Marketing Management Main

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Marketing is a system of business activities designed to plan, price, promote, and distributesomething of value; want-satisfying products services, and ideas for the benefit of target market(present and potential household consumers or industrial users to achieve the organizationalobjectives).

NEEDS OF CONSUMER

1.Basic needs food, shelter, and clothing

2. Indispensable needs education, medical care, electricity, appliance,

recreation, and leisure

3. Luxury cars, cell phone, jewelries, computers, cosmetics, travel, and beauty

products

Category of Marketing

A political party trying to market its candidate to the public

The director of an art museum providing new exhibits to generate greater attendance andfinancial support

A labor union marketing its ideas to members and to the company management

Professor trying to make their courses interesting for studentsProfit is a reward for entrepreneurship

CREATION OF UTILITIES

Utility defined as an attribute in an item that makes it capable of satisfying human needs

1. Form utility is the physical and chemical changes that makes the product

more valuable

2. Place utility is created when the product is made readily accessible to

potential consumers

3. Time utility is created when the product is available to consumers when they

want it

4. Possession utility is created when a costumer buys a product (ownership is

transferred to the buyer)

5. Image utility is more subjective, different to measure concept. It involves theemotional and psychological value that a person attaches to a product/brand because ofreputation or social standing of a person

MARKETING CONCEPT IS BASED ON THREE FUNDAMENTAL CONCEPT1. All company planning and operations should be costumer oriented2. The goal of the firm should be profitable sales volume and not just volume for thesake of the volume alone3. All marketing activities in a firm must be organizationally coordinated

DIFFERRENCE BETWEEN MARKETING AND SELLING

SELLING

1. emphasis is on the product

2. company first make the

product and then figure how to sell it

3. management is sales

volume oriented

4. planning is short-run in

terms of todays product and market

5. stresses needs of a seller

MARKETING1. emphasis on the consumer wants2. company first determinescostumer needs and wants3. materials is profit oriented

4. planning is long-run

oriented in terms of new product5. stresses wants of a buyer

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MARKETING ENVIRONMENT FORCES

A. Internal forces inherit in the organization and generally controllable by the organization

B. External forces which are largely uncontrollable by the organization, thus a strong

challenge to the marketing executives

Kinds Marketing Environment

I. Macro-environment national type of a business which includes all factors that can

influence an organization but that are out of their control

II. Micro-environment small type of a business which influence the organization

directly that includes suppliers that are directly and indirectly

III. External Macro-environment are forces that have considerable effect on any

organizations marketing system

a. Demography important to control the types and kinds of product to be produced

and its quantity base on sexes and ages capable for their needs

b. Economic conditions is the current stage of business cycle, inflation rate, and

interest rates Inflation rate is the increase of all prices in general level of goods and servicesbut decline in purchasing power

Interest rate when interest rates is too high, consumers may tend to hold-backto a long-term purchases like housing or car loans

c. Business cycle or economic cycle this cycle involves shift over times between

periods of relatively rapid growth output(recovery and prosperity) and periods of(stagnation ordecline) and (contraction orrecession)

Recovery stage where a businessman found ways to keep business moving

Prosperity stage of success of business

Recession stage of reductions of business expenses or declining of businessflow

Stagnation stage where business is not moving or no progress

d. Competition rivalry of two or more businesses striving for the same costumer or

marketAspects of competition

o Types of competition

o Market structure

Types of Market Structure

a. Pure competition very many competitors, small size of competitions,

homogenous products, no control of price, and easy to enter the industryb. Oligopoly -

c. Monopolistic many competitors, some depends on degree of

differentiation, and easy to enter the industry

Types of competitiono directly similar products

o substitute products

o limited products

IV. Social and Cultural forces

Emphasis on quality of life when lifestyles changes, ourmarketing also changes

Role of women women had now grown in political andeconomical power, and job opportunities and also as men

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Attitudes toward physical fitness and eating our physicalhealth sensitivity level is being raised which causes the growth of economy

Impulse buying we need to buy a product to satisfy our life

Desire for convenience a product should be suitable, fit, andsatisfy the costumers

V. Political and Legal forcesPolicy rules and regulation that should be followedLegislation process of making lawFive Categories

General monetary and fiscal policies level of government spending, money supply,and tax legislation

Broad social legislation and accompanying policies set by the regulatory agencies includes environmental control and pollution laws set by the environmental protectionagency to helps to reduce unemployment fall

Government relation with individual industries subsidies in agriculture, shipbuilding, and passenger rail transportation and other industries

Legislation specifically related to marketingLaws Should Marketing Executives Know

Laws to regulate competition Laws to protect consumers

The provisions of information and the purchase of products

VI.Technology major technological breakthroughs carry as a three-fold market impact

a. Start entirely new industries as computers, robots, and lasersb. Virtually alter and destroy existing industries as walkman and diskman beaten bymp3,mp4, and i-podsc. Stimulate other markets and industries not related to the new technology

Monitor the Environment

One key to learning about the environment

Marketing executives must be alert to the trends, new developments, and changeso Information sources

o New government publication

Information sourceso Periodicals

o News

o Government publications

Determine aspects of consumer behavior of competition activityVII. External Micro-environment

Market maybe defined as a place where buyers and sellers meet, products or services areoffered for sale, and transfers of ownership occur

Kinds of Market

Stock market

Automobile market

Retail market for furniture

Wholesale market for furnitureThree Factors to Consider in Market1. people or organization with needs or wants2. their purchasing power3. their buying behaviorSuppliers supply side of exchange transactionMarketing intermediaries are independent business organization that directly aid in the

flow of product and services between a marketing organization and its market.Two Types of Marketing Intermediaries

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resellers/middleman wholesalers and retailers

various facilitating organization provide transportation, warehousing, financing, andother supportive sellers needed to compete exchanges between buyers and sellers

Copy right policy of copying product

Laws to Protect Costumers ingredients

suggested retail price

consumers goods pricing

generic names

safety standards

safety suggestions and precaution

packaging and labeling

warranty seal

- trade mark - registered - copy right

Labeling carries information about the product or the sellerTypes of labeling

1. Brand label brand alone applied to the product or package

2. Grade label identifies quality by letter, number, or word

3. Descriptive label information about the use, construction, care, performance

or other features

Product design one way of building an image of product through its designGood design can improve the marketability of product in many ways as;

