American call center employees. “The team was managing cost instead of manag-ing service and quality,” Michael Dell confesses. How do customers ultimately make choices? They tend to be value maximizers, within the bounds of search costs and limited knowledge, mobility, and income. Customers choose—for whatever reason—the offer they believe will deliver the highest value and act on it (Figure 5. 2). Whether the offer lives up to CUSTOMERS C U S T O M E R SC U S T O M E R S Frontline people(b) Modern Customer-Oriented Organization Chart Middle management Top manage-ment CUSTOMERSMiddle management(a) Traditional Organization Chart Frontline people Top manage-ment| Fig. 5. 1 | Traditional Organization versus Modern Customer-Oriented Company Organization Custome r-perceived value Total customer benefit Total customer cost Monetar y cost Time cost Energy cost Psychological cost Product benefit Services benefit Personnel benefit Image benefit | Fig. 5. 2 | Determinants of Customer-Perceived Value | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
CRe ATing Long-Te Rm Loy ALTy Re LATionshi Ps | chapter 5 151 expectation affects customer satisfaction and the probability that the customer will purchase the product again. In one survey asking U. S. consumers “Does [Brand X] give good value for what you pay?” the top ten- scoring brands were: Subway, Cheerios, Amazon, History Channel, Ford, Discovery Channel, Lowe's, Olive Garden, Y ou Tube, and Google. 5 Defining Value Customer-perceived value (CPV) is the difference between the prospective customer's evaluation of all the benefits and costs of an offering and the perceived alternatives. Total customer benefit is the perceived monetary value of the bundle of economic, functional, and psychological benefits customers expect from a given market offering because of the product, service, people, and image. Total customer cost is the perceived bundle of costs customers expect to incur in evaluating, obtaining, using, and disposing of the given market offering, including monetary, time, energy, and psychological costs. Customer-perceived value is thus based on the difference between benefits the customer gets and costs he or she assumes for different choices. The marketer can increase the value of the offering by raising economic, func-tional, or emotional benefits and/or reducing one or more costs. The customer choosing between two value offer-ings, V1 and V2, will favor V1 if the ratio V1:V2 is larger than one, favor V2 if the ratio is smaller than one, and be indifferent if the ratio equals one. applying Value Con Cepts Suppose the buyer for a large construction company wants to buy a tractor for residential construction from either Caterpillar or Komatsu. He wants the tractor to deliver certain levels of reliability, durability, performance, and resale value. The competing salespeople carefully describe their respective offers. The buyer decides Caterpillar has greater product benefits based on his perceptions of those attributes. He also perceives differences in the accompanying services—delivery, training, and maintenance—and decides Caterpillar provides better service as well as more knowledgeable and responsive staff. Finally, he places higher value on Caterpillar's corporate image and reputation. He adds up all the economic, functional, and psychological benefits from these four sources—product, services, people, and image—and perceives Caterpillar as delivering greater customer benefits. Does he buy the Caterpillar tractor? Not necessarily. He also examines his total cost of transacting with Caterpillar versus Komatsu, a cost that consists of more than money. As Adam Smith observed more than two centuries ago in The Wealth of Nations, “The real price of anything is the toil and trouble of acquiring it. ” Total customer cost therefore also includes the buyer's time, energy, and psychological costs expended in product acqui-sition, usage, maintenance, ownership, and disposal. The buyer evaluates these elements together with the mon-etary cost to form a total customer cost. Then he considers whether Caterpillar's total customer cost is too high compared to total customer benefits. If it is, he might choose Komatsu. The buyer will choose whichever source delivers the highest perceived value. Now let's use this decision-making theory to help Caterpillar succeed in selling to this buyer. Caterpillar can improve its offer in three ways. First, it can increase total customer benefit by improving economic, functional, and psychological benefits of its product, services, people, and/or image. Second, it can reduce the buyer's nonmonetary costs by reducing the time, energy, and psychological investment. Third, it can reduce its product's monetary cost to the buyer. Suppose Caterpillar concludes the buyer sees its offer as worth $20,000. Further, suppose Caterpillar's cost of producing the tractor is $14,000. This means Caterpillar's offer generates $6,000 over its cost, so the firm needs to charge between $14,000 and $20,000. If it charges less than $14,000, it won't cover its costs; if it charges more, it will price itself out of the market. When Dell cut costs too much on its customer service, customer satisfaction dropped and the company's stock price sank. Source: Bloomberg via Getty Images | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
152 PART 3 | Conne CTing Wi Th Cus Tome Rs Caterpillar's price will determine how much value it delivers to the buyer and how much flows to Caterpillar. If it charges $19,000, it is creating $1,000 of customer-perceived value and keeping $5,000 for itself. The lower Caterpillar sets its price, the higher the customer's perceived value and, therefore, the higher the customer's in-centive to purchase. To win the sale, the firm must offer more customer-perceived value than Komatsu does. 6 Caterpillar is well aware of the importance of taking a broad view of customer value. 7 Cater Pi LLar Caterpillar has become a leading firm by maximizing total customer value in the construc-tion equipment industry, despite challenges from a number of able competitors such as John Deere, Case, Komatsu, Volvo, and Hitachi and emerging ones such as Liu Gong Machinery in China. First, Caterpillar produces high-performance equip-ment known for reliability and durability—key purchase considerations in heavy industrial equipment. The firm also makes it easy for customers to find the right product by providing a full line of construction equipment and a wide range of financial terms. Caterpillar maintains the largest number of independent construction-equipment dealers in the industry. These deal-ers all carry a complete line of Caterpillar products and are typically better trained and perform more reliably than competi-tors' dealers. Caterpillar has also built a worldwide parts and service system second to none in the industry. Customers recognize all the value Caterpillar creates in its offerings, allowing the firm to command a premium price 10 percent to 20 percent higher than competitors'. Caterpillar also makes strategic acquisitions to acquire new customers, such as pick-ing up mining equipment maker Bucyrus International for $8. 6 billion in 2010. Despite a recession that brought hard times to its industry and battered many of its competitors' finances, Caterpillar was one of the best-performing stocks among the 30 companies in the Dow Jones Industrial Average coming out of the recession. Very often, managers conduct a customer value analysis to reveal the company's strengths and weaknesses relative to those of various competitors. The steps in this analysis are: 1. Identify the major attributes and benefits that customers value. Customers are asked what attributes, ben-efits, and performance levels they look for in choosing a product and vendors. Attributes and benefits should be defined broadly to encompass all the inputs to customers' decisions. 8 2. Assess the quantitative importance of the different attributes and benefits. Customers are asked to rate the importance of different attributes and benefits. If their ratings diverge too much, the marketer should cluster them into different segments. 3. Assess the company's and competitors' performances on the different customer values against their rated im-portance. Customers describe where they see the company's and competitors' performances on each attribute and benefit. 4. Examine how customers in a specific segment rate the company's performance against a specific major com-petitor on an individual attribute or benefit basis. If the company's offer exceeds the competitor's offer on all important attributes and benefits, the company can charge a higher price (thereby earning higher profits), or it can charge the same price and gain more market share. 5. Monitor customer values over time. The company must periodically redo its studies of customer values and competitors' standings as the economy, technology, and product features change. Caterpillar's market success can be attributed in part to its focus on maximizing total customer value. Source: James Mattil/Shutterstock | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
CRe ATing Long-Te Rm Loy ALTy Re LATionshi Ps | chapter 5 153 Choi Ce pro Cesses an D impli Cations Some marketers might argue the process we have described is too rational. Suppose the customer chooses the Komatsu tractor. How can we explain this choice? Here are three possibilities. 1. The buyer might be under orders to buy at the lowest price. The Caterpillar salesperson's task is then to con-vince the buyer's manager that buying on price alone will result in lower long-term profits and customer value for the buyer's company. 2. The buyer will retire before the company realizes the Komatsu tractor is more expensive to operate. The buyer will look good in the short run; he is maximizing personal benefit. The Caterpillar salesperson's task is to convince other people in the customer company that Caterpillar delivers greater customer value. 3. The buyer enjoys a long-term friendship with the Komatsu salesperson. In this case, Caterpillar's salesper-son needs to show the buyer that the Komatsu tractor will draw complaints from the tractor operators when they discover its high fuel cost and need for frequent repairs. The point is clear: Buyers operate under various constraints and occasionally make choices that give more weight to their personal benefit than to the company's benefit. Customer-perceived value is a useful framework that applies to many situations and yields rich insights. It suggests that the seller must assess the total customer benefit and total customer cost associated with each com-petitor's offer in order to know how its own offer rates in the buyer's mind. It also implies that the seller at a dis-advantage has two alternatives: increase total customer benefit or decrease total customer cost. The former calls for strengthening or augmenting the economical, functional, and psychological benefits of the offering's product, services, personnel, and image. The latter calls for reducing the buyer's costs by reducing the price or cost of own-ership and maintenance, simplifying the ordering and delivery process, or absorbing some buyer risk by offering a warranty. Deli Vering high Customer Value Consumers have varying degrees of loyalty to specific brands, stores, and companies. Loyalty has been defined as “a deeply held commitment to rebuy or repatronize a preferred product or service in the future despite situational influences and marketing efforts having the potential to cause switching behavior. ”9 Table 5. 1 lists brands with the highest customer loyalty, according to one 2012 survey. The value proposition consists of the whole cluster of benefits the company promises to deliver; it is more than the core positioning of the offering. For example, Volvo's core positioning has been “safety, ” but the buyer is prom-ised more than just a safe car; other benefits include good performance, design, and safety for the environment. The value proposition is thus a promise about the experience customers can expect from the company's market offering and their relationship with the supplier. Whether the promise is kept depends on the company's ability to manage its value delivery system. The value delivery system includes all the experiences the customer will have on the way to obtaining and using the offering. At the heart of a good value delivery system is a set of core business processes that help deliver distinctive consumer value. 10 total Customer sat Isfa Ct Ion In general, satisfaction is a person's feelings of pleasure or disappointment that result from comparing a product or service's perceived performance (or outcome) to expectations. 11 If the performance or experience falls short of expectations, the customer is dissatisfied. If it matches expectations, the customer is satisfied. If it exceeds expec-tations, the customer is highly satisfied or delighted. 12 Customer assessments of product or service performance depend on many factors, including the type of loyalty relationship the customer has with the brand. 13 Consumers often form more favorable perceptions of a product with a brand they already feel positive about. Research has also shown an asymmetric effect of product perfor-mance and expectations on satisfaction: The negative effect on customer satisfaction of failing to meet expectations is disproportionally stronger than the positive effect of exceeding expectations. 14 Although the customer-centered firm seeks to create high customer satisfaction, that is not its ultimate goal. Increasing customer satisfaction by lowering price or increasing services may result in lower profits. The company might be able to increase its profitability by means other than increased satisfaction (for example, by improving manufacturing processes or investing more in R&D). The company also has many stakeholders, including employees, dealers, suppliers, and stockholders. Spending more to increase customer satisfaction might divert funds from increasing the satisfaction of other “partners. ” Ultimately, the company must try to deliver a high level of customer satisfaction subject to also delivering accept-able levels to other stakeholders, given its total resources. | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
154 PART 3 | Conne CTing Wi Th Cus Tome Rs table 5. 1 Top 30 Brands in Customer Loyalty Brand Category Rankings 2012 2011 Apple Tablet 1 N/A Amazon Tablet 2 N/A Apple Smart phone 3 2 Amazon Online retail 4 1 Apple Computer 5 5 Samsung Tablet 6 N/A Call of Duty Major league gaming 7 N/A Samsung Cellphone 8 4 Halo Major league gaming 9 N/A Twitter Social networks 10 20 Kindle E-reader 11 8 Mary Kay Cosmetics 12 10 Grey Goose Vodka 13 15 Google Search engine 14 16 You Tube Social networks 15 N/A Facebook Social networks 16 3 Dunkin' Donuts Coffee 17 12 Zappos Online retailer 18 6 Patron Tequila 19 9 Crest Whitestrips Tooth whitener 20 10 Walmart Discount retailer 21 13 Maybelline Cosmetics 22 14 Clinique Cosmetics, luxury 23 34 Ketel One Vodka 24 17 Hyundai Automotive 25 7 Samsung Smart phone 26 56 LG Cellphone 27 19 Mary Kay Facial moisturizer 28 28 Avis Car rental 29 23 Linked In Social networks 30 24 Source: “2012 Brand Keys Customer Loyalty Leaders List,” www. brandkeys. com. | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
CRe ATing Long-Te Rm Loy ALTy Re LATionshi Ps | chapter 5 155 How do buyers form their expectations? Expectations result from past buying experience, friends' and associates' advice, public information and discourse, and marketers' and competitors' information and promises. If a company raises expectations too high, the buyer is likely to be disappointed. If it sets expectations too low, it won't attract enough buyers (although it will satisfy those who do buy). 15 Some of today's most successful companies are raising expectations and delivering performances to match. Korean automaker Kia found success in the United States by launching low-cost, high-quality cars with enough reliability to offer 10-year, 100,000-mile warranties. mon Itor In G sat Isfa Ct Ion Many companies are systematically measuring how well they treat customers, identifying the factors shaping sat-isfaction, and changing operations and marketing as a result. 16 Wise firms measure customer satisfaction regularly because it is one key to customer retention. 17 A highly satis-fied customer generally stays loyal longer, buys more as the company introduces new and upgraded products, talks favorably to others about the company and its products, pays less attention to competing brands and is less sensi-tive to price, offers product or service ideas to the company, and costs less to serve than new customers because transactions can become routine. 18 The link between customer satisfaction and customer loyalty is not proportional, however. Suppose customer satisfaction is rated on a scale from 1 to 5. At a very low level of satisfaction (level 1), customers are likely to abandon the company and even bad-mouth it. At levels 2 to 4, customers are fairly satisfied but still find it easy to switch when a better offer comes along. At level 5, the customer is very likely to repurchase and even spread good word of mouth about the company. High satisfaction or delight creates an emotional bond with the brand or company, not just a rational preference. Xerox's senior management found its “completely satisfied” customers were six times more likely to repurchase Xerox products over the following 18 months than even its “very satis-fied” customers. 19 The company needs to recognize, however, that customers define good performance differently. Good delivery could mean early delivery, on-time delivery, or order completeness, and two customers can report being “highly satisfied” for different reasons. One may be easily satisfied most of the time, and the other might be hard to please but was pleased on this occasion. 20 It is also important to know how satisfied customers are with competitors in order to assess “share of wallet” or how much of the customer's spending the company's brand enjoys: The more highly the consumer ranks the company's brand in terms of satisfaction and loyalty, the more the customer is likely to spend on the brand. 21 measurement te Chniques Periodic surveys can track customers' overall satisfaction directly and ask additional questions to measure repurchase intention, likelihood or willingness to recommend the company and brand to others, and specific attribute or benefit perceptions likely to be related to customer satisfaction. The University of Michigan's Claes Fornell has developed the American Customer Satisfaction Index (ACSI) to measure consumers' perceived satisfaction with different firms, industries, economic sectors, and national economies. 22 Research has shown a strong and consistent association between customer satisfaction, as measured by ACSI, and firm financial performance in terms of ROI, sales, long-term firm value (Tobin's Q), and other metrics. 23 Table 5. 2 displays some of the 2014 ACSI leaders. “Marketing Insight: Net Promoter and Customer Satisfaction” describes why some companies believe just one well-designed question is all that is necessary to assess customer satisfaction. 24 Companies need to monitor their competitors' performance too. They can monitor their customer loss rate and contact those who have stopped buying or who have switched to another supplier to find out why. Finally, as described in Chapter 3, companies can hire mystery shoppers to pose as potential buyers and report on strong and weak points experienced in buying the company's and competitors' products. Managers themselves can enter com-pany and competitor sales situations where they are unknown and experience firsthand the treatment they receive, or they can phone their own company with questions and complaints to see how employees handle the calls. influen Ce of Customer satisfa Ction For customer-centered companies, customer satisfaction is both a goal and a marketing tool. Companies need to be especially concerned with their customer satisfaction level today because the Internet allows consumers to quickly spread both good and bad word of mouth to the rest of the world. Some customers set up their own Web sites to air grievances and galvanize protest, targeting high-profile brands such as United Airlines, Home Depot, and Mercedes-Benz. 25 Companies that do achieve high customer satisfaction ratings make sure their target market knows it. Once they achieved number-one status in their category on J. D. Power's customer satisfaction ratings, Hyundai, American Express, Medicine Shoppe (a chain pharmacy), and Alaska Airways, among others, communicated that fact. | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
156 PART 3 | Conne CTing Wi Th Cus Tome Rs table 5. 2 2014 ACSI Scores by Industry Industry Firm Score Airlines Jet Blue 79 Apparel Levi-Strauss, V. F. 82 Automobiles & Light Vehicles Mercedes-Benz 84 Banks JPMorgan Chase 76 Breweries Anheuser-Busch In Bev 81 Cellular Telephones Samsung 81 Department & Discount Stores Nordstrom 83 Fixed Line Telephone Service Verizon 73 Food Manufacturing H. J. Heinz, Quaker & General Mills 87 Health Insurance Blue Cross and Blue Shield 74 Hotels Marriott 81 Internet Brokerage Charles Schwab 84 Internet News & Information FOXNews. com & USATODAY. com 76 Internet Portals & Search Engines Google 83 Internet Retail Amazon 88 Internet Travel Orbitz 77 Life Insurance New York Life 80 Personal Care & Cleaning Products Clorox, Colgate-Palmolive & Unilever 85 Personal Computers Apple 84 Soft Drinks Dr Pepper Snapple 86 Supermarkets Publix 86 Wireless Telephone Service Verizon Wireless 75 Source: ACSI LLC, www. theacsi. org. Produ Ct and serv ICe Qual It Y Satisfaction will also depend on product and service quality. What exactly is quality? Various experts have defined it as “fitness for use, ” “conformance to requirements, ” and “freedom from variation. ” We will use the American Society for Quality's definition: Quality is the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs. 26 This is clearly a customer-centered defini-tion. We can say the seller has delivered quality whenever its product or service meets or exceeds the customers' expectations. A company that satisfies most of its customers' needs most of the time is called a high-quality company, but we need to distinguish between conformance quality and performance quality (or grade). A Lexus pro-vides higher performance quality than a Hyundai: The Lexus rides more smoothly, accelerates faster, and runs | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