Can make the product easier to operate

Can upgrade the products quality or durability

Can improve product appearance and reduce manufacturing costs

Color it is the determining factor in a costumers acceptance or rejection to the productProduct quality is extremely important but most difficult of all the image-building features to

defineProduct warranty and product liability are expressed (written or spoken) or implied

(intended by the seller)Branding it makes easy for costumer to identify products or services

Reasons for branding

To promote branding

To maintain a consistent quality of outputBrand is a name, term, symbol, or special design, or some combination of this elements that is

intended to identify the goods or services on one seller or a group of sellersBrand name consists of words, letters, and or elements that can be vocalized

Selecting brand name

Suggest something about the products characteristics

Be easy to pronounce

Be distinctive

Be adoptable

Be capable of being registered and legally protected

Brand strategies

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Marketing entire output under manufacturers own-brands

Branding of fabricating parts and materials

Marketing under middlemens brand

Middlemens strategies

carry only manufacturers brand

carry middlemens brand along with manufacturers brand

Strategies common to manufacturers and middlemen

branding a line of products

branding for market saturationBrand mark part of the brand that appears in the form of symbol, design, or distinctive coloring

or letteringTrademark is given legal protection under the law to the appropriate sellerGeneric name unofficial brand name to identify based by the stores and consumers

Battle of the brandsTrademark licensing effective branding strategy

Reasons of licensing trademark it can be very profitable since there is no expense involve on the part of the licensor

there is promotional benefit because the licensors name gets wider circulation forbeyond the original trademark article

licensing can help protect the trademarkPackaging are all activities involve in designing and producing the container or wrapper for a

product

Reasons for packaging

safety and utilitarian purposes

implement a companys marketing program

to increase profit possibilities

Importance of packaging in marketing To obtain the benefits of protection and convenience

Increase the use of branding and rise the publics health and sanitation standards

New developments occur rapidly and in seemingly endless flow which requiresmanagements constant attention to packaging design

Packaging strategies

1. Changing the package decrease in sales and expand the market by attracting

new groups of costumer

2. Packaging product line deciding whether to develop a family resemblance in

packaging of its several products

3. Family packaging involves the use of identical packages for all products or

use of packages with some common feature

4. Refuse packaging stimulate repeat purchases as the consumer attempts to

acquire a matching set of containers

5. Multiple packaging practice of placing several units in one container

Criticism of packaging

Packaging depletes our natural resources

Packaging is excessively expense

Health hazards occur from some forms of plastic and aerosol packaging

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Packaging is deceptive

PRODUCT AND PLANNING DEVELOPMENTProduct strategy

Product innovation

Product planning management

Meaning of product

Narrow set of tangible physical attributes

Broader recognizes each product as different product

Product manufacture, service, and physical components

Categories of New Product

Innovative product truly unique or original product

Replacement for a new product

Imitative product fake or imitation

Classification of product

Consumer goods intended for ultimate household use

Industrial goods intended for producing other goods or services

Convenience goods complete knowledge of a certain product with minimum of effort atlow price

Shopping goods compared by price, style, and demand

Specialty goods strong brand preferences at a high price

Unsought goods unwanted product or unaware of

Two Types of Unsought Goodso New products the consumer is not yet aware of

o Consumer does not want

Classification of New Product

Raw materials live materials used to make a product

Pubricating raw materials are used to make a product

Finished product pubricated product is ready to install

Installation finished product is installed

Accessory equipment used in the production of operation of an industrial firm

Operating supplies convenience goods of the industrial field

Stages of Life Cycle

Introduction product is lunch in the market

Growth market acceptance, sales and profit increases

Maturity sales and profit decline

Decline new products or brands eventually enter the industry

PRICING STRATEGY AND POLICYPolicy is a managerial guide to a decision-making when difficult situation arisesStrategy is a broad plan of action by which an organization intends to reach its goals

DISCOUNT AND ALLOWANCES

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Discounts and Allowances result in deduction from the price list or some other concessionsuch as free merchandise or advertising allowances

Quantity discounts are the deductions from the price list to encourage buyers to buy largeamounts or to make most of their purchases on that seller

Non-cumulative discounts are based on individual order or more products and to encouragelarge order

Cumulative discounts are used in perishable products and based on the total volumepurchased over a period of time

Trade discounts/functional discounts are deductions offered to the buyers in payment for thefunctions that they will perform

Cash discounts are given to the buyers when they pay in cash at specific period of timeSeasonal discounts are given during the seller slow seasonForward dating is the variation of both seasonal and cash discounts under which a buyer

places an order but does not have to pay until after the season has started and some salesrevenue has been generated

Promotional allowances are price reductions given as a payment for promotional servicesperformed by the buyers

Brokerage payment unlawful to pay or received brokerage allowances except for servicesrendered

Promotional Allowances are lawful only if they are offered to all competing costumers on

proportionally equal termsLegality of quantity discounts are result in different prices in different costumerLegality of trade discounts could be given to classes of buyers

GEOGRAPHIC PRICING STRATEGIESGeographic pricing strategies the buyers pay the geographic limits of the firm, location of the

production facilities, the source of its raw materials, and its competitive strength in variousmarket areas

F.O.B. (free on board) pricing its the only one that theseller pays only the costs of the loadand the buyer pays the entire costs of transportation as freight costs and costs of the load

PRICING STRATEGIES AND POLICIESUniform delivered pricing the same delivered price is quoted to all buyers regardless of their

location, also called postage stamp pricing or free delivery pricingZone delivered pricing sellers market is divided into a limited number of geographic zones

and freight-in is the average of all charges at all points within the zone areaFreight absorption pricing firm is at the price disadvantage when it tries to sell to buyers

located in the nearer to competitors plant and quoted a factory price plus the freight costs thatwould be charged the competitive seller located to that costumer

Skim-the-cream pricing involves setting a price that is high in the range of expected pricesand act as a strong hedge against a possible mistake in setting the price. Its easy to decreasethe original price if its too high but its difficult to increase if its price is too low.

Penetration pricing a low initial price is set to reach the mass market immediately, the productis high elastic demand, can be achieved through large-scale operations, and expected to face avery strong competition soon after it is introduced to the market.