CRe ATing Long-Te Rm Loy ALTy Re LATionshi Ps | chapter 5 157 Net Promoter and Customer Satisfaction Many companies make measuring customer satisfaction a top priority, but how should they go about doing it? Bain's Frederick Reichheld sug-gests only one customer question really matters: “How likely is it that you would recommend this product or service to a friend or colleague?” Reichheld was inspired in part by the experiences of Enterprise Rent-A-Car. When the company cut its customer satisfaction survey in 1998 from 18 questions to two—one about the quality of the rental experience and the other about the likelihood customers would rent from the company again—it found those who gave the highest ratings to their rental experience were three times as likely to rent again than those who gave the second-highest rating. The firm also found that diagnostic information managers collected from dissatisfied customers helped it fine-tune its operations. In a typical Net Promoter survey that follows Reichheld's thinking, customers are given a 1-to-10 scale on which to rate their likelihood of recommending the company. Marketers then subtract Detractors (those who gave a 0 to 6) from Promoters (those who gave a 9 or 10) to arrive at the Net Promoter Score (NPS). Customers who rate the brand with a 7 or 8 are deemed Passively Satisfied and are not included. A typi-cal set of NPS scores falls in the 10 percent to 30 percent range, but world-class companies can score over 50 percent. Some firms with top NPS scores in 2014 included USAA (82 percent), Amazon (64 percent), Southwest (62 percent), Wegmans (61 percent), Apple (72 percent), and Costco (82 percent). Reichheld has picked up many believers through the years. American Express, Dell, and Microsoft, among others, have all adopted the NPS metric. GE has tied 20 percent of its managers' bonuses to its NPS scores. When the European unit of GE Healthcare scored low, follow-up research revealed that response times to customers were a major problem. After it overhauled its call center and put more special-ists in the field, GE Healthcare's Net Promoter scores jumped 10 to 15 points. Philips has focused on engaging Promoters as well as ad-dressing the concerns of Detractors, developing a Reference Promoter program to get customers willing to recommend the brand to actually do so through taped testimonials. Reichheld says he developed NPS in response to overly compli-cated—and thus ineffective—customer surveys. So it's not surprising that client firms praise its simplicity and strong relationship to financial performance. When Intuit applied Net Promoter to its Turbo Tax product, feedback revealed dissatisfaction with the software's rebate procedure. After Intuit dropped the proof-of-purchase requirement, sales jumped 6 percent. Net Promoter is not without critics. A common criticism is that many different patterns of responses may lead to the same NPS. For example, NPS equals 20 percent when Promoters equal 20 percent, Passives equal 80 percent, and Detractors equal 0 percent, as well as when Promoters equal 60 percent, Passives equal 0 percent, and Detractors equal 40 percent, but the managerial implications of the two patterns of responses are very different. Another common criticism is that it is not a useful predictor of future sales or growth because it ignores important cost and revenue considerations. Others question its actual research support. One comprehensive academic study of 21 firms and more than 15,000 consumers in Norway failed to find NPS superior to any other metrics such as the ACSI measure. Some have criticized both NPS and ACSI measures for not fully accounting for ex-customers or those who were never customers. Peoples' opinions about any of the single items or indices measuring customer satisfaction depend in part on how they value the trade-off between simplicity and complexity. Sources: Fred Reichheld, Ultimate Question: For Driving Good Profits and True Growth (Cambridge, MA: Harvard Business School Press, 2006); Fred Reichheld, “The One Number You Need to Grow,” Harvard Business Review, December 2003; Neil A. Morgan and Lopo Leotte Rego, “The Value of Different Customer Satisfaction and Loyalty Metrics in Predicting Business Performance,” Marketing Science 25 (September-October 2006), pp. 426-39; Timothy L. Keiningham, Lerzan Aksoy, Bruce Cooil, and Tor W. Andreassen, “Linking Customer Loyalty to Growth,” MIT Sloan Management Review (Summer 2008), pp. 51-57; Suhail Khan, “How Philips Uses Net Promoter Scores to Understand Customers,” HBR Blog Network, May 10, 2011; Robert East, Jenni Romaniuk, and Wendy Lomax, “The NPS and ACSI: A Critique and an Alternative Metric,” International Journal of Market Research 53, no. 3 (2011), pp. 327-45; Randy Hanson, “Life after NPS,” Marketing Research (Summer 2011), pp. 8-11; Jenny van Doorn, Peter S. H. Leeflang, and Marleen Tijs, “Satisfaction as a Predictor of Future Performance: A Replication,” International Journal of Research in Marketing 30 (September 2013), pp. 314-18; www. satmetrix. com. marketing insight problem-free longer. Y et both a Lexus and a Hyundai deliver the same conformance quality if all the units de-liver their promised quality. impa Ct of quality Product and service quality, customer satisfaction, and company profitability are intimately connected. Higher levels of quality result in higher levels of customer satisfaction, which support higher prices and (often) lower costs. Studies have shown a high correlation between relative product quality and company profitability. 27 The drive to produce goods that are superior in world markets has led some countries to recognize or award prizes to companies that exemplify the best quality practices, such as the Deming Prize in Japan, the Malcolm Baldrige National Quality Award in the United States, and the European Quality Award. Companies that have lowered costs to cut corners have paid the price when the quality of the customer experi-ence suffers. British Airways also encountered turbulence when it became overly focused on cost cutting. 28 | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
158 PART 3 | Conne CTing Wi Th Cus Tome Rs Briti SH air Wa YS Since 2012, British Airways has won no less than 35 major awards for its quality of service. Most recently, the airline won Best Airline, Best Short Haul Carrier, and Best Frequent Flyer Program at the Business Traveler Awards. In 2014, British Airways also scooped the Times Travel Award for Best Airline, the Condé Nast Traveller Award for Short Haul Airline of the Year, several Daily Telegraph awards, and the renowned Chinese Travel Industry Award for Best European Airline and the Superbrands Award for Consumer Superbrand. For many global brands, such as British Airways, quality service is at the center of all their activities, but recognition of their efforts tends to come periodically since they are perceived as leaders in one year and ignored the next. British Airways celebrated its 90th anniversary in 2009, as part of the International Airlines Group; it now has 40,000 employees including 15,000 cabin crew members, 3,600 pilots, and 5,500 engineers. All this is in sharp contrast with the problems British Airways suffered between 1996 and 2009 when sharp budget cuts led to job losses, low employee morale, and strikes. Punctuality, customer service, and baggage handling all suffered during this time. Total quality is everyone's job, just as marketing is everyone's job. Nevertheless, marketing plays an especially important role in helping companies identify and deliver high-quality goods and services to target customers. How do marketers help? They correctly identify customers' needs and requirements. They communicate customer expectations properly to product designers. They make sure customers' orders are filled correctly and on time. They check that customers have received proper instructions, training, and technical assistance in the use of the product. They stay in touch with customers after the sale to ensure they are, and remain, satisfied. They gather customer ideas for product and service improvements and convey them to the appropriate departments. When marketers do all this, they make substantial contributions to total quality management and customer satisfaction as well as to customer and company profitability. Maximizing Customer Lifetime Value Ultimately, marketing is the art of attracting and keeping profitable customers. Y et every company loses money on some of its customers. The well-known 80-20 rule states that 80 percent or more of the company's profits come from the top 20 percent of its customers. Some cases may be more extreme—the most profitable 20 percent of customers (on a per capita basis) may contribute as much as 150 to 300 percent of profitability. The least prof-itable 10 to 20 percent, on the other hand, can actually reduce profits between 50 and 200 percent per account, Enterprise Rent-A-Car found its customer satisfaction surveys were more effective with just two questions. Source: UIG via Getty Images | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
CRe ATing Long-Te Rm Loy ALTy Re LATionshi Ps | chapter 5 159 with the middle 60 to 70 percent breaking even. 29 The implication is that a company could improve its profits by “firing” its worst customers. Companies need to concern themselves with Return on Customer (ROC) and how efficiently they create value from the customers and prospects available. 30 It's not always the company's largest customers who demand consid-erable service and deep discounts or who yield the most profit. The smallest customers pay full price and receive minimal service, but the costs of transacting with them can reduce their profitability. Midsize customers who re-ceive good service and pay nearly full price are often the most profitable. Customer Prof Itab Il It Y A profitable customer is a person, household, or company that over time yields a revenue stream exceeding by an acceptable amount the company's cost stream for attracting, selling, and serving that customer. Note the emphasis is on the lifetime stream of revenue and cost, not the profit from a particular transaction. 31 Marketers can assess customer profitability individually, by market segment, or by channel. Many companies measure customer satisfaction, but few measure individual customer profitability. 32 Banks claim this is a difficult task because each customer uses different banking services and the transactions are logged in different departments. However, the number of unprofitable customers in their customer database has appalled banks that have succeeded in linking customer transactions. Some report losing money on more than 45 percent of their retail customers. Customer profitability analysis A useful type of profitability analysis is shown in Figure 5. 3. 33 Customers are arrayed along the columns and products along the rows. Each cell contains a symbol representing the profitability of selling that product to that customer. Customer 1 is very profitable; he buys two profit-making products (P1 and P2). Customer 2 yields mixed profitability; she buys one profitable product (P1) and one unprofitable product (P3). Customer 3 is a losing customer because he buys one profitable product (P1) and two unprofitable products (P3 and P4). What can the company do about customers 2 and 3? (1) It can raise the price of its less profitable products or eliminate them, or (2) it can try to sell customers 2 and 3 its profit-making products. Unprofitable custom-ers who defect should not concern the company. In fact, the company should encourage them to switch to competitors. Customer profitability analysis (CP A) is best conducted with the tools of an accounting technique called activity-based costing (ABC). ABC accounting tries to identify the real costs associated with serving each cus-tomer—the costs of products and services based on the resources they consume. The company estimates all rev-enue coming from the customer, less all costs. With ABC, the costs in a business-to-business setting should include the cost not only of making and distribut-ing the products and services but also of taking phone calls from the customer, traveling to visit the customer, pay-ing for entertainment and gifts—all the company's resources that go into serving that customer. ABC also allocates indirect costs like clerical costs, office expenses, supplies, and so on, to the activities that use them, rather than in some proportion to direct costs. Both variable and overhead costs are tagged back to each customer. Companies that fail to measure their costs correctly are also not measuring their profit correctly and are likely to misallocate their marketing effort. The key to effectively employing ABC is to define and judge “activities” High-profit customer Mixed-bag customer Losing customer++ +Customers C1 C2 C3 Highly profitable product +Profitable product P2P1 P3 P4Products---Unprofitable product Highly unprofitable product| Fig. 5. 3 | Customer-Product Profitability Analysis | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
160 PART 3 | Conne CTing Wi Th Cus Tome Rs properly. One time-based solution calculates the cost of one minute of overhead and then decides how much of this cost each activity uses. 34 measur In G Customer l Ifet Ime value The case for maximizing long-term customer profitability is captured in the concept of customer lifetime value. 35 Customer lifetime value (CLV) describes the net present value of the stream of future profits expected over the customer's lifetime purchases. The company must subtract from its expected revenues the expected costs of at-tracting, selling, and servicing the account of that customer, applying the appropriate discount rate (say, between 10 and 20 percent, depending on cost of capital and risk attitudes). Lifetime value calculations for a product or service can add up to tens of thousands of dollars or even run to six figures. 36 Many methods exist to measure CLV. 37 “Marketing Memo: Calculating Customer Lifetime Value” illustrates one. CLV calculations provide a formal quantitative framework for planning customer investment and help mar-keters adopt a long-term perspective. One challenge, however, is to arrive at reliable cost and revenue estimates. Marketers who use CLV concepts must also take into account the short-term, brand-building marketing activities that help increase customer loyalty. One firm that has excelled in taking a short-run and long-run view of customer loyalty is Harrah's. 38 Harra H'S Harrah's Entertainment, led by one-time academic Gary Loveman, has gone in a different direc-tion from the big players in the Las Vegas gaming industry whose business models are based on building bigger and more opulent casinos. Back in 1997, Harrah's launched a pioneering loyalty program that pulled all customer data into a central-ized warehouse and then ran sophisticated analyses to better understand the value of the investments the casino made in its customers. Harrah's has more than 40 million active members in its Total Rewards loyalty program, a system it has fine-tuned to achieve near-real-time analysis: As customers interact with slot machines, check into casinos, or buy meals, they receive reward offers—food vouchers or gambling credits, for example—based on predictive analyses from its database. Harrah's spends $100 million a year on information technology. The company has now identified hundreds of highly specific customer segments, and by targeting offers to each of them, it can almost double its share of customers' gaming budgets and generate $6. 4 billion annually (80 percent of its gaming revenue). Research has shown that contrary to conventional wisdom, the most profitable customers are not the jet-setting high rollers, but older slot machine players. Harrah's also learned to dramatically cut back on its traditional ad spending, largely replacing it with direct mail and e-mail—a good cus-tomer may receive as many as 150 pieces in a year. Harrah's also rewards staff and bases compensation in part on cus-tomer service scores. To better fine-tune its Web sites and online ads, Harrah's monitors customer reviews and comments on Trip Advisor. com as well as social media sites such as Twitter and Facebook. After the company made changes to reflect customer interest in hotel amenities and the iconic views of the Las Vegas strip from its Paris Las Vegas hotel and casino, online bookings increased by double digits. Data from the Total Rewards program even influenced Harrah's decision to buy Caesars Entertainment, when company research revealed that most of Harrah's customers who visited Las Vegas without staying at a Harrah's-owned hotel were going to Caesars Palace. Harrah's latest loyalty innovation is a mobile marketing program that sends time-based and location-based offers to customers' mobile devices in real time. attra Ct In G and reta In In G Customers Companies seeking to expand profits and sales must invest time and resources searching for new customers. To generate leads, they advertise in media that will reach new prospects, send direct mail and e-mails to possible new prospects, send their salespeople to participate in trade shows where they might find new leads, purchase names from list brokers, and so on. Different acquisition methods yield customers with varying CLVs. One study showed that customers acquired through the offer of a 35 percent discount had about one-half the long-term value of customers acquired without any discount. 39 Many of these customers were more interested in the offer than in the product itself. Similarly, many local restaurants, car wash services, beauty salons, and dry cleaners have launched “daily deal” campaigns from Groupon and Living Social to attract new customers. Unfortunately, these campaigns have some-times turned out to be unprofitable in the long run because coupon users were not easily converted into loyal customers. 40 | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
CRe ATing Long-Te Rm Loy ALTy Re LATionshi Ps | chapter 5 161 Harrah's uses sophisticated customer analytics to guide its marketing activities, including filling rooms in its Paris Las Vegas hotel and casino. Source: AFP/Getty Images Researchers and practitioners have used many different approaches for modeling and estimating CLV. Columbia's Don Lehmann and Harvard's Sunil Gupta recommend the following formula to estimate the CLV for a not-yet-acquired customer: CLV=a T t=0 1pt-ct2rt 11+i2t-AC where pt = price paid by a consumer at time t, ct = direct cost of servicing the customer at time t, i = discount rate or cost of capital for the firm, rt = probability of customer repeat buying or being “alive” at time t, AC = acquisition cost, and T = time horizon for estimating CLV. A key decision is what time horizon to use for estimating CLV. Typically, three to five years is reasonable. With this information and estimates of other vari-ables, we can calculate CLV using spreadsheet analysis. Gupta and Lehmann illustrate their approach by calculating the CLV of 100 customers over a 10-year period (see Table 5. 3). In this example, the firm acquires 100 customers with an acquisition cost per customer of $40. Therefore, in year 0, it spends $4,000. Some of these customers defect each year. The present value of the profits from this cohort of customers over 10 years is $13,286. 52. The net CLV (after deducting acquisition costs) is $9,286. 52, or $92. 87 per customer. Using an infinite time horizon avoids having to select an arbitrary time horizon for calculating CLV. In the case of an infinite time horizon, if margins (price minus cost) and retention rates stay constant over time, the future CLV of an existing customer simplifies to the following: CLV=a∞ t=1 mrt 11+i2t=m r 11+i-r2 In other words, CLV simply becomes margin ( m) times a margin multiple [r/(1 + i-r)]. Table 5. 4 shows the margin multiple for various combinations of r and i and a simple way to estimate CLV of a customer. When retention rate is 80 percent and discount rate is 12 percent, the margin multiple is about two and a half. Therefore, the future CLV of an existing customer in this scenario is simply his or her annual margin multiplied by 2. 5. Sources: Sunil Gupta and Donald R. Lehmann, “Models of Customer Value,” Berend Wierenga, ed., Handbook of Marketing Decision Models (Berlin, Germany: Springer Science and Business Media, 2007); Sunil Gupta and Donald R. Lehmann, “Customers as Assets,” Journal of Interactive Marketing 17, no. 1 (Winter 2006), pp. 9-24; Sunil Gupta and Donald R. Lehmann, Managing Customers as Investments (Upper Saddle River, NJ: Wharton School Publishing, 2005); Peter Fader, Bruce Hardie, and Ka Lee, “RFM and CLV: Using Iso-Value Curves for Customer Base Analysis,” Journal of Marketing Research 42, no. 4 (November 2005), pp. 415-30; Sunil Gupta, Donald R. Lehmann, and Jennifer Ames Stuart, “Valuing Customers,” Journal of Marketing Research 41, no. 1 (February 2004), pp. 7-18. Calculating Customer Lifetime Value marketing memo | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
162 PART 3 | Conne CTing Wi Th Cus Tome Rs Promotional campaigns that reinforce the value of the brand, even if targeted to the already loyal, may be more likely to attract higher-value new customers. Two-thirds of the considerable growth spurred by UK mobile com-munication leader O2's loyalty strategy was attributed to recruitment of new customers; the remainder came from reduced defection. 41 re Du Cing Defe Ction It is not enough to attract new customers; the company must also keep them and increase their business. 42 Too many companies suffer from high customer churn or defection. Adding customers here is like adding water to a leaking bucket. Cellular carriers and cable TV operators are plagued by “spinners, ” customers who switch carriers at least three times a year looking for the best deal. Many carriers lose 25 percent of their subscribers each year, at an estimated cost of $2 billion to $4 billion. Defecting customers cite unmet needs and expectations, poor product/service qual-ity and high complexity, and billing errors. 43 To reduce the defection rate, the company must: 1. Define and measure its retention rate. For a magazine, subscription renewal rate is a good measure of reten-tion. For a college, it could be first-to second-year retention rate or class graduation rate. 2. Distinguish the causes of customer attrition and identify those that can be managed better. Not much can be done about customers who leave the region or go out of business, but poor service, shoddy products, and high prices can all be addressed. 44 3. Compare the lost customer's lifetime value to the costs of reducing the defection rate. As long as the cost to dis-courage defection is lower than the lost profit, spend the money to try to retain the customer. table 5. 3 A Hypothetical Example to Illustrate CLV Calculations Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Number of Customers100 90 80 72 60 48 34 23 12 6 2 Revenue per Customer100 110 120 125 130 135 140 142 143 145 Variable Cost per Customer70 72 75 76 78 79 80 81 82 83 Margin per Customer30 38 45 49 52 56 60 61 61 62 Acquisition Cost per Customer40 Total Cost or Profit-4,000 2,700 3,040 3,240 2,940 2,496 1,904 1,380 732 366 124 Present Value-4,000 2,454. 55 2,512. 40 2,434. 26 2,008. 06 1,549. 82 1,074. 76 708. 16 341. 48 155. 22 47. 81 table 5. 4 Margin Multiple Discount Rate Retention Rate 10% 12% 14% 16% 60% 1. 20 1. 5 1. 11 1. 07 70% 1. 75 1. 67 1. 59 1. 52 80% 2. 67 2. 50 2. 35 2. 22 90% 4. 50 4. 09 3. 75 3. 46 | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