Effects of Penetration Pricing It may discourage other firms to enter the field because of low profit margin

It may give the innovator such a strong hold on its share of the market that futurecompetitors cannot cut into it

One price strategy a seller charge the same price to all similar costumers who buys the samequantity of a product

Flexible price/variable price strategy the seller charge a different price to all similarcostumers who buys the same quantity of a product

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Unit pricing has been employed largely by supermarket chains; each separate product andpackage size there is a shelf label that states the price of the package that expressed in dollarsand cent per ounce, pound, pint or some other standard measure

Price lining is used extensively by retailers of all types of apparel which consists of selecting alimited number of prices at which the store will sell its merchandise

Resale price maintenance the manufacturers want to control the prices of their products bymaking a price lists which the retailers guide for reselling the manufacturers products andprovide mark-up

Off-price retailing reselling the well-known products under the manufacturers suggested retailprice

Resale maintenance laws a series of state and federal laws permitted manufacturers to legallyset the retail price on their products

The state fair trade laws are laws intended to protect small retailers from the onslaught oflarger retailers, especially the chain stores

LEADER PRICING AND UNFAIR PRACTICES ACTSLeader pricing temporary price units are made on well known items with the idea that these

special (leader) will attract costumers to the storesLoss leader product prices are cut with the idea that they will attract customer to the store

Two Model Laws

Unfair sales acts a reseller is prohibited from selling an item below invoice costs,including freight plus stated mark-up

Unfair practices acts the minimum price is set at invoice costs including freight plusretailers or wholesalers or cost doing business

PSYCHOLOGICAL PRICINGOdd pricing form of psychological pricing that consists of setting a price at uneven (odd)

amounts such as 49 cents, 19.95 rather than so called even amount

PRICE COMPETITION VERSUS NON-PRICE COMPETITIONPrice competition a firm can effectively engage price competition by regularly offering prices

that are as low as possibleA firm can also use price to compete by:

Changing its price management may decide to raise the rather than to cut quality oraggressively promote the product and still maintain the price

Reaction to price made by competitors only firm can assume that its competitors willchange price and should be ready to follow guidelines on how it will react. If a competitorsboosts price a reasonable delay in reacting probably will not be perilous.

Non-price competition sellers maintain stable prices attempt to improve their market positionby emphasizing other aspects on their marketing program

Two major methods of non-price competition

Promotion a striving to secure greater sales by intensive advertising

Product differentiation marketing strategy based on the creation upon the creation

and promotion of product differences which may be real or imagined in the character of theproduct or in packaging name or way it is being promoted

TYPES OF ORGANIATIONAL CHARTS

Functional Organization

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Mixing Department

Taller Organization Structure

Marketing ResearchManagers need information in order to introduce products and services that create value in

the mind of the customer.Market research deals specifically with the gathering of information about a market's size

and trends.Marketing research covers a wider range of activities. While it may involve market research,

marketing research is a more general systematic process that can be applied to a variety of

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marketing problems. The goal of marketing research is to provide the facts and direction thatmanagers need to make their more important marketing decisions.

The Value of Informationis determined by:

The ability and willingness to act on the information.

The accuracy of the information.

The level of indecisiveness that would exist without the information. The amount of variation in the possible results.

The level of risk aversion.

The reaction of competitors to any decision improved by the information.

The cost of the information in terms of time and money.

The Marketing Research ProcessMost marketing research projects involve these steps:

I. Problem Definition

The decision problem faced by management must be translated into a market researchproblem in the form of questions that define the information that is required to make the decisionand how this information can be obtained. The objective of the research should be definedclearly. To ensure that the true decision problem is addressed, it is useful for the researcher to

outline possible scenarios of the research results and then for the decision maker to formulateplans of action under each scenario.

II. Research Design

Three categories of marketing research:

1. Exploratory research has the goal of formulating problems more precisely,

clarifying concepts, gathering explanations, gaining insight, eliminating impractical ideas, andforming hypotheses. Exploratory research can be performed using a literature search,surveying certain people about their experiences, focus groups, and case studies. Whensurveying people, exploratory research studies would not try to acquire a representativesample, but rather, seek to interview those who are knowledgeable and who might be able toprovide insight concerning the relationship among variables. Exploratory research maydevelop hypotheses, but it does not seek to test them. Exploratory research is characterized

by its flexibility.2. Descriptive research is more rigid than exploratory research and seeks to

describe users of a product, determine the proportion of the population that uses a product, orpredict future demand for a product. Descriptive research should define questions, peoplesurveyed, and the method of analysis prior to beginning data collection. In other words, thewho, what, where, when, why, and how aspects of the research should be defined.Two basic types of descriptive research:

a. Longitudinal studies are time series analyses that make repeatedmeasurements of the same individuals, thus allowing one to monitor behavior such asbrand-switching.b. Cross-sectional studies sample the population to make measurementsat a specific point in time. A special type of cross-sectional analysis is a cohort analysis,which tracks an aggregate of individuals who experience the same event within the same

time interval over time. Cohort analyses are useful for long-term forecasting of productdemand.

3. Causal research seeks to find cause and effect relationships between variables.

It accomplishes this goal through laboratory and field experiments.

III. Data Types and Sources

Secondary data may be internal to the firm, such as sales invoices and warranty cards, ormay be external to the firm such as published data or commercially available data. Thegovernment census is a valuable source of secondary data. Secondary data has the advantage

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of saving time and reducing data gathering costs. The disadvantages are that the data may not fitthe problem perfectly and that the accuracy may be more difficult to verify for secondary datathan for primary data. Some secondary data is republished by organizations other than theoriginal source; one should obtain secondary data directly from its source and consider who thesource is and whether the results may be biased.There are several criteria that one should use to evaluate secondary data.

Whether the data is useful in the research study. How current the data is and whether it applies to time period of interest.

Errors and accuracy - whether the data is dependable and can be verified.

Presence of bias in the data.

Specifications and methodologies used, including data collection method, response rate,quality and analysis of the data, sample size and sampling technique, and questionnairedesign.

Objective of the original data collection.

Nature of the data, including definition of variables, units of measure, categories used,and relationships examined.

Primary data are demographic and socioeconomic characteristics, psychological andlifestyle characteristics, attitudes and opinions, awareness and knowledge, intentions, motive,

and behavior. Primary data can be obtained by communication or by observation.Communication involves questioning respondents either verbally or in writing. This methodis versatile, since one need only to ask for the information; however, the response may not beaccurate. Communication usually is quicker and cheaper than observation. Observationinvolves the recording of actions and is performed by either a person or some mechanical orelectronic device. Observation is less versatile than communication since some attributes of aperson may not be readily observable, such as attitudes, awareness, knowledge, intentions,and motivation. Observation also might take longer since observers may have to wait forappropriate events to occur, though observation using scanner data might be quicker andmore cost effective. Observation typically is more accurate than communication.

IV. Questionnaire DesignThe questionnaire is an important tool for gathering primary data. Poorly constructed

questions can result in large errors and invalidate the research data, so significant effortshould be put into the questionnaire design. The questionnaire should be tested thoroughlyprior to conducting the survey.Measurement ScalesAttributes can be measured on following scales:

Nominal numbers are simply identifiers, with the only permissible mathematical usebeing for counting. Example: social security numbers.

Ordinal scales are used for ranking. The interval between the numbers conveys nomeaning. Median and mode calculations can be performed on ordinal numbers. Example:class ranking

Interval scales maintain an equal interval between numbers. These scales can be usedfor ranking and for measuring the interval between two numbers. Since the zero point isarbitrary, ratios cannot be taken between numbers on an interval scale; however, mean,

median, and mode are all valid. Example: temperature scale Ratio scales are referenced to absolute zero values, so ratios between numbers on the

scale are meaningful. In addition to mean, median, and mode, geometric averages alsoare valid. Example: weight

Validity and ReliabilityThe validity of a test is the extent to which differences in scores reflect differences in themeasured characteristic. Predictive validity is a measure of the usefulness of a measuringinstrument as a predictor. Proof of predictive validity is determined by the correlation between

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results and actual behavior. Construct validity is the extent to which a measuring instrumentmeasures what it intends to measure.Reliability is the extent to which a measurement is repeatable with the same results. Ameasurement may be reliable and not valid. However, if a measurement is valid, then it alsois reliable and if it is not reliable, then it cannot be valid. One way to show reliability is to showstability by repeating the test with the same results.

Attitude MeasurementMany of the questions in a marketing research survey are designed to measure attitudes.Attitudes are a person's general evaluation of something. Customer attitude is an importantfactor for the following reasons:

Attitude helps to explain how ready one is to do something.

Attitudes do not change much over time.

Attitudes produce consistency in behavior.

Attitudes can be related to preferences.Attitudes can be measured using the following procedures:

Self-reporting - subjects are asked directly about their attitudes. Self-reporting is themost common technique used to measure attitude.

Observation of behavior - assuming that one's behavior is a result of one's attitudes,

attitudes can be inferred by observing behavior. For example, one's attitude about anissue can be inferred by whether he/she signs a petition related to it.

Indirect techniques - use unstructured stimuli such as word association tests.

Performance of objective tasks - assumes that one's performance depends on attitude.For example, the subject can be asked to memorize the arguments of both sides of anissue. He/she is more likely to do a better job on the arguments that favor his/her stance.

Physiological reactions - subject's response to stimuli is measured using electronic ormechanical means. While the intensity can be measured, it is difficult to know if theattitude is positive or negative.

Multiple measures - a mixture of techniques can be used to validate the findings,especially worthwhile when self-reporting is used.

There are several types of attitude rating scales:

Equal-appearing interval scaling - a set of statements are assembled. Thesestatements are selected according to their position on an interval scale of favorableness.Statements are chosen that has a small degree of dispersion. Respondents then areasked to indicate with which statements they agree.

Likert method of summated ratings - a statement is made and the respondentsindicate their degree of agreement or disagreement on a five point scale (StronglyDisagree, Disagree, Neutral, Agree, and Strongly Agree).

Semantic differential scale - a scale is constructed using phrases describing attributesof the product to anchor each end. For example, the left end may state, "Hours areinconvenient" and the right end may state, "Hours are convenient". The respondent thenmarks one of the seven blanks between the statements to indicate his/her opinion aboutthe attribute.

Stapel Scale - similar to the semantic differential scale except that 1) points on the scale

are identified by numbers, 2) only one statement is used and if the respondent disagreesa negative number should marked, and 3) there are 10 positions instead of seven. Thisscale does not require that bipolar adjectives be developed and it can be administered bytelephone.

Q-sort technique - the respondent if forced to construct a normal distribution by placinga specified number of cards in one of 11 stacks according to how desirable he/she findsthe characteristics written on the cards.

V. Sampling Plan

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The sampling frame is the pool from which the interviewees are chosen.In designing the research study, one should consider the potential errors. Two sources of

errors arerandom sampling errorand non-sampling error. Sampling errors are those dueto the fact that there is a non-zero confidence interval of the results because of the samplesize being less than the population being studied. Non-sampling errors are those caused byfaulty coding, untruthful responses, respondent fatigue, etc.

There is a tradeoff between sample size and cost. The larger the sample size, the smallerthe sampling error but the higher the cost. After a certain point the smaller sampling errorcannot be justified by the additional cost.

While a larger sample size may reduce sampling error, it actually may increase the totalerror. There are two reasons for this effect. First, a larger sample size may reduce the abilityto follow up on non-responses. Second, even if there is a sufficient number of an interviewerfor follow-ups, a larger number of interviewers may result in a less uniform interview process.

VI. Data Collection

In addition to the intrinsic sampling error, the actual data collection process will introduceadditional errors. These errors are called non-sampling errors. Some non-sampling errorsmay be intentional on the part of the interviewer, who may introduce a bias by leading therespondent to provide a certain response. The interviewer also may introduce unintentionalerrors, for example, due to not having a clear understanding of the interview process or dueto fatigue.

Respondents also may introduce errors. A respondent may introduce intentional errors bylying or simply by not responding to a question. A respondent may introduce unintentionalerrors by not understanding the question, guessing, not paying close attention, and beingfatigued or distracted.

Such non-sampling errors can be reduced through quality control techniques.