CRe ATing Long-Te Rm Loy ALTy Re LATionshi Ps | chapter 5 163 retention Dynami Cs Figure 5. 4 shows the main steps in attracting and retaining customers, imagined in terms of a funnel, and some sample questions to measure customer progress through the funnel. The marketing funnel identifies the percentage of the potential target market at each stage in the decision process, from merely aware to highly loyal. Consumers must move through each stage before becoming loyal customers. Some marketers extend the funnel to include loyal customers who are brand advocates or even partners with the firm. By calculating conversion rates —the percentage of customers at one stage who move to the next—the funnel allows marketers to identify any bottleneck stage or barrier to building a loyal customer franchise. If the percent-age of recent users is significantly lower than triers, for instance, something might be wrong with the product or service that prevents repeat buying. The funnel also emphasizes how important it is not just to attract new customers but to retain and cultivate existing ones. Satisfied customers are the company's customer relationship capital. If the company were sold, the acquiring company would pay not only for the plant and equipment and brand name but also for the delivered cus-tomer base, the number and value of customers who will do business with the new firm. Consider these data about customer retention:45 Acquiring new customers can cost five times more than satisfying and retaining current ones. It requires a great deal of effort to induce satisfied customers to switch from their current suppliers. The average company loses 10 percent of its customers each year. A 5 percent reduction in the customer defection rate can increase profits by 25 percent to 85 percent, depend-ing on the industry. Profit rate tends to increase over the life of the retained customer due to increased purchases, referrals, price premiums, and reduced operating costs to service. Aware Open to trial Trier (nonrejec-ters)Regular user (e. g., At least once every 2 weeks)Recent user (e. g., Once in past 3 months)Most often used I have heard of the brand. I am open to trying the brand but have not done so. I have tried the brand and would use again but have not done so in the past 3 months. I have used the brand in the past 3 months but am not a regular user. I am a regular user but this is not my most often used brand. I use this brand most often even though I do use other brands. I always use this brand as long as it is available. Target market Loyal| Fig. 5. 4 | The Marketing Funnel Whole Foods builds customer loyalty through its skillful procurement and merchandising of natural and organic foods. Source: Courtesy of Whole Foods Market. “Whole Foods Market” is a registered trademark of Whole Foods Market IP, L. P. | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
164 PART 3 | Conne CTing Wi Th Cus Tome Rs managing the Customer base Customer profitability analysis and the marketing funnel help marketers decide how to manage groups of customers that vary in loyalty, profitability, risk, and other factors. 46 A key driver of shareholder value is the aggregate value of the customer base. Winning companies improve that value by excelling at strategies like the following: Reducing the rate of customer defection. Selecting and training employees to be knowledgeable and friendly increases the likelihood that customers' shopping questions will be answered satisfactorily. Whole Foods, the world's largest retailer of natural and organic foods, woos customers with a commitment to market the best foods and a team concept for employees. Increasing the longevity of the customer relationship. The more engaged with the company, the more likely a customer is to stick around. Nearly 65 percent of new Honda purchases replace an older Honda. Drivers cited Honda's reputation for creating safe vehicles with high resale value. Seeking consumer advice can be an effec-tive way to engage consumers with a brand and company. 47 Enhancing the growth potential of each customer through “share of wallet, ” cross-selling, and up-selling. 48 Sales from existing customers can be increased with new offerings and opportunities. Harley-Davidson sells more than motorcycles and accessories like gloves, leather jackets, helmets, and sunglasses. Its dealerships sell more than 3,000 items of clothing—some even have fitting rooms. Licensed goods sold by others range from predictable items (shot glasses, cue balls, and Zippo cigarette lighters) to the more surpris-ing (cologne, dolls, and cell phones). Cross-selling isn't profitable if the targeted customer requires a lot of services for each product, generates a lot of product returns, cherry-picks promotions, or limits total spend-ing across all products. 49 Making low-profit customers more profitable or terminating them. To avoid trying to terminate them, marketers can instead encourage unprofitable customers to buy more or in larger quantities, forgo certain features or services, or pay higher amounts or fees. 50 Banks, phone companies, and travel agencies all now charge for once-free services to ensure minimum revenue levels from these customers. Firms can also discourage those with questionable profitability prospects. Progressive Insurance screens custom-ers and diverts the potentially unprofitable to competitors. 51 However, “free” customers who pay little or nothing and are subsidized by paying customers—as in print and online media, employment and dating services, and shopping malls—may still create useful direct and indirect network effects, an important function. 52 Focusing disproportionate effort on high-profit customers. The most profitable customers can be treated in a special way. Thoughtful gestures such as birthday greetings, small gifts, or invitations to special sports or arts events can send them a strong positive signal. bu Ild In G lo Yalt Y Companies that want to form strong, tight connections to customers should heed some specific considerations (see Figure 5. 5). One set of researchers sees retention-building activities as adding financial benefits, social ben-efits, or structural ties. 53 Next we describe three marketing activities that improve loyalty and retention. intera Ct Closely with Customers Connecting customers, clients, patients, and others directly with company employees is highly motivating and informative. End users can offer tangible proof of the positive impact of the company's products and services, express appreciation for employee contributions, and elicit empathy. A brief visit from a student who had received a scholarship motivated university fundraisers to increase their weekly productivity by 400 percent; a patient's photograph inspired radiologists to improve the accuracy of their diagnostic findings by 46 percent. 54 Create superior products, services, and experiences for the target market. Get cross-departmental participation in planning and managing the customer satisfaction and retention process. Integrate the “Voice of the Customer” to capture their stated and unstated needs or requirements in all business decisions. Organize and make accessible a database of information on individual customer needs, preferences, contacts, purchase frequency, and satisfaction. Make it easy for customers to reach appropriate company staff and express their needs, perceptions, and complaints. Assess the potential of frequency programs and club marketing programs. Run award programs recognizing outstanding employees. | Fig. 5. 5 | Forming Strong Customer Bonds | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
CRe ATing Long-Te Rm Loy ALTy Re LATionshi Ps | chapter 5 165 Listening to customers is crucial to customer relationship management. Some companies have created an ongoing mechanism that keeps their marketers permanently plugged in to frontline customer feedback. Deere & Company, which makes John Deere tractors and has a superb record of customer loyalty—nearly 98 percent annual retention in some product areas—has used retired employees to interview defectors and customers. 55 Chicken of the Sea has 80,000 members in its Mermaid Club, a core-customer group that receives special of-fers, health tips and articles, new product updates, and an informative e-newsletter. In return, club members provide valuable feedback on what the company is doing and thinking of doing. Their input has helped design the brand's Web site, develop messages for TV advertising, and craft the look and text on the packaging. 56 Build-A-Bear Workshop uses a “Cub Advisory Board” as a feedback and decision-input body. The board is made up of twenty 5-to 16-year-olds who review new-product ideas and give a “paws up or down. ” Many products in the stores are customer ideas. 57 But listening is only part of the story. It is also important to be a customer advocate and, as much as possible, take the customers' side and understand their point of view. 58 De Velop loyalty programs Frequency programs (FPs) are designed to reward customers who buy frequently and in substantial amounts. They can help build long-term loyalty with high CLV customers, creating cross-selling opportunities in the process. Pioneered by the airlines, hotels, and credit card companies, FPs now exist in many other industries. Most supermarket and drug store chains offer price club cards that grant discounts on certain items. Typically, the first company to introduce an FP in an industry gains the most benefit, especially if competitors are slow to respond. After competitors react, FPs can become a financial burden to all the offering companies, but some companies are more efficient and creative in managing them. Some FPs generate rewards in a way that locks customers in and creates significant switching costs. FPs can also produce a psychological boost and a feeling of being special and elite that customers value. 59 Club membership programs attract and keep those customers responsible for the largest portion of business. Clubs can be open to everyone who purchases a product or service or limited to an affinity group or those willing to pay a small fee. Although open clubs are good for building a database or snagging customers from competitors, limited membership is a more powerful long-term loyalty builder. Fees and membership conditions prevent those with only a fleeting interest in a company's products from joining. Apple encourages owners of its computers to form local Apple user groups. There are hundreds of groups, ranging in size from fewer than 30 members to more than 1,000. The groups provide Apple owners with opportu-nities to learn more about their computers, share ideas, and get product discounts. They sponsor special activities and events and perform community service. A visit to Apple's Web site will help a customer find a nearby user group. 60 Create institutional ties The company may supply business customers with special equipment or computer links that help them manage orders, payroll, and inventory. Customers are less inclined to switch to another supplier when it means high capital costs, high search costs, or the loss of loyal-customer discounts. Mc Kesson Corporation, a leading pharmaceutical wholesaler, invested millions of dollars in EDI (Electronic Data Interchange) capabilities to help its independent-pharmacy customers manage inventory, order-entry processes, and shelf space. Another example is Milliken & Company, which provides proprietary software programs, marketing research, sales training, and sales leads to loyal customers. brand Commun It Ies Thanks to the Internet, companies are interested in collaborating with consumers to create value through com-munities built around brands. A brand community is a specialized community of consumers and employees whose identification and activities focus around the brand. 61 Three characteristics identify brand communities:62 1. A “consciousness of kind, ” or a sense of felt connection to the brand, company, product, or other community members; 2. Shared rituals, stories, and traditions that help convey the meaning of the community; and 3. A shared moral responsibility or duty to both the community as a whole and individual community members. types of bran D Communities Brand communities come in many different forms. 63 Some arise organically from brand users, such as the Atlanta MGB riders club and the Porsche Rennlist online discussion | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
166 PART 3 | Conne CTing Wi Th Cus Tome Rs group. Others are company-sponsored and facilitated, such as Club Green Kids (official kids' fan club of the Boston Celtics) and the Harley Owners Group (H. O. G. ). 64 Har Le Y-Da Vi DSO n Founded in 1903 in Milwaukee, Wisconsin, Harley-Davidson has twice narrowly escaped bankruptcy but is today one of the most recognized motor vehicle brands in the world. In dire financial straits in the 1980s, Harley licensed its name to such ill-advised ventures as cigarettes and wine coolers. Although consumers loved the brand, sales were depressed by product-quality problems, so Harley began its return to greatness by improving manu-facturing processes. It also developed a strong brand community in the form of an inclusive owners' club, called the Harley Owners Group (H. O. G. ), which sponsors bike rallies, charity rides, and other motorcycle events and now numbers more than 1 million members in some 1,400 chapters. H. O. G. benefits include a magazine called Hog Tales, a touring handbook, emer-gency road service, a specially designed insurance program, theft reward service, discount hotel rates, and a Fly & Ride pro-gram enabling members to rent Harleys on vacation. The company also maintains an extensive Web site devoted to H. O. G. with information about club chapters and events and a special members-only section. Harley is active with social media too and boasts more than 3. 3 million Facebook fans. One fan inspired a digital video and Twitter campaign dubbed E Pluribus Unum—“Out of Many, One”—where Harley riders from all walks of life show their diversity and their pride in their bikes. Companies large and small can build brand communities. When New Y ork's Signature Theatre Company built a new 70,000-square-foot facility for its shows, it made sure there was a central hub where casts, crew, playwrights, and audiences for all productions could mingle and interact. 65 Online, marketers can tap into social media such as Facebook, Twitter, and blogs or create their own online community. Members can recommend products, share reviews, create lists of recommendations and favorites, or socialize together online. Online forums can be especially helpful in a business-to-business setting for professional development and feedback opportunities. The Kodak Grow Y our Biz blog is a place for members to learn and share insights about how Kodak products, services, and technologies can improve important company or industry business performance. 66 The Pitney Bowes User Forum is a place for members to discuss issues related to Pitney Bowes equipment and to mailing and marketing in general. Members often answer each other's business questions, though Pitney Bowes customer service representatives are available for any particularly difficult support questions. 67 maximizing the benefits of bran D Communities A strong brand community results in a more loyal, committed customer base. One study showed that a multichannel retailer of books, CDs, and DVDs enjoyed long-term incremental revenue of 19 percent from customers—what the authors called “social dollars”— after customers joined an online brand community. The more “connected” a member of the community was, the greater the likelihood he or she would spend more. 68 A brand community can be a constant source of inspiration and feedback for product improvements or innova-tions. The activities and advocacy of members of a brand community can also substitute to some degree for activi-ties the firm would otherwise have to engage in, creating greater marketing effectiveness and efficiency as a result. 69 Harley-Davidson has built an active brand community through its Harley Owner's Group which boasts more than one million members. Source: Nicholas J Reid/Getty Images | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
CRe ATing Long-Te Rm Loy ALTy Re LATionshi Ps | chapter 5 167 To better understand how brand communities work, one comprehensive study examined communities around brands as diverse as Stri Vectin cosmeceutical, BMW Mini auto, Jones soda, Tom Petty & the Heartbreakers rock and roll band, and Garmin GPS devices. Using multiple research methods such as “netnographic” research with online forums, participant and naturalistic observation of community activities, and in-depth interviews with community members, the researchers found 12 value creation practices taking place. They divided them into four categories—social networking, community engagement, impression management, and brand use—summarized in Table 5. 5. Building a positive, productive brand community requires careful thought and implementation. 70 One set of researchers offers these recommendations for making online brand communities more effective:71 1. Enhance the timeliness of information exchanged. Set appointed times for topic discussion; give rewards for timely, helpful responses; increase access points to the community. 2. Enhance the relevance of information posted. Keep the focus on topic; divide the forum into categories; en-courage users to preselect interests. 3. Extend the conversation. Make it easier for users to express themselves; don't set limits on length of responses; allow user evaluation of the relevance of posts. 4. Increase the frequency of information exchanged. Launch contests; use familiar social networking tools; create special opportunities for visitors; acknowledge helpful members. table 5. 5 Value Creation Practices So CIal Ne TWo Rk INg Welcoming Greeting new members, beckoning them into the fold, and assisting in their brand learning and community socialization. empathizing Lending emotional and/or physical support to other members, including support for brand-related trials (product failure, customizing) and/or for nonbrand-related life issues (illness, death, job). governing Articulating the behavioral expectations within the brand community. Im PRe SSIo N ma Nageme NT evangelizing Sharing the brand “good news,” inspiring others to use, and preaching from the mountaintop. Justifying Deploying rationales generally for devoting time and effort to the brand and collectively to outsiders and marginal mem-bers in the boundary. Commu NITy e Ngageme NT Staking Recognizing variance within the brand community membership and marking intragroup distinction and similarity. milestoning Noting seminal events in brand ownership and consumption. Badging Translating milestones into symbols and artifacts. Documenting Detailing the brand relationship journey in a narrative way, often anchored by and peppered with milestones. BRa ND u Se grooming Cleaning, caring for, and maintaining the brand or systematizing optimal use patterns. Customizing Modifying the brand to suit group-level or individual needs. This includes all efforts to change the factory specs of the product to enhance performance. Commoditizing Distancing/approaching the marketplace in positive or negative ways. May be directed at other members (you should sell/should not sell that) or may be directed at the firm through explicit link or through presumed monitoring of the site (you should fix this/do this/change this). Source: Adapted from Hope Jensen Schau, Albert M. Muniz, and Eric J. Arnould, “How Brand Community Practices Create Value,” Journal of Marketing 73 (September 2009), pp. 30-51. | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
168 PART 3 | Conne CTing Wi Th Cus Tome Rs WIn-ba Cks Regardless of how hard companies may try, some customers inevitably become inactive or drop out. The challenge is to reactivate them through win-back strategies. 72 It's often easier to reattract ex-customers (because the company knows their names and histories) than to find new ones. Exit interviews and lost-customer surveys can uncover sources of dissatisfaction and help win back only those with strong profit potential. 73 Cultivating Customer Relationships Companies are using information about customers to enact precision marketing designed to build strong long-term relationships. 74 Information is easy to differentiate, customize, personalize, and dispatch over networks at incredible speed. But that capability cuts both ways. For instance, customers now comparison-shop quickly and easily through sites such as Bizrate. com, Shopping. com, and Price Grabber. com, and Epinions. com and Y elp. com let them share information about their product and service experiences with others. Company empowerment has been matched by customer empowerment, and companies have to adjust to shifts in the nature and strength of their customer relationships. Customer relat Ionsh IP mana Gement Customer relationship management (CRM) is the process of carefully managing detailed information about individual customers and all customer “touch points” to maximize loyalty. 75 CRM is important because a major driver of company profitability is the aggregate value of the company's customer base. A related concept, cus-tomer value management (CVM), describes the company's optimization of the value of its customer base. CVM focuses on the analysis of individual data on prospects and customers to develop marketing strategies to acquire and retain customers and drive customer behavior. 76 A customer touch point is any occasion when a customer encounters the brand and product—from actual ex-perience to personal or mass communications to casual observation. For a hotel, the touch points include reserva-tions, check-in and checkout, frequent-stay programs, room service, business services, exercise facilities, laundry service, restaurants, and bars. The Four Seasons relies on personal touches, such as a staff that always addresses guests by name, high-powered employees who understand the needs of sophisticated business travelers, and at least one best-in-region facility, such as a premier restaurant or spa. 77 CRM enables companies to provide excellent real-time customer service through the effective use of indi-vidual account information. Based on what they know about each valued customer, they can customize market offerings, services, programs, messages, and media. Companies' increased ability to track and market to indi-vidual customers is not without its controversies, as “Marketing Insight: The Behavioral Targeting Controversy” highlights. personalizing marketing Widespread Internet usage allows marketers to abandon the mass-market practices that built brand powerhouses in the 1950s, 1960s, and 1970s for new approaches that are a throwback to marketing practices from a century ago, when merchants literally knew their customers by name. Personalizing marketing is about making sure the brand and its marketing are as personally relevant as possible to as many customers as possible—a challenge, given that no two customers are identical. Companies are using e-mail, Web sites, call centers, databases, and database software to foster continuous contact between company and customer. Although technology can help with customer relationship management, firms have to be careful not to roll out too many automated-response phone systems or social-networking tools as ways to satisfy customer service requests. Many customers still prefer to talk to a live representative to receive more personal service—an ongoing priority in marketing. 78 Companies are recognizing the role of the personal component in CRM and its influence once customers make actual contact with the company. Employees can create strong bonds with customers by individualiz-ing and personalizing relationships. Consider the lengths to which British Airways is going to satisfy valued customers. 79 | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