VII. Data Analysis - Preliminary Steps

First, it must be edited so that errors can be corrected or omitted. The data mustthen be coded; this procedure converts the edited raw data into numbers orsymbols. A codebook is created to document how the data was coded. Finally,the data is tabulated to count the number of samples falling into variouscategories. Simple tabulations count the occurrences of each variableindependently of the other variables. Cross tabulations, also known ascontingency tables or cross tabs, treats two or more variables simultaneously.However, since the variables are in a two-dimensional table, cross tabbing morethan two variables is difficult to visualize since more than two dimensions wouldbe required. Cross tabulation can be performed for nominal and ordinal variables.Cross tabulation is the most commonly utilized data analysis method inmarketing research. Many studies take the analysis no further than crosstabulation. This technique divides the sample into sub-groups to show how thedependent variable varies from one subgroup to another. A third variable can beintroduced to uncover a relationship that initially was not evident.

Conjoint analysis is a powerful technique for determining consumer preferencesfor product attributes.

Hypothesis TestingA basic fact about testing hypotheses is that a hypothesis may be rejected but that the

hypothesis never can be unconditionally accepted until all possible evidence is evaluated. In thecase of sampled data, the information set cannot be complete. So if a test using such data doesnot reject a hypothesis, the conclusion is not necessarily that the hypothesis should be accepted.

The null hypothesis in an experiment is the hypothesis that the independent variable has noeffect on the dependent variable. The null hypothesis is expressed as H0. This hypothesis isassumed to be true unless proven otherwise. The alternative to the null hypothesis is thehypothesis that the independent variable does have an effect on the dependent variable. This

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hypothesis is known as the alternative, research, or experimental hypothesis and is expressed asH1. This alternative hypothesis states that the relationship observed between the variablescannot be explained by chance alone.

There are two types of errors in evaluating a hypotheses:

Type I error: occurs when one rejects the null hypothesis and accepts the

alternative, when in fact the null hypothesis is true. Type II error: occurs when one accepts the null hypothesis when in fact thenull hypothesis is false.

Because their names are not very descriptive, these types of errors sometimes are confused.Some people jokingly define a Type III error to occur when one confuses Type I and Type II.To illustrate the difference, it is useful to consider a trial by jury in which the null hypothesis isthat the defendant is innocent. If the jury convicts a truly innocent defendant, a Type I errorhas occurred. If, on the other hand, the jury declares a truly guilty defendant to be innocent, aType II error has occurred.

Hypothesis testing involves the following steps:

Formulate the null and alternative hypotheses.

Choose the appropriate test.

Choose a level of significance (alpha) - determine the rejection region.

Gather the data and calculate the test statistic.

Determine the probability of the observed value of the test statistic under the nullhypothesis given the sampling distribution that applies to the chosen test.

Compare the value of the test statistic to the rejection threshold.

Based on the comparison, reject or do not reject the null hypothesis.

Make the marketing research conclusion.

In order to analyze whether research results are statistically significant or simply by chance, atest of statistical significance can be run.

Tests of Statistical Significance

The chi-square goodness-of-fit test is used to determine whether a set of proportions havespecified numerical values.

ANOVAAnother test of significance is the Analysis of Variance (ANOVA) test. The primary purpose ofANOVA is to test for differences between multiple means. Whereas the t-test can be used tocompare two means, ANOVA is needed to compare three or more means. If multiple t-testswere applied, the probability of a TYPE I error (rejecting a true null hypothesis) increases asthe number of comparisons increases.

One-way ANOVA examines whether multiple means differ. The test is called an F-test.ANOVA calculates the ratio of the variation between groups to the variation within groups (theF ratio). While ANOVA was designed for comparing several means, it also can be used tocompare two means. Two-way ANOVA allows for a second independent variable andaddresses interaction.

To run a one-way ANOVA, use the following steps:1. Identify the independent and dependent variables.

2. Describe the variation by breaking it into three parts- the total variation, the portion that is

within groups,and the portion that is between groups (or among groups for more than twogroups). The total variation (SStotal) is the sum of the squares of the differences betweeneach valueand the grand mean of all the values in all the groups. The in-group variation

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(SSwithin) is the sum of the squares of the differences in each element's value and thegroup mean. The variation between group means (SSbetween) is the total variation minusthe in-group variation (SStotal - SSwithin).

3. Measure the difference between each group's mean and the grand mean.4. Perform a significance test on the differences.5. Interpret the results.

Discriminant analysis is to determine which variables discriminate between two or morenaturally occurring groups. Discriminant analysis can determine which variables are the bestpredictors of group membership. Essentially, the discriminant function problem is a one-wayANOVA problem in that one can determine whether multiple groups are significantly differentfrom one another with respect to the mean of a particular variable.A discriminant analysis consists of the following steps:

1. Formulate the problem.2. Determine the discriminant function coefficients that result in the highest ratio ofbetween-group variation to within-group variation.3. Test the significance of the discriminant function.4. Interpret the results.5. Determine the validity of the analysis.

Factor Analysis is a very popular technique to analyze interdependence. Factor analysisstudies the entire set of interrelationships without defining variables to be dependent orindependent. Factor analysis combines variables to create a smaller set of factors.Mathematically, a factor is a linear combination of variables. A factor is not directlyobservable; it is inferred from the variables. The technique identifies underlying structureamong the variables, reducing the number of variables to a more manageable set. Factoranalysis groups variables according to their correlation. The factor loadingcan be definedas the correlations between the factors and their underlying variables. A factor loading matrixis a key output of the factor analysis. An example matrix is shown below. Each cell in thematrix represents correlation between the variable and the factor associated with that cell.The square of this correlation represents the proportion of the variation in the variableexplained by the factor. The sum of the squares of the factor loadings in each column iscalled an eigenvalue. An eigenvalue represents the amount of variance in the original

variables that is associated with that factor. The communality is the amount of the variablevariance explained by common factors. A rule of thumb for deciding on the number of factorsis that each included factor must explain at least as much variance as does an averagevariable. In other words, only factors for which the eigenvalue is greater than one are used.Other criteria for determining the number of factors include the Screen plot criteria and thepercentage of variance criteria. To facilitate interpretation, the axis can be rotated. Rotation ofthe axis is equivalent to forming linear combinations of the factors. A commonly used rotationstrategy is the varimax rotation. Varimax attempts to force the column entries to be eitherclose to zero or one.