CRe ATing Long-Te Rm Loy ALTy Re LATionshi Ps | chapter 5 169 Briti SH air Wa YS British Airways took personalization to a higher level in the summer of 2012 with its new “Know Me” program. One goal was to centralize information about frequent fliers from every one of BA's service chan-nels—Web site, call center, e-mail, on board planes, and inside airports—into a single database. For any one passenger booked on a flight, BA would know his or her current seating location, previous flights and meal choices, prior complaint history, and so on. BA also distributed 2,000 i Pads among crew members and ground staff to allow them to access the database as well as receive personal recognition messages about passengers on any one flight. The goal was to have 4,500 daily messages, or approximately seven message updates per flight. To facilitate VIP passenger identification, British Airways also used stored photos of fliers downloaded from Google Image searches. One company representative described the program as aiming to “recreate the feeling of recognition you get in a favorite restaurant when you're welcomed there, but in our case it will be delivered by thousands of staff to millions of customers. ” Although some observers raised privacy concerns—even calling it “creepy”—British Airways noted that the passenger information was already available or viewed as helpful by its most valuable fliers. The Behavioral Targeting Controversy The emergence of behavioral targeting is allowing companies to track the online behavior of target customers and find the best match between ads and prospects. Tracking an individual's Internet usage behavior relies on cookies—randomly assigned numbers, codes, and data that are stored on the user's computer hard drive and reveal which sites have been visited, the amount of time spent there, which products or pages were viewed, and which search terms were entered. The Wall Street Journal reviewed 1,000 top Web sites and found that 75 percent included code from social networks such as Facebook's “like” and Twitter's “tweet” buttons. The existence of the code could match people's identities with their Web-browsing activities, tracking a user's arrival on a page even if the Facebook or Twitter button was never clicked. Another Wall Street Journal study showed that roughly a quarter of the times a user logged into one of 70 popular Web sites, the user's real name and e-mail address or other personal details, such as username, were passed on to third-party companies. A new customer signing up with Microsoft for a free Hotmail e-mail account, for example, is required to give the company his or her name, age, gender, and zip code. Microsoft can then combine those facts with information such as observed online behavior and character-istics of the area in which the customer lives to help advertisers better understand whether, when, and how to contact that customer. Although Microsoft maintains it carefully preserves consumer privacy—it claims it won't purchase an individual's income history—it can still provide advertising clients with behavioral targeting information. For example, Microsoft can help a Dining In franchisee zero in on working moms ages 30 to 40 in a given neighborhood with ads designed to reach them before 10 am when they're most likely to be planning their evening meal. Or if a person clicks on three Web sites related to auto insurance and then visits an unrelated site for sports or entertainment, auto insurance ads may show up on that site. Microsoft claims behavioral targeting can increase the likelihood a visitor clicks an ad by as much as 76 percent. Proponents of behavioral targeting maintain that it also brings consumers more relevant ads. Because the ads are more effective as a result, more ad revenue is available to support free online con-tent. Supporters also maintain that many consumers would be less concerned if they knew exactly how tracking worked. They argue that practices conform with the online ad industry's self-regulation norms, ensuring anonymity by not giving firms access to “personal identifiable information” (PII). Identity information is removed, protected, or separated from browsing history in different ways. For example, a Web site can use a formula to turn its users' e-mail addresses into jumbled strings of num-bers and letters, as can an advertiser. Both can send their jumbled lists to a third company that looks for matches so the Web site can show an ad targeted to a specific person without any real e-mail addresses changing hands. Nevertheless, as Chapter 3 pointed out, consumers have sig-nificant misgivings about advertisers tracking them online. A single Web page can contain computer code from dozens of different ad compa-nies or tracking firms. Government regulators wonder whether industry self-regulation will be sufficient or whether legislation is needed. Sources: Elisabeth Sullivan, “Behave,” Marketing News, September 15, 2008, pp. 12-15; Stephanie Clifford, “Two-Thirds of Americans Object to Online Tracking,” New York Times, September 30, 2009; Jessica Mintz, “Microsoft Adds Behavioral Targeting,” Associated Press, December 28, 2006; Laurie Birkett, “The Cookie That Won't Crumble,” Forbes, January 18, 2010, p. 32; Alden M. Hayashi, “How Not to Market on the Web,” MIT Sloan Management Review (Winter 2010), pp. 14-15; Deborah L. Golemon and Laurie A. Babin, “How Marketers Are Dealing With the Controversy Surrounding Behavioral Targeting,” International Journal of Business, Marketing and Decision Sciences 4 (Spring 2011), pp. 127-141; Jennifer Valentino-Devries and Jeremy Singer-Vine, “They Know What You're Shopping For,” Wall Street Journal, December 7, 2012. marketing insight | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
170 PART 3 | Conne CTing Wi Th Cus Tome Rs While British Airways is personalizing its service experiences, BMW is figuring out ways to personalize its products. While 15 percent of U. S. drivers custom-ordered their cars in 2010, BMW's goal was to make that number 40 percent of its buyers by 2015. The company offers 500 side-mirror combinations, 1,300 front bumper combinations, and 9,000 center-console combinations and provides new buyers a video link to watch their car being “born” while waiting for delivery. Its detailed manufacturing and procurement system takes the slack out the production process, reduces inventory carrying costs, and avoids rebates on slow-moving sellers. Customers tend to load up with options—generating more profitability for BMW and its dealers—but are also more loyal. 80 Even Coca-Cola is getting in on the action. The Coca-Cola Freestyle dispensing machine can dispense 125 sparkling and still brands that consumers can mix via a touchscreen, creating a beverage to suit their particular taste. 81 To adapt to customers' increased desire for personalization, marketers have embraced concepts such as permission marketing. Permission marketing, the practice of marketing to consumers only after gaining their expressed permis-sion, is based on the premise that marketers can no longer use “interruption marketing” via mass media campaigns. According to Seth Godin, a pioneer in the new technique, marketers develop stronger consumer relationships by respecting consumers' wishes and sending messages only when they express a willingness to become more engaged with the brand. 82 Godin believes permission marketing works because it is “anticipated, personal, and relevant. ” Permission marketing, like other personalization approaches, presumes consumers know what they want, though they often have undefined, ambiguous, or conflicting preferences. “Participatory marketing” may be a more appropriate concept than permission marketing because marketers and consumers need to work together to find out how the firm can best satisfy consumers. Customer empowerment Marketers are helping consumers become evangelists for brands by providing them resources and opportunities to demonstrate their passion. Doritos held a contest to let consumers name its next flavor. Converse asked amateur filmmakers to submit 30-second short films that demonstrated how the iconic sneaker brand inspired them. The best of the 1,800 submissions were showcased in the Converse Gallery As part of a broad trend towards personalization, Coca-Cola has introduced Freestyle dispensing machines that allow users to customize their soft drink choices. Source: Scott Keeler/ZUMAPRESS/Newscom | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
CRe ATing Long-Te Rm Loy ALTy Re LATionshi Ps | chapter 5 171 Web site, and the best of the best became TV commercials. Sales of shoes via the Web site doubled in the month after the gallery's launch. 83 As much as new technologies help customers assist or become involved in a brand's marketing, they also help them avoid marketing at the same time. For example, ad blocking is the most popular software extension for lead-ing browsers, and the overall rate of ad blocking by users averages about 10 percent. 84 Although much has been made of the newly empowered consumer—in charge, setting the direction of the brand, and playing a much bigger role in how it is marketed—it's still true that only some consumers want to get involved with some of the brands they use and, even then, only some of the time. Consumers have lives, jobs, families, hobbies, goals, and commitments, and many things matter more to them than the brands they purchase and consume. Understanding how to best market a brand given such diversity in customer interests is crucially important. 85 When will consumers choose to engage with a brand? Many factors can come into play, but follow-up analy-sis of the IBM 2010 CEO Study revealed the following about customer pragmatism: “. .. most do not engage with companies via social media simply to feel connected. ... To successfully exploit the potential of social media, com-panies need to design experiences that deliver tangible value in return for customers' time, attention, endorsement and data. ” According to these IBM analysts, that “tangible value” includes discounts, coupons, and information to facilitate purchase. They also note that many businesses overlook social media's most potent capabilities for captur-ing customer insights, monitoring the brand, conducting research, and soliciting new-product ideas. 86 Customer re Views an D re Commen Dations Although the strongest influence on consumer choice remains “recommended by relative/friend, ” an increasingly important decision factor is “recommendations from consumers. ” With increasing mistrust of some companies and their advertising, online customer ratings and reviews are playing a growing role in the customer buying process. 87 A Forrester research study, for example, found that close to 50 percent of consumers won't book a hotel that does not have online reviews. Not surprisingly, more hotels are launching their own program to post reviews (Starwood places independent, authenticated reviews on individual hotel sites) or are using travel review sites (Wyndham streams its five most recent reviews from Trip Advisor on its site, leading to a 30 percent increase in bookings). 88 Trip Advisor has quickly grown to be a valuable online resource for travelers. 89 tri Pa DV i SOr After being frustrated by the lack of detailed, reliable, and up-to-date information available to help him decide where to go on a Mexican holiday, Stephen Kaufer founded Trip Advisor in 2001. The pioneer in online consumer travel reviews, the company grew quickly and is now the world's largest travel Web site, with more than 170 mil-lion user reviews and opinions as of 2014. It allows users to collect and share information and make bookings for a wide variety of hotels, vacation rentals, airlines, restaurants, and other travel-related locations or businesses through its hotel and air booking partners. Users can post reviews, photos, and opinions and participate in discussions on a variety of different topics. To improve the quality and accuracy of its content, Trip Advisor uses both manual review and advanced computer algorithms, including a verification and fraud detection system that considers the IP and e-mail address of reviewers (as well as other review attributes) and monitors suspicious patterns of postings as well as inappropriate language. About 30 hotels have been blacklisted from the site for suspicious reviews. Trip Advisor has more than 280 million unique visitors monthly, and hundreds of millions of people each month view its content on 500 other sites, including Best Western International, Expedia, and Thomas Cook. In recent years, Trip Advisor has innovated to improve the personalization and social nature of its services; in fact, it was one of Facebook's initial launch partners for its “Instant Personalization” project, which allows users to personalize their Trip Advisor experience by allowing them to see Trip Advisor content posted by their Facebook friends, subject to their privacy elections. Local Picks is a Facebook app that allows users to localize Trip Advisor restaurant reviews and auto-share user reviews on Facebook Timeline. The Friends of Friends function allows Trip Advisor users to sort reviews by a user's Facebook friend status. Its acquisitions of social and mobile connectivity travel sites Wanderfly and Every Trail have further strengthened Trip Advisor's capabilities in that area. When online pet food retailer PETCO started using consumer product ratings and reviews in e-mails and banner ads, it found its click-through rate increased considerably as a result. 90 Brick-and-mortar retailers such as Best Buy, Staples, and Cabela's are also recognizing the power of consumer reviews and have begun to display them in their stores. 91 | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
172 PART 3 | Conne CTing Wi Th Cus Tome Rs Despite consumer acceptance of such reviews, however, their quality and integrity can be in question. 92 In one famous example, over a period of seven years, the cofounder and CEO of Whole Foods Market posted more than 1,100 entries on Y ahoo! Finance's online bulletin board under a pseudonym, praising his company and criticizing competitors. Some companies offer computer-recognition technology to monitor for fraud. Bazaarvoice helps companies such as Walmart and Best Buy manage and monitor online reviews using a process called device fingerprinting. The company caught one firm posting hundreds of positive reviews of one of its products and negative reviews of its competitor's. 93 Online reviews and blogging sites such as Gawker have struggled to police comments. 94 To avoid attracting anonymous or biased reviews, Angie's List allows only paid and registered subscribers to access its Web site, which compiles about 40,000 reviews of service companies and health care professionals from its 1. 5 million North American subscribers each month. Users rate providers on price, quality, responsiveness, punctuality, and profes-sionalism using a report card-style A-to-F scale. 95 Other sites offer summaries of professional third-party reviews. Metacritic aggregates music, game, TV, and movie reviews from leading critics—often from more than 100 publications—averaged into a single 1-to-100 score. Review sites are important in the video game industry because of the influence they wield and the prod-uct's high selling price—often $50 to $60. Some game companies tie bonuses for their developers to game scores on the more popular sites. If a major new release doesn't make the 85-plus cutoff, the publisher's stock price may even drop. 96 Bloggers who review products or services are influential because they may have thousands of followers; blogs are often among the top links returned in online searches for certain brands or categories. A company's PR department may track popular blogs via online services such as Google Alerts and Technorati. Firms also court the favor of key bloggers via free samples and advance information. Most bloggers disclose this special treatment. For smaller brands with limited media budgets, online word of mouth is critical. To generate prelaunch buzz for one of its new hot cereals, organic food maker Amy's Kitchen shipped out samples before its release to several of the 50 or so vegan, gluten-free, or vegetarian food bloggers the company tracks. When favorable reviews appeared on these blogs, the company was besieged by e-mails asking where to buy the cereal. 97 As it turns out, sometimes even negative reviews can be surprisingly helpful. For one thing, although they can hurt a well-known brand, they can create awareness about an unknown or overlooked one. They can also provide valued information. A Forrester study of 10,000 consumers of Amazon. com's electronics and home and garden products found that 50 percent found negative reviews helpful. Most purchased the products regardless of negative comments because they felt these merely reflected personal tastes and opinions different from their own. When consumers can better learn the advantages and disadvantages of products through negative reviews, fewer product returns may result, saving retailers and producers money. 98 Online retailers often add their own recommendations to consumer selections or purchases: “If you like that black handbag, you'll love this red top. ” One source estimated that recommendation systems contribute 10 percent to 30 percent of an online retailer's sales. Specialized software tools help facilitate customer “discovery” or un-planned purchases. At the same time, online companies need to make sure their attempts to create relationships with customers don't backfire, as when customers are bombarded by computer-generated recommendations that consistently miss the mark. Buy a few baby gifts on Amazon. com, and your personalized recommendations suddenly don't look so personal! E-tailers need to recognize the limitations of online personalization while searching for technology and processes that really work. Customer Complaints Some companies think they're getting a sense of customer satisfaction by tallying complaints, but studies show that while customers are dissatisfied with their purchases about 25 percent of the time, only about 5 percent complain. The other 95 percent either feel complaining is not worth the effort or don't know how or to whom to complain. They just stop buying. 99 Of the customers who register a complaint, 54 percent to 70 percent will do business with the organization again if their complaint is resolved. The figure goes up to a staggering 95 percent if the customer feels the com-plaint was resolved quickly. Customers whose complaints are satisfactorily resolved tell an average of five people about the good treatment they received. 100 The average dissatisfied customer, however, gripes to 11 people. If each of these tells still other people, the number exposed to bad word of mouth may grow exponentially. | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
CRe ATing Long-Te Rm Loy ALTy Re LATionshi Ps | chapter 5 173 No matter how perfectly designed and implemented a marketing program is, mistakes will happen. The best thing a company can do is make it easy for customers to complain. Suggestion forms, toll-free numbers, Web sites, and e-mail addresses allow for quick, two-way communication. The 3M Company claims that more than two-thirds of its product-improvement ideas come from listening to customer complaints. Given that many customers may choose not to complain, companies should proactively monitor social media and other places where customer complaints and feedback may be aired. Jet Blue's 27-member customer service team is charged with monitoring the airline's Twitter account and Facebook page, among other responsibilities. When a customer's complaint about a fee for bringing a folded bike on board began to circulate online, Jet Blue quickly responded and decided it was not a service it should charge for. 101 Given the potential downside of having an unhappy customer, it's critical that marketers deal with negative experiences properly. 102 Although challenging, the following practices can help to recover customer goodwill:103 1. Set up a seven-day, 24-hour toll-free hotline (by phone, fax, or e-mail) to receive and act on complaints— make it easy for the customer. 2. Contact the complaining customer as quickly as possible. The slower the company is to respond, the more dis-satisfaction may grow and lead to negative word of mouth. 3. Accept responsibility for the customer's disappointment; don't blame the customer. 4. Use customer service people who are friendly and empathic. 5. Resolve the complaint swiftly and to the customer's satisfaction. Some complaining customers are not looking for compensation so much as a sign that the company cares. Not all complaints, however, reflect actual deficiencies or problems with a company's product or service. 104 Big companies especially are targets for opportunistic customers who attempt to capitalize on even minor transgres-sions or generous compensation policies. Some firms fight back and even take an aggressive stance if they feel a criticism or complaint is unjustified. When Taco Bell began to attract negative buzz online after rumors and a consumer lawsuit alleged that its taco mixture consisted of more filler than meat, it leaped into action with full-page newspaper ads headlined, “Thank you for suing us. ” There and in Facebook postings and a Y ou Tube video, the company pointed out that its taco mixture was 88 percent beef, with ingredients such as water, oats, spices, and cocoa powder added only for flavor, texture, and moisture. To help spread the word, Taco Bell marketers bought the key words “taco, ” “bell, ” and “lawsuit” so that its official responses appeared as the first link on Y ahoo!, Google, and Bing searches. 105 Many senior executives worry about their firms using social media and the potential negative effects of cranky customers communicating online. Marketers, however, contend that the positives outweigh the negatives and steps can be taken to minimize the likelihood of such damage. One strategy for companies active in corporate social responsibility is to actively shape their public image dur-ing quiet times and then leverage that goodwill in paid or other media during difficult times. Nike was once a target of Internet-savvy critics who skillfully used search engine optimization to populate unflattering portraits of the company. Now, searches for Nike yield links to sites that describe its many environmental and community initiatives (such as shoe recycling). 106 Taco Bell aggressively defends the quality of its products via social media. Source: ASSOCIATED PRESS | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