Cluster AnalysisMarket segmentation usually is based not on one factor but on multiple factors. Initially, eachvariable represents its own cluster. The challenge is to find a way to combine variables so

that relatively homogenous clusters can be formed. Such clusters should be internallyhomogenous and externally heterogeneous. Cluster analysis is one way to accomplish thisgoal. Rather than being a statistical test, it is more of a collection of algorithms for groupingobjects, or in the case of marketing research, grouping people. Cluster analysis is useful inthe exploratory phase of research when there are no a-priori hypotheses.Cluster analysis steps:1. Formulate the problem, collecting data and choosing the variables to analyze.2. Choose a distance measure. The most common is the Euclidean distance. Other

possibilities include the squared Euclidean distance, city-block (Manhattan) distance,Chebychev distance, power distance, and percent disagreement.

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3. Choose a clustering procedure (linkage, nodal, or factor procedures).4. Determine the number of clusters. They should be well separated and ideally they should

be distinct enough to give them descriptive names such as professionals, buffs, etc.5. Profile the clusters.6. Assess the validity of the clustering.

VIII.Marketing Research ReportThe format of the marketing research report varies with the needs of the organization. The

report often contains the following sections:

Authorization letter for the research

Table of Contents

List of illustrations

Executive summary

Research objectives

Methodology

Results

Limitations

Conclusions and recommendations

Appendices containing copies of the questionnaires, etc.

Concluding ThoughtsMarketing research by itself does not arrive at marketing decisions, nor does it guarantee thatthe organization will be successful in marketing its products. However, when conducted in asystematic, analytical, and objective manner, marketing research can reduce the uncertaintyin the decision-making process and increase the probability and magnitude of success.

Assessing Marketings Critical Role Organizational PerformanceOur purpose is to make products with pleasure, that we can sell with pleasure and that our

customers can use with pleasure.Soichiro Honda

Marketing is so basic that it cannot be considered a separate function. It is the wholebusiness seen from the point of view of its final result, that is, from the customers point of view

Business success is not determined by the producer but by the customer.PETER DRUCKER

Marketing's job is to convert societal needs into profitable opportunities.ANONYMOUS

Low labor skills will challenge educational and training companies to design more effectiveprograms for upgrading human skills.

One scholar insightfully described the purpose of marketing as the creation and delivery of astandard of living.

Doing Business in the Global EconomyThe Global- Economy

The world economy has undergone a radical transformation in the last two decades.Geographical and cultural distances have shrunk significantly with the advent of jet airplanes, fax

machines, global computer and telephone linkups, and world television satellite broadcasting.

Asia-Pacific Economic EnvironmentAsia's stake in the global economy has been increasing over the years. The region has

recorded high growth rates for much of the 1990s. Asia's economic, prosperity has seen moreconsumer needs and demands satisfied: improved service, higher-quality merchandise, moreconvenience, and better value-for-money. Consequently, Asian consumers are tightening theirbelts and spending less. Thai consumers are shopping more at hypermarts, and Japaneseconsumers are buying more frequently from discount stores. Governments such as those inThailand and Malaysia are urging con- turners to switch from imported to locally-made products.

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Under such challenging conditions, marketing becomes even more important as there exists lessmargin for error.

The Environmental Imperative and Socially Responsible MarketingIn today's business climate, companies must accept increasing responsibility for the

environment. In the past, a chemical company could belch out factory smoke that polluted the airand dispose of chemicals that polluted the water and soil without much accountability. The moveforward environmental protection raised costs for some manufacturers who felt they were beingput at a disadvantage against other competitors who operated under weaker or non-existentenvironmental regulations.

Technological AdvancesThe boom in, and merger of, computer, telephone, and television technology has had a major

impact on how businesses produce and market their products. As technology has delivered newand better foods, clothing, housing, vehicles, and entertainment possibilities, our lives havechanged dramatically. Internet is fast being embraced by businesses as link (or hypertext) tocommunities, to employees, customers, suppliers, and distributes sales information quickly.

The Powerful ConsumerThe late 1990s, Asian companies can no longer ignore foreign competitors, foreign markets,

and foreign sources of supply. They cannot allow their wage and material costs to get far out ofline with the rest of the world. They cannot ignore timer technologies, materials, equipment, andnew ways of organizing and marketing.

In view of this "marketing myopia,"' it is not surprising that there has been a flood of booksoffering fresh prescriptions on how to run businesses in the new environment. In the 1960s,"Theory Y" was the rage, calling for companies to treat their employees not as cogs in a machinebut as individuals whose creativity can be released through enlightened management practice. Inthe 1970s,"strategic planning' offered a way of thinking about building and managing thecompany's portfolio of businesses in a turbulent environment. In the 1980s, "excellence andquality" received major attention as the new formulas for success. All of these themes willcontinue to inspire our business thinking.

In the 1990s, companies acknowledged the critical importance of being "customer-orientedand driven" in conducting their activities. It is not enough to be product-driven or technology-

driven; too many companies still design their products without customer input, only to find themrejected in the marketplace. And too many companies forget the customers after the sale, only tolose them to competitors through benign neglect.

Other IssuesMany other critical changes have occurred in consumer and business markets. Consumer

markets are often characterized by an aging population; an increasing number of working women;later marriage, more divorces, and smaller families; the emergence of distinct ethnic consumergroups and needs; and the proliferation of more varied consumer lifestyles. Business markets arealso changing. Business firms demand higher product quality from their suppliers, faster delivery,better service, and lower prices. Business firms need to speed up their product-developmentprocesses because of shorter product life cycles. They need to find better ways to distribute andpromote their products at lower cost.

The Core Concepts of Marketing1. Needs, Wants, and Demands

A human need is a state of felt deprivation of some basic satisfaction such as food, clothing,shelter, safety, belonging, esteem, and a few other things for survival.Wants are desires for specific satisfiers of these deeper needs. Human wants are continuallyshaped and reshaped by social forces and institutions such as religious groups, schools, families,and business corporations.Demands are wants for specific products that are backed by an ability and willingness to buythem. Wants become demands when supported by purchasing power.

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2. Products (Goods, Services, and Ideas)A product is anything that can be offered to satisfy a need or want.

3. Value, Cost, and SatisfactionValue is the consumer's estimate of the product's overall capacity to satisfy his or her needs.

4. Exchange and TransactionsExchange is frequently described as value-creating process because it normally leaves bothparties better off. It is also an act of obtaining a desired product from someone by offeringsomething in return. For exchange to take place, five conditions must be satisfied:

1. There are at least two parties.2. Each party has something that might be of value to the other party.3. Each party is capable of communication and delivery4. Each party is free to accept or reject the offer.5. Each party believes it is appropriate or desirable to deal with the other party.

Transactions are the basic unit of exchange between two parties.Monetary transactions, however, do not require money as one of the traded values.Barter transaction consists of the trading of goods or services for other goods or services.Negotiation is the process of trying to arrive at mutually agreeable terms.

5. Relationships and NetworksTransaction marketing is part of a larger idea, called relationship marketing. Smart marketerstry to build up long-term, trusting win-win relationships with valued customers, distributors,

dealers, and suppliers.Relationship marketingcuts down on transaction costs and time in the best cases, transactionsmove from being negotiated each time to being routinized.Marketing network is the building of unique company asset consists of the company and itssuppliers, distributors, and a customer, with which it has built solid, dependable businessrelationships. Build a good network of relationships with key stakeholders and profits will follow.

MARKET is consists of all the potential customers sharing a particular need or want who mightbe willing and able to engage to exchange to satisfy that need or want.Traditionally, a market was the place where buyers and sellers gathered to exchange their goods.Marketer is someone seeking one or more prospects who .might engage in an exchange ofvalues.Prospectis someone whom the marketer identifies as potentially willing and able to engage in an

exchange of values. The marketer can be a seller or a buyer. Suppose several persons want tobuy an attractive house' that has just become available. Each prospective buyer will try to markethimself or herself to the seller. These buyers are doing the marketing!Reciprocal marketingis the event that both parties actively seek an exchange.MARKETING is a social and managerial process by which individuals and groups obtain whatthey need and want through creating, offering, and exchanging products of value with others.Marketing Management is the process of panning and executing the conception, pricing,promotion, and distribution of goods, services, and ideas to create exchanges that satisfyindividual and organizational goals. Marketing management has the task of influencing the level,timing and composition of demand in a way that will help the organization achieve its objectives.Marketing management is essentially demand management.

Marketing planning, marketers must make decisions on Target markets, market positioning,

product development, pricing, distribution channels, physical distribution, communication, andpromotion.Company Orientations Toward the MarketplaceWe have defined marketing management as the conscious effort to achieve desired exchangeoutcomes with target markets.

Demand States and Marketing Tasks

1. Negative demand - If a major part of the market dislikes the product and may

even pay a price to avoid it. The marketing task is to analyze why the market dislikes the

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product and whether `a marketing program consisting o product redesign, lower prices, andmore positive promotion can change the market's beliefs and attitudes.

2. No demand Target consumers maybe unaware of or uninterested in the product.

The marketing task is to find ways to connect the benefits of the product with the person'snatural needs and interests.

3. Latent demand - Many consumers may share a strong need that cannot be

satisfied by any existing product. The marketing task is to measure the size of the potentialmarket and develop effective goods and services that would satisfy the demand.

4. Declining demand - Every organization, sooner or later, faces declining demand

for one or more of its products. The marketer must analyze the causes of market decline anddetermine whether demand can be restimulated by finding new target markets, changing theproduct's features or developing more effective communication. The marketing task is toreverse the declining demand through creative remarketing of the product.

5. Irregular demand - Demand that varies on a seasonal, daily, or even hourly

basis, causing problems of idle or overworked capacity. The marketing task, called synchro-marketing, is to find ways to alter the same pattern of demand through flexible pricing,promotion, and other incentives.

6. Full demand - Organizations face full demand when they are pleased with their

volume of business. The marketing task is to maintain the current level of demand in the face

of changing consumer preferences and increasing competition or improve its quality andcontinually measure consumer satisfaction.

7. Overfull demands - Some organizations face a demand level that is higher than

they can or want to handle. The marketing task, called demarketing, requires finding ways toreduce the demand temporarily but not to destroy demand or permanently. Either todiscourage overall demand like raising prices and reducing promotion and service.

8. Unwholesome demand - Unwholesome products will attract organized efforts to

discourage their consumption. The marketing task is to get people who like something to giveit up, using such tools as fear messages, price hikes, and reduced availability.

The marketing concept rests on four main pillars

1. Target market

2.Customer needs

3. Coordinated marketing

4. Profitability.

TARGET MARKETNo company can operate in every market and satisfy every need. Nor can it even do a good jobwithin one broad market.CUSTOMER NEEDS Once a company has defined its target market, it must understand thecustomers' needs.Five types of needs

1. Stated needs (the customer wants an inexpensive car)

2. Real needs (the customer wants a car whose operating cost, not its initial price,

is low)

3. Unstated needs (the customer expects good service from the dealer)

4. Delight needs (the customer buys the car and receives a complimentary map)

5. Secret needs (the customer wants to be seen by friends as a value-oriented

savvy consumer)Customer-oriented thinking requires the company to define customer needs from the

customer point of view. In general, a company can respond to customers' requests by givingcustomers what they want, or what they need, or what they really need. The key to professionalmarketing is to meet the customers' real needs better than any competitor can.

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Some marketers distinguish between responsive marketing and creative marketing. Aresponsive marketer finds a stated need and fills it. A creative marketer discovers andproduces solutions that customers did not ask for but to which they enthusiastically respond.Hamel and Prahalad believe that companies must go beyond just asking consumers what theywant.

Why is it supremely important to satisfy the customer? Because a company's sales eachperiod come from two groups: new customers and repeat customers. It always costs more toattract new customers than to retain current customers. Therefore, customer retention is morecritical than customer attraction. The key to customer retention is customer satisfaction:A satisfied customer:

1. Stays "loyal" longer 2. Buys more as the company introduces new products and upgrades existing products3. Talks favorably about the company and its products

4. Pays less attention to competing brands and advertising and is less price sensitive

5. Offers product/service ideas to the company

6. Costs less to serve than new customers because transactions are routinized

COORDINATED MARKETINGIntegrated marketing refers to all the company's departments work together to serve the

customer's interests, the result is integrated marketing.Integrated marketing means two things:

First, the various marketing functions-sales force; advertising, product management,marketing research, and so on-must be coordinated among themselves. Too often the salesforce is, mad at the product managers for setting "too high a price or "too high a volumetarget; or the advertising director and a brand manager cannot agree on the best advertisingcampaign for the brand. These marketing functions must be coordinated from the customer'spoint of view

Second, marketing must be well coordinated with the other company departments.Marketing does not work when it is merely a department; it works only when all employeesappreciate the impact they have on customer satisfaction.To foster teamwork among all departments, the company carries out internal marketing as

well as external marketing.