174 PART 3 | Conne CTing Wi Th Cus Tome Rs 4. Quality is the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs. Marketers play a key role in achieving high levels of total quality so that firms remain solvent and profitable. 5. Marketing managers must calculate customer lifetime values of their customer base to understand their profit implications. They must also determine ways to increase the value of the customer base. 6. Companies are also becoming skilled in customer relationship management (CRM), which focuses on developing programs to attract and retain the right customers and meeting the individual needs of those valued customers. Summary 1. Customers are value maximizers. They form an expec-tation of value and act on it. Buyers will buy from the firm that they perceive to offer the highest customer-delivered value, defined as the difference between total customer benefits and total customer cost. 2. A buyer's satisfaction is a function of the product's per-ceived performance and the buyer's expectations. Rec-ognizing that high satisfaction leads to high customer loyalty, companies must ensure that they meet and ex-ceed customer expectations. 3. Losing profitable customers can dramatically affect a firm's profits. The cost of attracting a new customer is estimated to be five times the cost of keeping a current customer happy. The key to retaining customers is rela-tionship marketing. My Marketing Lab Go to mymktlab. com to complete the problems marked with this icon as well as for additional assisted-graded writing questions. Marketing Discussion Using CLV Consider customer lifetime value (CLV). Choose a busi-ness and show how you would go about developing a quan-titative formulation that captures the concept. How would that business change if it fully embraced the customer eq-uity concept and maximized CLV?Applications Marketing Debate Online versus Offline Privacy As more firms practice relationship marketing and develop customer databases, privacy issues are emerging as an important topic. Consumers and public interest groups are scrutinizing—and sometimes criticizing—the privacy poli-cies of firms and raising concerns about potential theft of online credit card information or other potentially sensitive or confidential financial information. Others maintain online privacy fears are unfounded and that security issues are as much a concern offline. They argue that the opportunity to steal information exists virtually everywhere and that it's up to consumers to protect their interests. Take a position: Privacy is a bigger issue online than offline versus Privacy is no different online than offline. | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
CRe ATing Long-Te Rm Loy ALTy Re LATionshi Ps | chapter 5 175 Audi also heavily invests in motor sports. Numerous races and world championships have been won with its cars. Besides its motor sports activities, Audi spon-sors major teams like Germany's number one soccer club FC Bayern Muenchen. Since 2002, Audi and the Bavarians have been strategic partners. Audi is also the sponsoring partner for other leading European soc-cer clubs like FC Barcelona and Chelsea FC. In India, Audi became famous overnight in 1985. India won the world championship in cricket, the sport the country is most passionate about, and Ravi Shastri of the Indian team was awarded an Audi 100 for his winning per-formance—an event that is fondly remembered in the country even today. The success of Audi's marketing over the past two decades becomes clear if you compare the company's sales figures to the turnover of their major competi-tive brands, BMW and Mercedes-Benz. In 2000, Audi sold approximately 653,000 cars, BMW 822,000, and Mercedes-Benz 1. 053 million. Based on sales figures from 2013, BMW is leading the market with a narrow margin of 1. 66 million cars as compared to Audi's 1. 58 million and Mercedes-Benz's 1. 46 million cars. In China, the most important automotive market in the world with 15. 9 million cars sold (USA: 15. 6 million) in 2013, Audi leads the market among the German competitors with 492,000 cars sold as compared to BMW's 360,000 and Mercedes-Benz's 228,000. Overall, 84 percent of Audi's sales are realized outside of Germany today. What else has Audi done over the past years besides a bold move in repositioning, and the creation of a con-vincing advertising and sponsorship concept? Audi offers a variety of innovative products that meet the customer's increasing demand for SUVs and luxury cars on the one hand, and alternative driving systems and compact cars on the other. Audi's SUVs are branded in its “Q” series. The company is rounding up its product range with a new Q7 in 2015, a Q1 in 2016, and a Q8 in 2017. With other Audi products like the Audi A3 e-tron, customers can combine the advantages of hybrids with traditional-drive systems. The company's image of being a superior sports car manufacturer is being enhanced with models like the R8, a car based on Audi's race car prototype for the Le Mans 24-hours race. Its compact and middle-class cars A1, A3, and A4 mark the other side of the product portfolio. They also profit from the company's innovativeness through light-weight construction and plug-in hybrid technology. According to a 2014 con-sumer survey, Audi is considered to be Germany's most innovative car manufacturer. To further involve its customers emotionally, while at the same time acknowledging the increasing importance of the Internet as a communication and distribution channel, Audi has introduced digital showrooms. In Marketing Excellence >> Audi The year 1899 marked the establishment of August Horch & Cie, the first car manufacturing company founded by August Horch. As a pioneer in automotive engineering, Horch had previously worked with Carl Benz, inventor of modern automobiles with combustion engines. Horch left his company in 1909 because of dif-ferences with its co-management and supervisory board. He immediately set up a second car venture which he named “Audi”—the Latin translation of his German family name, Horch (“hark” or “listen” in English). From the very beginning, Audi established a tradition of sports victories. Thanks to Audi's accomplishments in the Austrian Alpine Runs between 1911 and 1914, August Horch succeeded in making the brand internationally well-known within just a few years. In 1932, the company's famous four-ring emblem was created when Audi merged with the previously in-dependent companies Horch, Dampf-Kraft-Wagen, and Wanderer to form Auto Union. For many years, the name Audi was not in use. A new merger in 1969, between Auto Union and NSU Motorenwerke AG, established Audi NSU Auto Union AG. The company was renamed Audi in 1985 by Volkswagen, the holding company of Audi since the mid-1960s. A new advertising slogan was created for the com-pany in 1971 and has been used as the company's mis-sion statement ever since. “Vorsprung durch Technik,” which roughly translated means “progress through tech-nology,” remains the main catchphrase for Audi. In the 1970s and 1980s, the company was effectively putting this to practice with innovations like the quattro four-wheel drive, aluminum car bodies, direct-injection en-gines, and the first hybrid vehicles. Despite these achievements, Audi had problems and needed to reposition itself in an increasingly com-petitive environment. Customers in the United States complained about a mysterious acceleration in their cars, and the image of Audi was not sophisticated enough for a manufacturer of premium and luxury cars. So in a bold move, the company's management decided on an extreme repositioning strategy. Audi was to be the most progressive of all premium car manufacturers. Sportiness was picked as the second differentiating fac-tor. With a famous commercial, the brand transformation was put into practice in 1986. An Audi 100 quattro, a four-wheel drive, drove up a snow-covered ski jump, apparently all by itself. The commercial won a Gold Lion (Lion' d'Or) at the international advertising festival in Cannes, and in 1997 was voted best German advertising of all times by a professional jury. | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
176 PART 3 | Conne CTing Wi Th Cus Tome Rs Questions 1. In your opinion, how important is it to invest in cus-tomer loyalty for cars, a product most people buy only every couple of years? 2. Try to estimate the lifetime value of an Audi customer. 3. What measures should Audi take to build long-term loyalty relationships? Sources: Frank Janssen, Heiner Müller-Elsner, “Mutiger Steilpass”, Stern, March 7, 2005; Debasish Roy, “Audi hands over Q5 to Yuvraj Singh; with some low-scale marketing moves,” The Economic Times, April 17, 2011; Sergio Zyman, The End of Advertising as We Know it, (Hoboken, New Jersey: Wiley, 2003); “Facebook bleibt für uns in erster Linie eine Dialog-und Kommunikationsplattform,” Absatzwirtschaft, December 2, 2013; “Audi will noch größere SUVs bauen,” Automobil Produktion, October 17, 2014; Rebecca Eisert, “Carsharing: Audi testet in Stockholm,” Wirtschaftswoche, October 13, 2014; “Audi Case Study: Post-milennium success,” Market Line, December, 2011; Audi, www. audi. com; BMW, www. bmwgroup. com; Daimler, www. daimler. de; Statista, http://de. statista. com; Volkswagen, www. volkswagenag. com. these “Audi Cities,” consumers can experience the virtual world of Audi in 3D. London, Beijing, and Berlin were the starting places for the concept. Moscow and other locations will follow. An innovative idea for car-sharing has recently been presented by Audi's Chief of Sales and Marketing, Luca de Meo. Stockholm serves as a test market for a concept where up to five persons share a car for one or two years. Through an app, par-ticipants can make advance reservations and locate their car. Despite its global success, there are challenges remaining for Audi. The average selling price of an Audi is still lower than an average BMW or Mercedes-Benz. New entrants in the growing market for envi-ronmentally sustainable cars like Tesla as well as its German key competitors will test Audi's innovativeness even further. Examples of events and activities that are sponsored by independent dealerships, such as Harley-Davidson of Singapore, can range from short rides and major destina-tion rides, to local charity events. H. O. G. members are also invited to events, such as new model launches, and riders' appreciation nights. Dealers in each country sup-port H. O. G. members and foster positive bonding rela-tionships among members and other dealers. In Singapore, for instance, a community of friends rides Harley-Davidson motorcycles with a passion. “We ride 'em, and we have lots of fun! And we've been do-ing it since 1996 in Singapore. ” “To Ride and Have Fun” is a motto that all H. O. G. chapters around the world follow. Riders associate riding with other owners as a time of bonding that conveys the image of freedom and adventure. Membership in H. O. G. has increased. Now not only men but women, children, and families are a part of H. O. G. 's many and varied group outings and activities. Harley-Davidson has developed a strong brand image and consumers appreciate it even more by experiencing it firsthand. The desire to be associated with the Harley-Davidson brand is strong because it is linked to an aspi-rational lifestyle. There are more than 2,000 H. O. G. members in Malaysia alone, with around 500 active riders. The Southeast Asia Harley Owners Group (SEA HOG) orga-nizes rallies and rides as well as charity events. In late 2013, a two-day event followed by a five-day riding tour attracted 800 owners to celebrate the 110th anniversary of the brand. Marketing Excellence >> Harley-Davidson Harley-Davidson, a U. S. brand synonymous with beauti-ful motorbikes, inspires many to own its customized bike with iconic engine. Today the brand is sought after not only in the United States but globally too. What explains its wide global acceptance, and the strong sense of brand loyalty among Harley-Davidson motorbike owners? Harley-Davidson dealers, ranging from the CEO to the sales staff, maintain personalized relationships with customers through face-to-face and social media con-tact. Knowing customers as individuals and conducting ongoing research to keep up with the changing expecta-tions and experiences helps Harley-Davidson to define its customers' needs better. Current customers have told Harley-Davidson's man-agement to keep the identity, look, and sound of the motorcycles because they are unique. Globally, custom-ers accept the U. S. brand image as it stands. When customers' views are heard and accepted by manage-ment, customers develop greater brand loyalty, creating an extraordinary customer experience that is unique and valuable. Buying a Harley allows owners to express their individualism and freedom, connect with friends, and share a sense of comradeship through the activities of H. O. G., the company-sponsored Harley Owners Group and riding club. Owners of new Harley-Davidson motorbikes enjoy free H. O. G. membership in the first year. If renewed, mem-bers can enjoy various discounts and benefits. | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
CRe ATing Long-Te Rm Loy ALTy Re LATionshi Ps | chapter 5 177 Some H. O. G. members around the world ride in ral-lies every Sunday, rain or shine, displaying a strong sense of loyalty to the Harley-Davidson brand. In Hong Kong, H. O. G. members include professionals, like doctors, law-yers, accountants, pilots, engineers, movie stars, and business executives. Their participation shows the strong brand loyalty among Harley-Davidson owners and the strong desire to be engaged in H. O. G. members' activities. Proactive in people development, Harley-Davidson shares company values, philosophy, and brand experi-ence with its staff and provides effective communication to its independent dealers. Professional training by members of the Harley-Davidson University in the U. S. encour-ages consistent service at every dealership. Thus, Harley-Davidson's employees around the world can be confident about providing the genuine Harley-Davidson experience. Satisfied employees deliver outstanding services that gen-erates sustainable customer and brand loyalty, positive word of mouth, and ultimately higher company sales. To remain competitive, Milwaukee-based Harley-Davidson has started to enlarge its customer base and successfully connect with new, younger riders by way of social media applications, such as Facebook and Twitter. Engaging relationships have been established with young adults who form a large part of its global followership. Important feedback that Harley-Davidson's strong brand name remains appealing to the younger audience is encouraging. Harley-Davidson also makes in-person connec-tions with potential riders at music festivals by using dynamometers to create an interactive experience called Jump Start, which allows novice or non-riders an oppor-tunity to feel what it's like to ride a Harley-Davidson. In 2008, it became the leading manufacturer of motorcycles to sell to customers younger than 34 years without changing the products too drastically or lowering its prices. Harley-Davidson merely modified some design elements for its Dark Custom series of motorcycles, which consists largely of existing Harley-Davidson motor-cycles but with flat black paint, much less chrome, and toned-down styling. It portrayed its heritage message of freedom, uniqueness, individual expression, and shared experience as recognized by older customers. Questions 1. What has Harley-Davidson done with its H. O. G. pro-gram to create an extraordinary customer experience that is unique and valuable to its members? Has the motorcycle manufacturer been successful? 2. To enlarge its customer base, what would you rec-ommend Harley-Davidson do to cultivate long-term relationships with a younger audience, aged between 18-34? Sources: Jill Z. Mc Bride, “DMA2010-How Harley-Davidson Builds Champion Customers One Rider at a Time,” www. colloquy. com; Shaun Smith, “Customer Experience Management Plus: Harley-Davidson,” Customer Think, March 4, 2008; Harley-Davidson Hong Kong; Harley-Davidson Kuala Lumpur; Harley-Davidson Singapore; H. O. G. Singapore, www. hogsingapore. com/events. php; Eric Decker, “Harley reaches out to the next generation,” Biz Times, July 23, 2010. | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
178 In This Chapter, We Will Address the Following Questions 1. How do consumer characteristics influence buying behavior? (p. 179) 2. What major psychological processes influence consumer responses to the marketing program? (p. 187) 3. How do consumers make purchasing decisions? (p. 194) 4. In what ways do consumers stray from a deliberative, rational decision process? (p. 202)Based on detailed customer insights, Domino's improved its products and how they were marketed. Source: Domino's Pizza, LLC My Marketing Lab™ Improve Y our Grade! Over 10 million students improved their results using the Pearson My Labs. Visit mymktlab. com for simulations, tutorials, and end-of-chapter problems. | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
179 Adopting a holistic marketing orientation requires fully understanding customers—gaining a 360-degree view of both their daily lives and the changes that occur during their lifetimes so the right products are always marketed to the right customers in the right way. This chapter explores individual consumers' buying dynamics; the next chapter the buying dy-namics of business buyers. Marketers must have a thorough understanding of how consumers think, feel, and act and offer clear value to each and every target consumer. In an award-winning marketing campaign, Domino's decided how to deal with negative consumer attitudes about its pizza. 1Analyzing Consumer Markets6 Known more for the speed of its delivery than for the taste of its pizza, Domino's decided to ad-dress negative perceptions head on. A major communication program themed “Oh Yes We Did” featured documentary-style TV ads that opened with Domino's employees at corporate headquarters reviewing written and videotaped focus group feedback from customers. The feedback contains bit-ing comments, such as “Domino's pizza crust to me is like cardboard” and “The sauce tastes like ketchup. ” Company president Patrick Doyle is shown stating that these results are unacceptable, and the ads then show Domino's chefs and executives in their test kitchens proclaiming that their pizza is new and improved with a bolder, richer sauce; a more robust cheese combination; and an herb-and-garlic-flavored crust. Many critics were stunned by the company's admission that its number-two-ranked pizza had, in effect, been inferior for years. Oth-ers countered by noting that the new product formulation and unconventional ads were addressing a widely held, difficult-to-change negative belief that was dragging the brand down and required decisive action. Doyle summed up consumer reaction: “Most really like it, some don't. And that's OK. ” Subsequent events proved Doyle right. Backed by additional ads and social media campaigns—and the reformulated pizza—Domino's found itself improving its image and gaining share in the following years. From the end of 2009, when Domino's announced its plans, until the end of 2011, the stock gained 233 percent, compared with 37 percent for its key rival, Papa John's. In recent years, sales have been further spurred by marketing innovations such as a mobile-optimized Web site for online ordering, new audible formats for the chain's popular Pizza Tracker, smart-phone and table apps for ordering, and the Pizza Hero game for the i Pad. What Influences Consumer Behavior? Consumer behavior is the study of how individuals, groups, and organizations select, buy, use, and dispose of goods, services, ideas, or experiences to satisfy their needs and wants. 2 Marketers must fully understand both the theory and the reality of consumer behavior. Table 6. 1 provides a snapshot profile of U. S. consumers. A consumer's buying behavior is influenced by cultural, social, and personal factors. Of these, cultural factors exert the broadest and deepest influence. Cultural Fa Ctors Culture, subculture, and social class are particularly important influences on consumer buying behavior. Culture is the fundamental determinant of a person's wants and behavior. Through family and other key institutions, a child growing up in the United States is exposed to values such as achievement and success, activity, efficiency | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
180 PART 3 | Conne CTing Wi Th Cus Tome Rs Table 6. 1 U. S. Consumer Almanac Expenditures Average U. S. outlays for goods and services in 2013 $ Housing $17,148 Transportation $9,004 Food $6,602 Personal insurance and pensions $5,528 Health care $3,631 Entertainment $2,482 Apparel and services $1,604 Cash contributions $1,834 All other $3,267 Total average annual expenditures $51,100 Time use on an average workday for employed persons ages 25-54 with children in 2013 Working and related activities 8. 7 hours Sleeping 7. 7 hours Leisure and sports 2. 5 hours Caring for others 1. 3 hours Eating and drinking 1. 0 hours Household activities 1. 1 hours Other 1. 7 hours Average time spent per person per day—Q4 2013 Hours Watching TV in the home 5. 04 Watching time-shifted TV 0. 32 Video games 0. 12 DVD playback 0. 09 Sources: Bureau of Labor Statistics, Consumer Expenditure Survey, www. bls. gov, September 9, 2014; Bureau of Labor Statistics, American Time Use Survey, www. bls. gov, June 18, 2014; AC Nielsen, “An Era of Growth: The Cross-Platform Report: Q4 2013,” www. nielsen. com, March 5, 2014. | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
An Alyzing Consume R m AR ke Ts | chapter 6 181 and practicality, progress, material comfort, individualism, freedom, external comfort, humanitarianism, and youthfulness. 3 A child growing up in another country might have a different view of self, relationship to others, and rituals. Marketers must closely attend to cultural values in every country to understand how to best market their exist-ing products and find opportunities for new products. Each culture consists of smaller subcultures that provide more specific identification and socialization for their members. Subcultures include nationalities, religions, racial groups, and geographic regions. When subcultures grow large and affluent enough, companies often design spe-cialized marketing programs to serve them. Virtually all human societies exhibit social stratification, most often in the form of social classes, relatively ho-mogeneous and enduring divisions in a society, hierarchically ordered and with members who share similar values, interests, and behavior. One classic depiction of social classes in the United States defined seven ascending levels: (1) lower lowers, (2) upper lowers, (3) working class, (4) middle class, (5) upper middles, (6) lower uppers, and (7) upper uppers. 4 Social class members show distinct product and brand preferences in many areas. so CIal Fa Ctors In addition to cultural factors, social factors such as reference groups, family, and social roles and statuses affect our buying behavior. Refe Rence G Roups A person's reference groups are all the groups that have a direct (face-to-face) or indirect influence on their attitudes or behavior. Groups having a direct influence are called membership groups. Some of these are primary groups with whom the person interacts fairly continuously and informally, such as family, friends, neighbors, and coworkers. People also belong to secondary groups, such as religious, professional, and trade-union groups, which tend to be more formal and require less continuous interaction. Reference groups influence members in at least three ways. They expose an individual to new behaviors and lifestyles, they influence attitudes and self-concept, and they create pressures for conformity that may affect prod-uct and brand choices. People are also influenced by groups to which they do not belong. Aspirational groups are those a person hopes to join; dissociative groups are those whose values or behavior an individual rejects. Where reference group influence is strong, marketers must determine how to reach and influence the group's opinion leaders. An opinion leader is the person who offers informal advice or information about a specific prod-uct or product category, such as which of several brands is best or how a particular product may be used. 5 Opinion leaders are often highly confident, socially active, and frequent users of the category. Marketers try to reach them by identifying their demographic and psychographic characteristics, identifying the media they read, and directing messages to them. 6 cliques Communication researchers propose a social-structure view of interpersonal communication. 7 They see society as consisting of cliques, small groups whose members interact frequently. Clique members are similar, and their closeness facilitates effective communication but also insulates the clique from new ideas. The challenge is to create more openness so cliques exchange information with others in society. This openness is helped along by people who function as liaisons and connect two or more cliques without belonging to either and by bridges, people who belong to one clique and are linked to a person in another. Cultural values differ by countries and markets. Source: © Blend Images/Alamy | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
182 PART 3 | Conne CTing Wi Th Cus Tome Rs Best-selling author Malcolm Gladwell claims three factors work to ignite public interest in an idea. 8 According to the first, “The Law of the Few, ” three types of people help to spread an idea like an epidemic. First are Mavens, people knowledgeable about big and small things. Second are Connectors, people who know and communicate with a great number of other people. Third are Salesmen, who possess natural persuasive power. Any idea that catches the interest of Mavens, Connectors, and Salesmen is likely to be broadcast far and wide. The second factor is “Stickiness. ” An idea must be expressed so that it motivates people to act. Otherwise, “The Law of the Few” will not lead to a self-sustaining epidemic. Finally, the third factor, “The Power of Context, ” controls whether those spreading an idea are able to organize groups and communities around it. Not everyone agrees with Gladwell's ideas. 9 One team of viral marketing experts cautions that although in-fluencers or “alphas” start trends, they are often too introspective and socially alienated to spread them. They advise marketers to cultivate “bees, ” hyperdevoted customers who are not satisfied just knowing about the next trend but live to spread the word. 10 More firms are in fact finding ways to actively engage their passionate brand evangelists. LEGO's Ambassador Program targets its most enthusiastic followers for brainstorming and feedback. 11 Some firms are exploring ways to identify the most influential and potentially lucrative customers online. 12 Sc Oring c On Su Mer S On Line To better profile and market to customers, firms are ex-ploring different ways to score consumers online. E-scores go beyond personal credit reports to estimate a consumer's buy-ing power. They take into account factors such as occupation, salary, and home value as well as the amount and nature of luxury and non-luxury purchases. Independent suppliers like EBureau amass the personal information and combine it with a company's customer database to score a customer from 0 (unprofitable) to 99 (likely to return an investment). Another area of online scoring is influence measurement. A pioneer in the field, Klout measures the clout a person has online with its Klout Scores. Klout Scores range from 0 to 100 and are based on analysis of 400 different factors—and 12 billion pieces of data a day—like how influential your followers are and how many people retweet or respond to your messages. President Obama scored a near-perfect 99; singer Justin Bieber scored an impressive 92. Companies like Chevrolet pay Klout to identify and contact influencers for auto purchases. Those people targeted by Chevrolet are given special perks, like a three-day test drive of a Volt, in hopes that they will talk up the car on social media. Of course, much word-of-mouth is offline person-to-person communication—face to face or over the phone. One of the most valuable sources of information is almost always “people I know and trust. ”13 Some word-of-mouth tactics walk a fine line between acceptable and unethical. One controversial tactic, sometimes called shill marketing or stealth marketing, pays people to anonymously promote a product or service in public places without disclosing their financial relationship to the sponsoring firm. To launch its T681 mobile camera phone, Sony Ericsson hired actors dressed as tourists to approach people at tourist locations and ask to have their photo taken. Handing over the mobile phone created an opportunity to discuss its merits, but many found the deception distasteful. 14 Shill marketing is also a problem online, where the legitimacy of a customer or so-called expert reviewer may be hard to verify. family The family is the most important consumer buying organization in society, and family members constitute the most influential primary reference group. 15 There are two families in the buyer's life. The family of orientation consists of parents and siblings. From parents a person acquires an orientation toward religion, politics, and economics and a sense of personal ambition, self-worth, and love. 16 Even if the buyer no longer interacts very much with his or her parents, parental influence on behavior can be significant. Almost 40 percent of families have auto insurance with the same company as the husband's parents. A more direct influence on everyday buying behavior is the family of procreation —namely, the person's spouse and children. In the United States, in a traditional husband-wife relationship, engagement in purchases has varied widely by product category. The wife has usually acted as the family's main purchasing agent, especially for food, sundries, and staple clothing items. Now traditional purchasing roles are changing, and marketers would be wise to see both men and women as possible targets. For expensive products and services such as cars, vacations, or housing, the vast majority of husbands and wives engage in joint decision making. 17 Men and women may respond differently to marketing messages, however. Research has shown that women value connections and relationships with family and friends and place a higher priority on people than on companies. Men, on the other hand, relate more to competition and place a high pri-ority on action. 18 Marketers have taken direct aim at women with new products such as Quaker's Nutrition for Women cereals and Crest Rejuvenating Effects toothpaste. | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
An Alyzing Consume R m AR ke Ts | chapter 6 183 Another shift in buying patterns is an increase in the amount of dollars spent by and the direct and indirect influence wielded by children and teens. Direct influence describes children's hints, requests, and demands— “I want to go to Mc Donald's. ” Indirect influence means parents know the brands, product choices, and preferences of their children without hints or outright requests—“I think Jake and Emma would want to go to Panera. ” Research has shown that more than two-thirds of 13-to 21-year-olds make or influence family purchase de-cisions on audio/video equipment, software, and vacation destinations. 19 In total, these teens and young adults spend more than $120 billion a year. They report that to make sure they buy the right products, they watch what their friends say and do as much as what they see or hear in an ad or are told by a salesperson in a store. Television can be especially powerful in reaching children, and marketers are using it to target them at younger ages than ever before with product tie-ins for just about everything— Disney Princess character pajamas, retro G. I. Joe toys and action figures, Dora the Explorer backpacks, and Toy Story playsets. By the time children are about 2 years old, they can often recognize characters, logos, and specific brands. They can distinguish between advertising and programming by about ages 6 or 7. A year or so later, they can understand the concept of persuasive intent on the part of advertisers. By 9 or 10, they can perceive the discrepancies between message and product. 20 Roles and s Ta Tus We each participate in many groups—family, clubs, organizations—and these are often an important source of information and help to define norms for behavior. We can define a person's position in each group in terms of role and status. A role consists of the activities a person is expected to perform. Each role in turn connotes a status. A senior vice president of marketing may have more status than a sales manager, and a sales manager may have more status than an office clerk. People choose products that reflect and communicate their role and their actual or desired status in society. Marketers must be aware of the status-symbol potential of products and brands. Personal Fa Ctors Personal characteristics that influence a buyer's decision include age and stage in the life cycle, occupation and economic circumstances, personality and self-concept, and lifestyle and values. Because many of these have a di-rect impact on consumer behavior, it is important for marketers to follow them closely. See how well you do with “Marketing Memo: The Average U. S. Consumer Quiz. ” a Ge and s Ta Ge in The life cycle Our taste in food, clothes, furniture, and recreation is often related to our age. Consumption is also shaped by the family life cycle and the number, age, and gender of people in the household at any point in time. U. S. households are increasingly fragmented—the traditional family of four with a husband, wife, and two kids makes up a much smaller percentage of total households than it once did. The 2010 census revealed that the average U. S. household size was 2. 6 persons. 21 In addition, psychological life-cycle stages may matter. Adults experience certain passages or transformations as they go through life. 22 Their behavior during these intervals, such as when becoming a parent, is not necessarily fixed but changes with the times. Marketers should also consider critical life events or transitions —marriage, childbirth, illness, relocation, di-vorce, first job, career change, retirement, death of a spouse—as giving rise to new needs. These should alert service providers—banks, lawyers, and marriage, employment, and bereavement counselors—to ways they can help. Many of Disney's successful products for kids involve tie-ins with their popular TV or movie franchises. Source: © Directphoto Collection / Alamy | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
184 PART 3 | Conne CTing Wi Th Cus Tome Rs Not surprisingly, the baby industry attracts many marketers given the enormous amount parents spend—it's estimated to be a $36 billion market annually—and its life-changing nature. 23 The Ba By Marke T Although they may not yet have reached their full earning potential, expectant and new parents seldom hold back when spending on their loved ones, making the baby industry more recession-proof than most. Spending tends to peak between the second trimester of pregnancy and the 12th week after birth. First-time mothers-to-be are especially attractive targets given the fact they will be unable to use many hand-me-downs and will need to buy the full range of new furniture, strollers, toys, and baby supplies. Recognizing the importance of reaching expectant parents early to win their trust—industry pundits call it a “first in, first win” opportunity—marketers use a variety of media including direct mail, inserts, space ads, e-mail marketing, and Web sites. Product samples are especially popular; kits are often given at childbirth education classes and other places. Many hospitals have banned the traditional bedside gift bag, though, concerned with privacy and potentially adverse effects on a vulnerable audience (for example, distributing baby for-mula may discourage new mothers from breast-feeding). Avenues of access still exist. Partnering with a company that sells baby bedside photos, Disney Baby hands out playful Disney Cuddly Bodysuits and solicits sign-ups for e-mail alerts from Disney Baby. com. Not all expenditures go directly to the baby. Going through such a fundamental life change, expectant or new parents have a whole new set of needs that has them thinking differently about life insurance, financial services, real estate, home improvement, and automobiles. Listed below is a series of statements used in attitude surveys of U. S. consumers. For each statement, estimate what percent of U. S. men and women agreed with it in 2012 and write your answer, a number between 0 percent and 100 percent, in the columns to the right. Then check your results against the correct answers in the footnote. *The Average U. S. Consumer Quiz marketing memo1. M = 81%, W = 81%; 2. M = 61%, W = 49%; 3. M = 67%, W = 63%; 4. M = 64%, W = 58%; 5. M = 61%, W = 60%; 6. M = 42%, W = 30%; 7. M = 45%, W = 51%; 8. M = 47%, W = 34%; 9. M = 66%, W = 52%; 10. M = 91%, W = 93%Percent of Consumers Agreeing Statements % Men % Women 1. Most companies today are becoming too inhuman and impersonal when it comes to connecting with their customers_____ _____ 2. Even if others might find it offensive, it is always OK to speak what is on your mind _____ _____ 3. I appreciate the influence that other cultures are having on the American way of life _____ _____ 4. One of the reasons this country is losing its leadership position in the world is because parents don't push their kids hard enough to succeed_____ _____ 5. The food and beverage industry should take more responsibility for helping solve the obesity problem in the U. S. _____ _____ 6. I believe I will become rich in my lifetime _____ _____ 7. I could not get by without my cell phone/smart phone (among those who have a cell phone) _____ _____ 8. I'd really like to start my own business _____ _____ 9. I feel that I have to take whatever I can get in this world because no one is going to give me anything _____ _____ 10. Protecting my personal information and privacy is more of a concern now than it was a few years ago _____ _____ Note: Results are from a nationally representative sample of more than 4,000 respondents surveyed in 2012. Source: The Futures Company Yankelovich MONITOR (with permission). Copyright 2012, Yankelovich, Inc. *Answers | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
An Alyzing Consume R m AR ke Ts | chapter 6 185 occupa Tion and economic ci Rcums Tances Occupation also influences consumption patterns. Marketers try to identify the occupational groups that have above-average interest in their products and services and even tailor products for certain occupational groups: Computer software companies, for example, design different products for brand managers, engineers, lawyers, and physicians. As the recent prolonged recession clearly indicated, both product and brand choice are greatly affected by economic circumstances like spendable income (level, stability, and pattern over time), savings and assets (including the percent-age that is liquid), debts, borrowing power, and attitudes toward spending and saving. Although luxury-goods makers such as Gucci, Prada, and Burberry may be vulnerable to an economic downturn, some luxury brands did surprisingly well in the latest recession. 24 If economic indicators point to a recession, market-ers can take steps to redesign, reposition, and reprice their products or introduce or increase the emphasis on discount brands so they can continue to offer value to target customers. pe Rsonali Ty and self-concep T By personality, we mean a set of distinguishing human psychological traits that lead to relatively consistent and enduring responses to environmental stimuli including buying behavior. We often describe personality in terms of such traits as self-confidence, dominance, autonomy, deference, sociability, defensiveness, and adaptability. 25 Brands also have personalities, and consumers are likely to choose brands whose personalities match their own. We define brand personality as the spe-cific mix of human traits that we can attribute to a particular brand. Stanford's Jennifer Aaker researched brand personalities and identified the following traits:26 1. Sincerity (down to earth, honest, wholesome, and cheerful) 2. Excitement (daring, spirited, imaginative, and up to date) 3. Competence (reliable, intelligent, and successful) 4. Sophistication (upper-class and charming) 5. Ruggedness (outdoorsy and tough) Aaker analyzed some well-known brands and found that a number tended to be strong on one particular trait: Levi's on “ruggedness”; MTV on “excitement”; CNN on “competence”; and Campbell's on “sincerity. ” These brands will, in theory, attract users high on the same traits. A brand personality may have several attributes: Levi's suggests a personality that is also youthful, rebellious, authentic, and American. A cross-cultural study exploring the generalizability of Aaker's scale outside the United States found three of the five factors applied in Japan and Spain, but a “peacefulness” dimension replaced “ruggedness” in both countries, and a “passion” dimension emerged in Spain instead of “competence. ”27 Research on brand personality in Korea revealed two culture-specific factors—“passive likeableness” and “ascendancy”—reflecting the importance of Confucian values in Korea's social and economic systems. 28 Consumers often choose and use brands with a brand personality consistent with their actual self-concept (how we view ourselves), though the match may instead be based on the consumer's ideal self-concept (how we would like to view ourselves) or even on others' self-concept (how we think others see us). 29 These effects may also be more pronounced for publicly consumed products than for privately consumed goods. 30 On the other hand, consumers who are high “self-monitors”—that is, sensitive to the way others see them—are more likely to choose brands whose personalities fit the consumption situation. 31 Finally, multiple aspects of self (serious professional, caring family member, active fun-lover) may often be evoked differently in different situations or around different types of people. Some marketers carefully orchestrate brand experiences to express brand personalities. Here's how San Francisco's Joie de Vivre does this. 32 JOie de Vi Vre Joie de Vivre Hotels operates a chain of boutique hotels and resorts in the San Francisco area as well as Arizona, Illinois, and Hawaii. Each property's unique décor, quirky amenities, and thematic style are loosely based on popular magazines. For example, The Hotel del Sol—a converted motel bearing a yellow exterior and surrounded by palm trees wrapped in festive lights—is described as “kind of Martha Stewart Living meets Islands magazine. ” The The baby market, targeting expectant and new parents, is highly lucrative for marketers. Source: Paul Bradbury/Getty Images | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