Internal marketing is the task of successfully hiring, training, and motivating able employeeswho want to serve the customers well.

PROFITABILITYThe ultimate purpose of the marketing concept is to help organizations achieve their goals. Forprivate firms, the major goal is profit; for nonprofit and public organizations, it is surviving andattracting enough funds to perform their work. The key is not to aim for profits as such but toachieve them as a byproduct of doing the job well. A company makes money by satisfyingcustomer needs better than competitors can.

Most companies do not really grasp or embrace the marketing concept until driven to it bycircumstances. Any of the following developments might prod them to take the marketing conceptto heart:

1. Sales decline: When companies experience falling sales, they panic and look for

answers.2. Slow growth: Slow sales growth will lead some companies to cast about for new

markets. They realize that they need marketing know-how if they are to identify and selectnew opportunities.

3. Changing buying patterns: Many companies operate in markets characterized by

rapidly changing customer wants. These companies need more marketing know-how if theyare to continue producing value for buyers.

4. Increasing competition: Complacent companies may suddenly be attacked by powerful

marketing companies and forced to learn marketing to meet the challenge.

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5. Increasing marketing expenditure: Companies may find their expenditure for

advertising, sales promotion, marketing research, and customer service getting out of hand.Management then decides it is time to undertake a marketing audit and to improve itsmarketing.

Three hurdles in converting to a market-oriented company

I. ORGANIZED RESISTANCESome company departments, often manufacturing, finance, and research and

development, do not like to see marketing built up because it threatens their power in theorganization. Initially, the marketing function is seen as one of several equally importantbusiness functions in a check-and-balance: relationship. A dearth of demand then leadsmarketers to argue that their function is somewhat more important than the others. A fewmarketing enthusiasts go further and say marketing is the major function of the enterprise, forwithout customers, there would be no company. They put marketing at the center, with otherbusiness functions serving as support functions. This view incenses the other managers, whodo not want to think of themselves as working for marketing. Enlightened marketers clarify theissue by putting the customer rather than marketing at the center of the company. They arguefor a customer orientation in which all functions work together to sense, serve, and satisfy thecustomer. Finally, some marketers say that marketing still needs to command a central

company position if customers' needs are to be correctly interpreted and efficiently satisfied.The marketer's argument for the business concept is as follows:1. The company's assets have little value without the existence of customers.2. The key company task is therefore to attract and retain customers.3. Customers are attracted through competitively superior offers and retainedthrough satisfaction.4. Marketing's task is to develop a superior offer and deliver customer satisfaction.5. Customer satisfaction is affected by the performance of the other departments.6. Marketing needs to influence these other departments to cooperate in deliveringcustomer satisfaction.

II. SLOW LEARNING

Despite resistance, many companies manage to introduce some marketing into theirorganization. The company CEO establishes a marketing department; outside marketingtalent is hired; key managers attend marketing seminars; the marketing budget issubstantially increased; marketing planning and control systems are introduced. Even withthese steps, learning what marketing really is comes slowly.

III. FAST FORGETTING Even after installing marketing, management must fight a strong

tendency to forget basic marketing principles, especially in the wake of marketing success.Some failed because they forgot the marketing maxim: Know your target market and how tosatisfy them.

Companies face a particularly difficult task in adapting their ad slogans to internationalmarkets. When Coca Cola entered China in 1979, for instance, it discovered that thecountry's simplified Chinese writing system had turned the literal meaning of Coca-Cola into'Bite the wax tadpole " Coca Cola solved this problem by using four Chinese charactersmeaning "Very Tasty, Very Happy." Even when the language is the same, the way words areused may differ from country to country. Electrolux's British ad line for its vacuum cleaners(Nothing sucks like an Electrolux") would certainly not lure customers in the Philippines.

Marketing is a social and managerial process by which individuals and groups obtain whatthey need and want through creating, offering, and exchanging products of value in the market. Amarketer is someone seeking one or more prospects who might engage in an exchange ofvalues.

Relationship marketing is the practice of building long-term satisfying relations with keyparties-customers, suppliers, distributors-in order to retain their long-term preference and

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business. Good marketers build up long-term, win-win" relationships by delivering high quality,good service, and fair prices to other parties over time.

Marketing management is the process of planning and executing the conception, pricing,promotion, and distribution of goods, services, and ideas to create exchanges with target groupsthat satisfy customer and organizational objectives. Marketing management is essentiallydemand management; its task is to influence the level, timing, and composition of demand.Five competing concepts

1. Production concept holds that consumers will favor those products that are

widely available and low in cost. Managers of production-oriented organizations concentrateon achieving high production efficiency and wide distribution.

2. Product concept holds that consumers will favor those products that offer the

most quality, performance, or innovative features. Managers in these product-orientedorganizations focus their energy on making superior products and improving them over time.Under this concept, managers assume that buyers admire well-made products and canappraise product quality and performance. However, these managers are caught up in a loveaffair with their product and do not realize that the market may be less "turned on." Marketingmanagement becomes a victim of the "better mousetrap" fallacy, believing that a bettermousetrap will lead people to beat a path to its door. The product concept leads to marketingmyopia, a focus on the product rather than on market.

3. Selling/sales concept holds that consumers, if left alone, will ordinarily not buyenough of the organization's products. The organization must therefore undertake anaggressive selling and promotion effort. Selling is preoccupied with the seller's need toconvert his product into cash; marketing with the idea of satisfying the needs of the customerby means of the product and the whole cluster of things associated with creating, deliveringand finally consuming it." Theodore Levitt drew a perceptive contrast between the selling andmarketing concepts.

4. Marketing concept holds that the key to achieving organizational goals consists

of being more effective than competitors in integrating marketing activities toward determiningand satisfying the needs and wants of target markets.The marketing concept has been expressed in many ways:"Meeting needs profitably""Find wants and fill them."

Love the customer, not the product.5. Societal marketing concept holds that the organization's task is to determine

the needs, wants, and interests of target markets and to deliver the desired satisfaction moreeffectively and efficiently than competitors in a way that preserves or enhances theconsumer's and the society's well-being.

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