186 PART 3 | Conne CTing Wi Th Cus Tome Rs Phoenix, represented by Rolling Stone, is, like the magazine, described as “adventurous, hip, irreverent, funky, and young at heart. ” Each one of Joie de Vivre's more than 30 hotels is an original concept designed to reflect its location and engage the five senses. The boutique concept enables the hotels to offer personal touches, such as vitamins in place of chocolates on pillows. lifes Tyle and Values People from the same subculture, social class, and occupation may adopt quite different lifestyles. A lifestyle is a person's pattern of living in the world as expressed in activities, interests, and opinions. It portrays the “whole person” interacting with his or her environment. Marketers search for relationships between their products and lifestyle groups. A computer manufacturer might find that most computer buyers are achievement-oriented and then aim the brand more clearly at the achiever lifestyle. Lifestyles are shaped partly by whether consumers are money constrained or time constrained. Companies aim-ing to serve the money-constrained will create lower-cost products and services. By appealing to thrifty consum-ers, Walmart has become the largest company in the world. Its “everyday low prices” have wrung tens of billions of dollars out of the retail supply chain, passing the larger part of savings along to shoppers in the form of rock-bottom bargain prices. Consumers who experience time famine are prone to multitasking, doing two or more things at the same time. They will also pay others to perform tasks because time is more important to them than money. Companies aiming to serve them will create products and services that offer multiple time-saving benefits. For example, multitasking blemish balm (BB) skin creams offer an all-in-one approach to skin care—incorporating moisturizer, anti-aging ingredients, sunscreen, and maybe even whitening. 33 In some categories, notably food processing, companies targeting time-constrained consumers need to be aware that these very same people want to believe they're not operating within time constraints. Marketers call those who seek both convenience and some involvement in the cooking process the “convenience involvement seg-ment, ” as Hamburger Helper discovered. 34 ha MBurger he LPer Launched in 1971 in response to tough economic times, the inexpensive pasta-and-powdered-mix Hamburger Helper was designed to quickly and inexpensively stretch a pound of meat into a family meal. With an estimated 44 percent of evening meals prepared in under 30 minutes and given strong competi-tion from fast-food drive-through windows, restaurant deliveries, and precooked grocery store dishes, it might seem that Hamburger Helper's days of prosperity are numbered. Market researchers found, however, that some consumers don't want the fastest microwaveable solution possible—they also want to feel good about how they prepare a meal. In fact, on average, they prefer to use at least one pot or pan and 15 minutes of time. To remain attractive to this segment, market-ers of Hamburger Helper are always introducing new flavors and varieties such as Tuna Helper, Asian Chicken Helper, and Whole Grain Helper to tap into evolving consumer taste trends. Not surprisingly, the latest economic downturn saw brand sales steadily rise. Each of Joie de Vivre's hotel properties has a personality loosely based on a popular magazine, as with the Rolling Stone-inspired Phoenix hotel. Source: Image provided by Commune Hotels + Resorts. Photo by Kelly Ishikawa. | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
An Alyzing Consume R m AR ke Ts | chapter 6 187 Consumer decisions are also influenced by core values, the belief systems that underlie attitudes and behaviors. Core values go much deeper than behavior or attitude and at a basic level guide people's choices and desires over the long term. Marketers who target consumers on the basis of their values believe that with appeals to people's in-ner selves, it is possible to influence their outer selves—their purchase behavior. Key Psychological Processes The starting point for understanding consumer behavior is the stimulus-response model shown in Figure 6. 1. Marketing and environmental stimuli enter the consumer's consciousness, and a set of psychological processes combine with certain consumer characteristics to result in decision processes and purchase decisions. The mar-keter's task is to understand what happens in the consumer's consciousness between the arrival of the outside marketing stimuli and the ultimate purchase decisions. Four key psychological processes—motivation, percep-tion, learning, and memory—fundamentally influence consumer responses. Mot Ivat Ion We all have many needs at any given time. Some needs are biogenic ; they arise from physiological states of tension such as hunger, thirst, or discomfort. Other needs are psychogenic ; they arise from psychological states of tension such as the need for recognition, esteem, or belonging. A need becomes a motive when it is aroused to a sufficient level of intensity to drive us to act. Motivation has both direction—we select one goal over another—and inten-sity—we pursue the goal with more or less vigor. Three of the best-known theories of human motivation—those of Sigmund Freud, Abraham Maslow, and Frederick Herzberg—carry quite different implications for consumer analysis and marketing strategy. f Reud's Theo Ry Sigmund Freud assumed the psychological forces shaping people's behavior are largely unconscious and that a person cannot fully understand his or her own motivations. Someone who examines specific brands will react not only to their stated capabilities but also to other, less conscious cues such as shape, size, weight, material, color, and brand name. A technique called laddering lets us trace a person's motivations from the stated instrumental ones to the more terminal ones. Then the marketer can decide at what level to develop the message and appeal. 35 Motivation researchers often collect in-depth interviews with a few dozen consumers to uncover deeper mo-tives triggered by a product. They use various projective techniques such as word association, sentence completion, picture interpretation, and role playing, many pioneered by Ernest Dichter, a Viennese psychologist who settled in the United States. 36 Dichter's research led him to believe that for women, pulling a cake out of the oven was like “giving birth. ” Because having women only add water to a cake mix could seem to marginalize their role, Dichter's research sug-gested having them also add an egg, a symbol of fertility, a practice used to this day. 37 Another motivation researcher, cultural anthropologist Clotaire Rapaille, works on breaking the “code” behind product behavior—the unconscious meaning people give to a particular market offering. Rapaille worked with Boeing on its 787 “Dreamliner” to identify features in the airliner's interior that would have universal appeal. Based Marketing Stimuli Products & services Price Distribution Communications Buying Decision Process Problem recognition Information search Evaluation of alternatives Purchase decision Post-purchase behavior Purchase Decision Product choice Brand choice Dealer choice Purchase amount Purchase timing Payment method Other Stimuli Economic Technological Political Cultural Consumer Psychology Motivation Perception Learning Memory Consumer Characteristics Cultural Social Personal| Fig. 6. 1 | Model of Consumer Behavior | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
188 PART 3 | Conne CTing Wi Th Cus Tome Rs in part on his research, the Dreamliner has a spacious foyer; larger, curved luggage bins closer to the ceiling; larger, electronically dimmed windows; and a ceiling discreetly lit by hidden LEDs. 38 maslow's Theo Ry Abraham Maslow sought to explain why people are driven by particular needs at particular times. 39 His answer is that human needs are arranged in a hierarchy from most to least pressing—from physiological needs to safety needs, social needs, esteem needs, and self-actualization needs (see Figure 6. 2). People will try to satisfy their most important need first and then move to the next. For example, a starving man (need 1) will not take an interest in the latest happenings in the art world (need 5), nor in the way he is viewed by others (need 3 or 4), nor even in whether he is breathing clean air (need 2), but when he has enough food and water, the next most important need will become salient. he Rzbe RG's Theo Ry Frederick Herzberg developed a two-factor theory that distinguishes dissatisfiers (factors that cause dissatisfaction) from satisfiers (factors that cause satisfaction). 40 The absence of dissatisfiers is not enough to motivate a purchase; satisfiers must be present. For example, a computer that does not come with a warranty is a dissatisfier. Y et the presence of a product warranty does not act as a satisfier or motivator of a purchase because it is not a source of intrinsic satisfaction. Ease of use is a satisfier. Physiological Needs (food, water, shelter)Safety Needs (security, protection)Social Needs (sense of belonging, love)Esteem Needs (self-esteem, recognition, status)Self-actualization Needs (self-development and realization) 12345| Fig. 6. 2 | Maslow's Hierarchy of Needs Source: A. H. Maslow, Motivation and Personality, 3rd ed. (Upper Saddle River, NJ: Prentice Hall, 1987). Printed and electronically reproduced by permission of Pearson Education, Inc., Upper Saddle River, NJ. In-depth motivational research on product meaning helped Boeing design its 787 Dreamliner. Source: © John Keates / Alamy | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
An Alyzing Consume R m AR ke Ts | chapter 6 189 Herzberg's theory has two implications. First, sellers should do their best to avoid dissatisfiers (for example, a poor training manual or a poor service policy). Although these things will not sell a product, they might easily unsell it. Second, the seller should identify the major satisfiers or motivators of purchase in the market and then supply them. Per Ce Pt Ion A motivated person is ready to act— how is influenced by his or her perception of the situation. In marketing, per-ceptions are more important than reality because they affect consumers' actual behavior. Perception is the pro-cess by which we select, organize, and interpret information inputs to create a meaningful picture of the world. 41 Consumers perceive many different kinds of information through their senses, as reviewed in “Marketing Memo: The Power of Sensory Marketing. ” Sensory marketing has been defined as “marketing that engages the consumers' senses and affects their perception, judgment and behavior. ” In other words, sensory marketing is an application of the understanding of sensation and perception to the field of marketing. All five senses may be engaged with sensory marketing: sight, sound, smell, taste, and feel. In a 2012 Journal of Consumer Psychology article, Aradhna Krishna offers an excellent review of the rapidly accumulating academic research on this topic. In doing so, she notes, “Given the gamut of explicit marketing appeals made to consumers every day, subconscious 'triggers' which may appeal to the basic senses may be a more efficient way to engage consumers. ” In other words, consumers' own inferences about a product's attributes may be more per-suasive, at least in some cases, than explicit claims from an advertiser. Krishna argues that sensory marketing's effects can be manifested in two main ways. One, sensory marketing can be used subconsciously to shape consumer perceptions of more abstract qualities of a product or service (say, different aspects of its brand personality such as its sophistication, ruggedness, warmth, quality, and modernity). Two, sensory marketing can also be used to affect the perceptions of specific product or service attributes such as its color, taste, smell, or shape. Marketers certainly appreciate the importance of sensory marketing. Many hotels, retailers, and other service establishments use signature scents to set a mood and distinguish themselves. Westin's White Tea scent was so popular it began to sell it for home use. Although NBC, Intel, and Yahoo! have trademarked their brand jingles (or yodels), Harley-Davidson was unsuccessful trademarking its distinctive engine roar. In packaging, companies try to find shapes that are pleasing to the touch, and in food advertising, visual and verbal depictions try to tantalize consumers' taste buds. Based on Krishna's review of academic research in psychology and marketing, we next highlight some key considerations for each of the five senses. Touch (haptics) Touch is the first sense to develop and the last sense we lose with age. People vary in their need for touch, and Peck and Childers have developed a scale to capture those differences. In one application, high need-for-touch (NFT) individuals were more confident and less frustrated about their product evaluations when they could actually touch a product than when they could only see it. For low NFT individuals, touching did not matter one way or another. Written prod-uct descriptions helped alleviate the NFT's level of frustration, though only for more concrete product attributes (such as the weight of a cell phone). Smell Scent-encoded information has been shown to be more durable and last longer in memory than information encoded with other sensory cues. People can recognize scents after very long lapses of time, and using scents as reminders can cue all kinds of autobiographical memories. Pleasant scents have also been show to enhance evaluations of products and stores. Consumers also take more time shopping and engage in more variety seeking in the presence of pleasant scents. Sound (audition) Marketing communications by their very nature are often auditory in nature. Even the sounds that make up a word can carry meanings. One study showed that Frosh-brand ice cream sounded creamier than Frish-brand ice cream. Language too can have its own associations. In bilingual cultures where English is the second language—such as Japan, Korea, Germany, and India—use of English in ads signals modernity, progress, sophistication, and a cosmopolitan identity. Ambient music in a store has also been shown to influence consumer mood, time spent in a location, perception of time spent in a location, and spending. Taste Humans can distinguish only five pure tastes: sweet, salty, sour, bitter, and umami. Umami comes from Japanese food researchers and stands for “delicious” or “savory” as it relates to the taste of pure protein or monosodium glutonate (MSG). Taste perceptions themselves depend on all the other senses—the way a food looks, feels, smells, and sounds to eat. Thus many factors have been shown to affect taste perceptions, including physical attributes, brand name, product The Power of Sensory Marketing marketing memo | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
190 PART 3 | Conne CTing Wi Th Cus Tome Rs information (ingredients, nutritional information), product packaging, and advertising. Foreign-sounding brand names can improve ratings of yogurt, and ingre-dients that sound unpleasant (balsamic vinegar or soy) can affect consumers taste perceptions if disclosed before product consumption. Vision Visual effects have been studied in detail in an advertising context. Many visual perception biases or illusions exist in day-to-day consumer behavior. For example, people judge tall thin containers to contain more volume than short fat ones, but after drinking from the containers, people actually feel they have consumed more from short fat containers than tall thin containers, over-adjusting their expectations. Even something as simple as the way a mug is depicted in an ad can affect product evaluations. A mug photographed with the handle on the right side was shown to elicit more mental stimulation and product purchase intent from right-handed people than if shown with the handle on the left side. Sources : Aradhna Krishna, Sensory Marketing: Research on the Sensuality of Products (New York: Routledge, 2010); Aradhna Krishna, “An Integrative Review of Sensory Marketing: Engaging the Senses to Affect Perception, Judgment and Behavior,” Journal of Consumer Psychology 22 (July 2012), pp. 332-51; Joann Peck and Terry L. Childers, “To Have and to Hold: The Influence of Haptic Information on Product Judgments,” Journal of Marketing 67 (April 2003), pp. 35-48; Joann Peck and Terry L. Childers, “Individual Differences in Haptic Information Processing: On the Development, Validation, and Use of the 'Need for Touch' Scale,” Journal of Consumer Research 30 (December 2003), pp. 430-42; Joann Peck and Terry L. Childers, “Effects of Sensory Factors on Consumer Behaviors,” Frank Kardes, Curtis Haugtvedt, and Paul Herr, eds., Handbook of Consumer Psychology (Mahwah, NJ: Erlbaum, 2008), pp. 193-220; Aradhna Krishna, May Lwin, and Maureen Morrin, “Product Scent and Memory,” Journal of Consumer Research 37 (June 2010), pp. 57-67; Eric Yorkston and Geeta Menon, “A Sound Idea: Phonetic Effects of Brand Names on Consumer Judgments,” Journal of Consumer Research 31 (June 2004), pp. 43-45; Aradhna Krishna and Rohini Ahluwalia, “Language Choice in Advertising to Bilinguals: Asymmetric Effects for Multinationals versus Local Firms,” Journal of Consumer Research 35 (December 2008), pp. 692-705; Richard F. Yalch and Eric R. Spangenberg, “The Effects of Music in a Retail Setting on Real and Perceived Shopping Times,” Journal of Business Research 49 (August 2000), pp. 139-47; France Leclerc, Bernd H. Schmitt, and Laurette Dube, “Foreign Branding and Its Effect on Product Perceptions and Attitudes,” Journal of Marketing Research 31 (May 1994), pp. 263-70; Priya Raghubir and Aradhna Krishna, “Vital Dimensions: Antecedents and Consequences of Biases in Volume Perceptions,” Journal of Marketing Research 36 (August 1994), pp. 313-26; Ryan S. Elder and Aradhna Krishna, “The 'Visual Depiction Effect' in Advertising: Facilitating Embodied Mental Simulation through Product Orientation,” Journal of Consumer Research 38 (April 2012), pp. 988-1003. Perception depends not only on physical stimuli but also on the stimuli's relationship to the surrounding envi-ronment and on conditions within each of us. One person might perceive a fast-talking salesperson as aggressive and insincere, another as intelligent and helpful. Each will respond to the salesperson differently. People emerge with different perceptions of the same object because of three perceptual processes: selective at-tention, selective distortion, and selective retention. selec Ti Ve a TTen Tion Attention is the allocation of processing capacity to some stimulus. Voluntary attention is something purposeful; involuntary attention is grabbed by someone or something. It's estimated that the average person may be exposed to more than 1,500 ads or brand communications a day. Because we cannot possibly attend to all these, we screen most stimuli out—a process called selective attention. Selective attention means that marketers must work hard to attract consumers' notice. The real challenge is to explain which stimuli people will notice. Here are some findings: 1. People are more likely to notice stimuli that relate to a current need. A person who is motivated to buy a smart phone will notice smart phone ads and be less likely to notice non-phone-related ads. 2. People are more likely to notice stimuli they anticipate. Y ou are more likely to notice laptops than portable radios in a computer store because you don't expect the store to carry portable radios. 3. People are more likely to notice stimuli whose deviations are large in relationship to the normal size of the stimuli. Y ou are more likely to notice an ad offering $100 off the list price of a computer than one offering $5 off. Though we screen out much, we are influenced by unexpected stimuli, such as sudden offers in the mail, over the Internet, or from a salesperson. Marketers may attempt to promote their offers intrusively in order to bypass selec-tive attention filters. selec Ti Ve dis To RTion Even noticed stimuli don't always come across in the way the senders intended. Selective distortion is the tendency to interpret information in a way that fits our preconceptions. Consumers will often distort information to be consistent with prior brand and product beliefs and expectations. For a stark demonstration of the power of consumer brand beliefs, consider that in blind taste tests, one group of consumers samples a product without knowing which brand it is while another group knows. Invariably, the groups have different opinions, despite consuming exactly the same product. When consumers report different opinions of branded and unbranded versions of identical products, it must be the case that their brand and product beliefs, created by whatever means (past experiences, marketing activity for the brand, or the like), have somehow changed their product perceptions. We can find examples for virtually every | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
An Alyzing Consume R m AR ke Ts | chapter 6 191 type of product. When Coors changed its label from “Banquet Beer” to “Original Draft, ” consumers claimed the taste had changed even though the formulation had not. Selective distortion can work to the advantage of marketers with strong brands when consumers distort neutral or ambiguous brand information to make it more positive. In other words, coffee may seem to taste better, a car may seem to drive more smoothly, and the wait in a bank line may seem shorter, depending on the brand. selec Ti Ve Re Ten Tion Most of us don't remember much of the information to which we're exposed, but we do retain information that supports our attitudes and beliefs. Because of selective retention, we're likely to remember good points about a product we like and forget good points about competing products. Selective retention again works to the advantage of strong brands. It also explains why marketers need to use repetition—to make sure their message is not overlooked. subliminal pe Rcep Tion The selective perception mechanisms require consumers' active engagement and thought. Subliminal perception has long fascinated armchair marketers, who argue that marketers embed covert, subliminal messages in ads or packaging. Consumers are not consciously aware of them, yet they affect behavior. Although it's clear that mental processes include many subtle subconscious effects,42 no evidence supports the notion that marketers can systematically control consumers at that level, especially enough to change strongly held or even moderately important beliefs. 43 learn In G When we act, we learn. Learning induces changes in our behavior arising from experience. Most human behavior is learned, though much learning is incidental. Learning theorists believe learning is produced through the inter-play of drives, stimuli, cues, responses, and reinforcement. A drive is a strong internal stimulus impelling action. Cues are minor stimuli that determine when, where, and how a person responds. Suppose you buy an HP laptop computer. If your experience is rewarding, your response The size and shape of the glass and the color and smell of the liquid are all cues which may affect consumer perceptions and evaluations when drinking a glass of orange juice. Source: © valery121283/Fotolia | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
192 PART 3 | Conne CTing Wi Th Cus Tome Rs to the laptop and HP will be positively reinforced. Later, when you want to buy a printer, you may assume that be-cause it makes good laptops, HP also makes good printers. In other words, you generalize your response to similar stimuli. A countertendency to generalization is discrimination. Discrimination means we have learned to recog-nize differences in sets of similar stimuli and can adjust our responses accordingly. Learning theory teaches marketers that they can build demand for a product by associating it with strong drives, using motivating cues, and providing positive reinforcement. A new company can enter the market by ap-pealing to the same drives competitors use and providing similar cues because buyers are more likely to transfer loyalty to similar brands (generalization); or the company might design its brand to appeal to a different set of drives and offer strong cue inducements to switch (discrimination). Some researchers prefer more active, cognitive approaches when learning depends on the inferences or inter-pretations consumers make about outcomes (Was an unfavorable consumer experience due to a bad product, or did the consumer fail to follow instructions properly?). The hedonic bias occurs when people have a general ten-dency to attribute success to themselves and failure to external causes. Consumers are thus more likely to blame a product than themselves, putting pressure on marketers to carefully explicate product functions in well-designed packaging and labels, instructive ads and Web sites, and so on. e Mot Ions Consumer response is not all cognitive and rational; much may be emotional and invoke different kinds of feel-ings. A brand or product may make a consumer feel proud, excited, or confident. An ad may create feelings of amusement, disgust, or wonder. Brands like Hallmark, Mc Donald's, and Coca-Cola have made an emotional con-nection with loyal customers for years. Marketers are increasingly recognizing the power of emotional appeals—especially if these are rooted in some functional or rational aspects of the brand. Given it was released 10 years after Toy Story 2, Disney's Toy Story 3 used social media to tap into feelings of nostalgia in its marketing. 44 To help teen girls and young women feel more comfortable talking about feminine hygiene and feminine care products, Kimberly-Clark used four different social media networks in its “Break the Cycle” campaign for its new U by Kotex brand. With overwhelmingly positive feedback, the campaign helped Kotex move into the top spot in terms of share of word of mouth on feminine care for that target market. 45 An emotion-filled brand story has been shown to trigger's people desire to pass along things they hear about brands, through either word of mouth or on-line sharing. Firms are giving their communications a stronger human appeal to engage consumers in their brand stories. 46 Many different kinds of emotions can be linked to brands. A classic example is Unilever's Axe brand. 47 axe A pioneer in product development—it established the male body wash category—and in its edgy sex appeals, Unilever's Axe personal-care brand has become a favorite of young males all over the world. With scents employing different combina-tions of flowers, herbs, and spices, the Axe line includes deodorant body sprays, sticks, roll-ons, and shampoos. The brand was built on the promise of the “Axe Effect”—an over-the-top notion that using Axe products would get women to enthusiastically and sometimes even desperately pursue the user. For Axe, Unilever employs both traditional and nontraditional media with a heavy dose of sexual innuendo and humor. A recent social media-driven campaign gave a cheeky wink to environmentalism while advocating the practice of “showerpooling. ” As one ad proclaimed, “When you Showerpool, you can save water while enjoying the company of a like-minded acquaintance, or even an attrac-tive stranger. ” Facebook promotions, You Tube videos, and other social media messages all helped to spread the word. By cleverly serving as the “wing man” for confidence in the “mating game” —especially for 18-to 24-year-old males—the brand has become a key player in the multibillion-dollar male grooming market. Axe has concentrated grassroots marketing efforts on college campuses with brand ambassadors who hand out products, host parties, and generate buzz. A Twitter account dispenses advice and giveaways. Axe runs edgy promotional campaigns to connect with its young male target audience, like this Showerpooling event hosted by spokesperson and actress Nikki Reed. Source: ASSOCIATED PRESS | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
An Alyzing Consume R m AR ke Ts | chapter 6 193 Emotions can take all forms. Ray-Ban glasses and sunglasses' 75th anniversary campaign “Never Hide” showed a variety of stand-out hipsters and stylish people to suggest wearers will feel attractive and cool. Some brands have tapped into the hip-hop culture and music to market a brand in a modern multicultural way, as Apple did with its i Pod. 48 Me Mor Y Cognitive psychologists distinguish between short-term memory (STM) —a temporary and limited repository of information—and long-term memory (LTM) —a more permanent, essentially unlimited repository. All the information and experiences we encounter as we go through life can end up in our long-term memory. Most widely accepted views of long-term memory structure assume we form some kind of associative model. For example, the associative network memory model views LTM as a set of nodes and links. Nodes are stored in-formation connected by links that vary in strength. Any type of information can be stored in the memory network, including verbal, visual, abstract, and contextual. A spreading activation process from node to node determines how much we retrieve and what information we can actually recall in any given situation. When a node becomes activated because we're encoding external in-formation (when we read or hear a word or phrase) or retrieving internal information from LTM (when we think about some concept), other nodes are also activated if they're associated strongly enough with that node. In this model, we can think of consumer brand knowledge as a node in memory with a variety of linked asso-ciations. The strength and organization of these associations will be important determinants of the information we can recall about the brand. Brand associations consist of all brand-related thoughts, feelings, perceptions, images, experiences, beliefs, attitudes, and so on, that become linked to the brand node. In this context we can think of marketing as a way of making sure consumers have product and service ex-periences that create the right brand knowledge structures and maintain them in memory. Companies such as Procter & Gamble like to create mental maps of consumers that depict their knowledge of a particular brand in terms of the key associations likely to be triggered in a marketing setting and their relative strength, favorability, and uniqueness to consumers. Figure 6. 3 displays a very simple mental map highlighting some brand beliefs for a hypothetical consumer for State Farm insurance. memo Ry p Rocesses Memory is a very constructive process because we don't remember information and events completely and accurately. Often we remember bits and pieces and fill in the rest based on whatever else we know. Memory encoding describes how and where information gets into memory. The strength of the resulting association depends on how much we process the information at encoding (how much we think about it, for in-stance) and in what way. 49 In general, the more attention we pay to the meaning of information during encoding, the stronger the resulting associations in memory will be. Advertising research in a field setting suggests that high levels of repetition for an uninvolving, unpersuasive ad, for example, are unlikely to have as much sales impact as lower levels of repetition for an involving, persuasive ad. 50 Dependable Good reputation Reliable Conservative Safe Around a long time Convenient Reputable Fast settlement Personal service “Good Neighbors” Agents that are part of my neighborhood Red color Good home and auto insurance Top-of-the-line insurance Responsive| Fig. 6. 3 | Hypothetical State Farm Mental Map Source: Courtesy of State Farm Mutual Automobile Insurance Co. | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
194 PART 3 | Conne CTing Wi Th Cus Tome Rs Memory retrieval is the way information gets out of memory. Three facts are important about memory retrieval. 1. The presence of other product information in memory can produce interference effects and cause us to either overlook or confuse new data. One marketing challenge in a category crowded with many competitors—for example, airlines, financial services, and insurance companies—is that consumers may mix up brands. 2. The time between exposure to information and encoding has been shown generally to produce only gradual decay. Cognitive psychologists believe memory is extremely durable, so once information becomes stored in memory, its strength of association decays very slowly. 3. Information may be available in memory but not be accessible for recall without the proper retrieval cues or reminders. The effectiveness of retrieval cues is one reason marketing inside a supermarket or any retail store is so critical—the product packaging and use of in-store mini-billboard displays remind us of information al-ready conveyed outside the store and become prime determinants of consumer decision making. Accessibility of a brand in memory is important for another reason: People talk about a brand when it is top-of-mind. 51 The Buying Decision Process: The Five-Stage Model The basic psychological processes we've reviewed play an important role in consumers' actual buying decisions. Table 6. 2 provides a list of some key consumer behavior questions marketers should ask in terms of who, what, when, where, how, and why. Smart companies try to fully understand customers' buying decision process—all the experiences in learn-ing, choosing, using, and even disposing of a product. Marketing scholars have developed a “stage model” of the Table 6. 2 Understanding Consumer Behavior Who buys our product or service? Who makes the decision to buy the product or service? Who influences the decision to buy the product or service? How is the purchase decision made? Who assumes what role? What does the customer buy? What needs must be satisfied? What wants are fulfilled? Why do customers buy a particular brand? What benefits do they seek? Where do they go or look to buy the product or service? Online and/or offline? When do they buy? Any seasonality factors? Any time of day/week/month? How is our product or service perceived by customers? What are customers' attitudes toward our product or service? What social factors might influence the purchase decision? Do customers' lifestyles influence their decisions? How do personal, demographic, or economic factors influence the purchase decision? Source: Based in part on figure 1. 7 from George Belch and Michael Belch, Advertising and Promotion: An Integrated Marketing Communications Perspective, 8th ed. (Homewood, IL: Irwin, 2009). | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
An Alyzing Consume R m AR ke Ts | chapter 6 195 process (see Figure 6. 4). The consumer typically passes through five stages: problem recognition, information search, evaluation of alternatives, purchase decision, and postpurchase behavior. Clearly, the buying process starts long before the actual purchase and has consequences long afterward. 52 Some consumers passively shop and may decide to make a purchase from unsolicited information they encounter in the normal course of events. 53 Recognizing this fact, marketers must develop activities and programs that reach consumers at all decision stages. Consider how Procter & Gamble launched a new Cover Girl “Smokey Eye Look” makeup kit. 54 P&g c OV ergir L To create awareness at product launch, P&G sent makeup bloggers “Makeup Master” kits with packs of mascara, eyeliner, and eye shadow along with application instructions, blogging tips, product photo-graphs, and a Cover Girl-emblazoned director's chair before the product was available in stores. At stores, Cover Girl created attention and interest with live product demonstrations, co-branded print ads with Walmart, and cardboard trays displaying product features and the product kits themselves. After they bought, purchasers were encouraged via Facebook and other online campaigns to provide feedback and write reviews to influence others. The brand's Facebook page featured testimo-nies from celebrities Ellen De Generes and Sofia Vergara. Cover Girl is one of P&G's most digitally supported brands, recog-nizing the high level of consumer involvement and the need to stay up to date. P&G is also supporting Cover Girl via mobile marketing through targeted ads and a microsite with experts' tips and video on proper application. Consumers don't always pass through all five stages—they may skip or reverse some. When you buy your regu-lar brand of toothpaste, you go directly from the need to the purchase decision, skipping information search and evaluation. The model in Figure 6. 4 provides a good frame of reference, however, because it captures the full range of considerations that arise when a consumer faces a highly involving or new purchase. Later in the chapter, we will consider other ways consumers make decisions that are less calculated. Proble M re Co Gn It Ion The buying process starts when the buyer recognizes a problem or need triggered by internal or external stimuli. With an internal stimulus, one of the person's normal needs—hunger, thirst, sex—rises to a threshold level and becomes a drive. A need can also be aroused by an external stimulus. A person may admire a friend's new car or see a television ad for a Hawaiian vacation, which inspires thoughts about the possibility of making a purchase. Marketers need to identify the circumstances that trigger a particular need by gathering information from a number of consumers. They can then develop marketing strategies that spark consumer interest. Particularly for discretionary purchases such as luxury goods, vacation packages, and entertainment options, marketers may need to increase consumer motivation so a potential purchase gets serious consideration. Problem recognition Information search Evaluation of alternatives Purchase decision Postpurchase behavior | Fig. 6. 4 | Five-Stage Model of the Consumer Buying Process P&G engages consumers at every stage of the buying process for its Cover Girl brand. Source: © Vladyslav Starozhylov / Alamy | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
196 PART 3 | Conne CTing Wi Th Cus Tome Rs In For Mat Ion sear Ch Surprisingly, consumers often search for only limited information. Surveys have shown that for durables, half of all consumers look at only one store, and only 30 percent look at more than one brand of appliances. We can distinguish between two levels of engagement in the search. The milder search state is called heightened attention. At this level a person simply becomes more receptive to information about a product. At the next level, the person may enter an active information search: looking for reading material, phoning friends, going online, and visiting stores to learn about the product. Marketers must understand what type of information consumers seek—or are at least receptive to—at different times and places. 55 Unilever, in collaboration with Kroger, the largest U. S. retail grocery chain, has learned that meal planning goes through a three-step process: discussion of meals and what might go into them; choice of ex-actly what will go into a particular meal, and finally purchase. Mondays turn out to be critical days for planning for the week. Conversations at breakfast time tend to focus on health, but later in the day, at lunch, discussion centers more on how meals could possibly be repurposed for leftovers. 56 info Rma Tion sou Rces Major information sources to which consumers will turn fall into four groups: Personal. Family, friends, neighbors, acquaintances Commercial. Advertising, Web sites, e-mails, salespersons, dealers, packaging, displays Public. Mass media, social media, consumer-rating organizations Experiential. Handling, examining, using the product The relative amount of information and influence of these sources vary with the product category and the buyer's characteristics. Generally speaking, although consumers receive the greatest amount of information about a product from commercial—that is, marketer-dominated—sources, the most effective information often comes from personal or experiential sources or public sources that are independent authorities. 57 Each source performs a different function in influencing the buying decision. Commercial sources normally perform an information function, whereas personal sources perform a legitimizing or evaluation function. For example, physicians often learn of new drugs from commercial sources but turn to other doctors for evaluations. Many consumers alternate between going online and offline (in stores) to learn about products and brands. sea Rch dynamics By gathering information, the consumer learns about competing brands and their features. The first box in Figure 6. 5 shows the total set of brands available. The individual consumer will come to know a subset of these, the awareness set. Only some, the consideration set, will meet initial buying criteria. As the consumer gathers more information, just a few, the choice set, will remain strong contenders. The consumer makes a final choice from these. 58 Marketers need to identify the hierarchy of attributes that guide consumer decision making in order to under-stand different competitive forces and how these various sets get formed. This process of identifying the hierarchy is called market partitioning. Y ears ago, most car buyers first decided on the manufacturer and then on one of its car divisions ( brand-dominant hierarchy ). A buyer might favor General Motors cars and, within this set, Chevrolet. Today, many buyers decide first on the nation or nations from which they want to buy a car ( nation-dominant hier-archy ). Buyers may first decide they want to buy a German car, then Audi, and then the A4 model of Audi. The hierarchy of attributes also can reveal customer segments. Buyers who first decide on price are price dominant; those who first decide on the type of car (sports, passenger, hybrid) are type dominant; those who Apple Dell Hewlett-P ackard Toshiba Compaq NEC... Apple Dell Hewlett-P ackard Toshiba Compaq Apple Dell Toshiba Apple Dell?Total Set Awareness Set Consideration Set Decision Choice Set| Fig. 6. 5 | Successive Sets Involved in Consumer Decision Making | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
An Alyzing Consume R m AR ke Ts | chapter 6 197 choose the brand first are brand dominant. Type/price/brand-dominant consumers make up one segment; quality/service/type buyers make up another. Each may have distinct demographics, psychographics, and mediagraphics and different awareness, consideration, and choice sets. Figure 6. 5 makes it clear that a company must strategize to get its brand into the prospect's awareness, consider-ation, and choice sets. If a food store owner arranges yogurt first by brand (such as Dannon and Y oplait) and then by flavor within each brand, consumers will tend to select their flavors from the same brand. However, if all the strawberry yogurts are together, then all the vanilla, and so forth, consumers will probably choose the flavors they want first and then choose the brand name they want for that particular flavor. Search behavior can vary online, in part because of the manner in which product information is presented. For example, product alternatives may be presented in order of their predicted attractiveness for the consumer. Consumers may then choose not to search as extensively as they would otherwise. 59 The company must also identify the other brands in the consumer's choice set so that it can plan the appropriate competitive appeals. In addition, marketers should identify the consumer's information sources and evaluate their relative importance. Asking consumers how they first heard about the brand, what information came later, and the relative importance of the different sources will help the company prepare effective communications for the target market. evaluat Ion o F alternat Ives How does the consumer process competitive brand information and make a final value judgment? No single process is used by all consumers or by one consumer in all buying situations. There are several processes, and the most current models see the consumer forming judgments largely on a conscious and rational basis. Some basic concepts will help us understand consumer evaluation processes. First, the consumer is trying to satisfy a need. Second, the consumer is looking for certain benefits from the product solution. Third, the consumer sees each product as a bundle of attributes with varying abilities to deliver the benefits. The attributes of interest to buyers vary by product—for example: 1. Hotels —Location, cleanliness, atmosphere, price 2. Mouthwash —Color, effectiveness, germ-killing capacity, taste/flavor, price 3. Tires —Safety, tread life, ride quality, price Consumers will pay the most attention to attributes that deliver the sought-after benefits. We can often segment the market for a product according to attributes and benefits important to different consumer groups. beliefs and a TTi Tudes Through experience and learning, people acquire beliefs and attitudes. These in turn influence buying behavior. A belief is a descriptive thought that a person holds about something. Just as important are attitudes, a person's enduring favorable or unfavorable evaluations, emotional feelings, and action tendencies toward some object or idea. People have attitudes toward almost everything: religion, politics, clothes, music, or food. Attitudes put us into a frame of mind: liking or disliking an object, moving toward or away from it. They lead us to behave in a fairly consistent way toward similar objects. Because attitudes economize on energy and thought, they can be very difficult to change. As a general rule, a company is well advised to fit its product into existing at-titudes rather than try to change attitudes. If beliefs and attitudes become too negative, however, more active steps may be necessary. expec Tancy-Value model The consumer arrives at attitudes toward various brands through an attribute-evaluation procedure, developing a set of beliefs about where each brand stands on each attribute. 60 The expectancy-value model of attitude formation posits that consumers evaluate products and services by combining their brand beliefs—the positives and negatives—according to importance. Suppose Linda has narrowed her choice set to four laptops (A, B, C, and D). Assume she's interested in four attributes: memory capacity, graphics capability, size and weight, and price. Table 6. 3 shows her beliefs about how each brand rates on the four attributes. If one computer dominated the others on all the criteria, we could predict that Linda would choose it. But, as is often the case, her choice set consists of brands that vary in their appeal. If Linda wants the best memory capacity, she should buy C; if she wants the best graphics capability, she should buy A; and so on. If we knew the weights Linda attaches to the four attributes, we could more reliably predict her choice. Suppose she assigned 40 percent of the importance to the laptop's memory capacity, 30 percent to graphics capability, 20 percent to size and weight, and 10 percent to price. To find Linda's perceived value for each laptop according to | Keller Kevin Lane_ Kotler Philip - Marketing management-Pearson Education 2016 1.pdf |
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