Marketing Management Final 4400

New-Product Development Process

1. Idea generation 2. idea screening 3. concept development and testing 4. marketing strategy development 5. business analysis 6. product development 7. market testing 8. commercialization

Managing Integrated Marketing Communications

"A planning process designed to assure that all brand contacts received by a customer or prospect for a product, service, or organization are relevant to that person and consistent over time" When done well, this planning process evaluates the strategic roles of a variety of communications disciplines and combines them seamlessly to provide clarity, consistency, and maximum impact of messages. The wide range of communication tools, messages, and audiences available to marketers makes it imperative that companies move toward integrated marketing communications. They must adopt a 360-degree view of consumers to fully understand all the different ways communications can affect behavior.

Competitive frame of reference

- Defines which other brands a brand competes with and which should thus be the focus of competitive analysis - Identifying and analyzing competitors

Communication Options

A company chooses which forms of online marketing will be most cost-effective in achieving communication and sales objectives. The options include Web sites, search ads, display ads, and e-mail. Companies must design Web sites that embody or express their purpose, history, products, and vision and that are attractive on first viewing and interesting enough to encourage repeat visits. Search ADS An important component of online marketing is paid search or pay-per-click ads. Thirty-five percent of all searches are reportedly for products or services. Display ads or banner ads are small, rectangular boxes containing text and perhaps a picture that companies pay to place on relevant Web sites. Interstitials are advertisements, often with video or animation, that pop up between page changes within a Web site or across Web sites. E-mail allows marketers to inform and communicate with customers at a fraction of the cost of a d-mail, or direct mail, campaign. E-mails can be very productive selling tools. The rate at which they prompt purchase has been estimated to be at least three times that of social media ads, and the average order value is thought to be 17 percent higher.

Systemic Approach: Setting the Price

A firm must set a price for the first time when it develops a new product, when it introduces its regular product into a new distribution channel or geographical area, and when it enters bids on new contract work. The firm must decide where to position its product on quality and price. Most markets have three to five price points or tiers. Firms devise their branding strategies to help convey the price-quality tiers of their products or services to consumers.

Categories ofService Mix

A pure tangible good A tangible good with accompanying services A hybrid A major service with accompanying minor goods/services A pure service

Value network

A system of partnerships and alliances that a firm creates to source, augment, and deliver its offerings Demand chain planning A value network includes a firm's suppliers and its suppliers' suppliers and its immediate customers and their end customers. It also incorporates valued relationships with others such as university researchers and government approval agencies. A supply chain view of a firm sees markets as destination points and amounts to a linear view of the flow of ingredients and components through the production process to their ultimate sale to customers. The company should first think of the target market, however, and then design the supply chain backward from that point. This strategy has been called demand chain planning.

Online Marketing pros/cons

Advantages Can offer or send tailored information/messages Can trace effects by UVs clicks on a page/ad Contextual placement Can place advertising based on search engine keywords Disadvantages Consumers can screen out most messages Ads can be less effective than they appear (bogus clicks) Lost control over online messages via hacking/vandalism

Service

Any act or performance one party can offer to another that is essentially intangible and does not result in the ownership of anything

Product

Anything that can be offered to a market to satisfy a want or need, including physical goods, services, experiences, events, persons, places, properties, organizations, information, and ideas Many people think a product is tangible, but this definition suggests otherwise.

Points-of-Differenceand Points-of-Parity

Attributes/benefits that consumers strongly associate with a brand, positively evaluate, and believe they could not find to the same extent with a competitive brand POD- Desirable, deliverable, differentiating POP- Attribute/benefit associations that are not necessarily unique to the brand but may in fact be shared with other brands

The digital channels revolution

Customer support in store/online/phone Check online for product availability at local stores Order product online to pick up at store Return a product purchased online to a nearby store The digital revolution is profoundly transforming distribution strategies. With customers—both individuals and businesses—becoming more comfortable buying online and the use of smart phones exploding, traditional brick-and-mortar channel strategies are being modified or even replaced. Customers want the advantages both of digital—vast product selection, abundant product information, helpful customer reviews and tips—and of physical stores—highly personalized service, detailed physical examination of products, an overall event and experience.

Evaluation Continuum for Product types

Customers typically cannot judge the technical quality of some services even after they have received them. Figure 14.1 shows various products and services according to difficulty of evaluation.6 At the left are goods high in search qualities—that is, characteristics the buyer can evaluate before purchase. In the middle are goods and services high in experience qualities—characteristics the buyer can evaluate after purchase. At the right are goods and services high in credence qualities—characteristics the buyer normally finds hard to evaluate even after consumption.

Inelastic And Elastic Demand

Each price will lead to a different level of demand and have a different impact on a company's marketing objectives. The normally inverse relationship between price and demand is captured in a demand curve (see Figure 16.1): The higher the price, the lower the demand. For prestige goods, the demand curve sometimes slopes upward. Some consumers take the higher price to signify a better product. However, if the price is too high, demand may fall. Consider the two demand curves in Figure 16.1. In demand curve (a), a price increase from $10 to $15 leads to a relatively small decline in demand from 105 to 100. In demand curve (b), the same price increase leads to a substantial drop in demand from 150 to 50. If demand hardly changes with a small change in price, we say it is inelastic. If demand changes considerably, it is elastic. Prices are less sensitive when the product is distinctive; customers aren't aware of alternatives; cant easily compare alternatives, is a small part of the buyer's income; prestige, can't store it, part of the cost is borne by another party

Product Differentiation

Form Many products can be differentiated in form—the size, shape, or physical structure of a product. Features Most products can be offered with varying features that supplement their basic function. Performance Quality Most products occupy one of four performance levels: low, average, high, or superior. Performance quality is the level at which the product's primary characteristics operate. Conformance Quality Buyers expect a high conformance quality, the degree to which all produced units are identical and meet promised specifications. Durability Durability, a measure of the product's expected operating life under natural or stressful conditions, is a valued attribute for vehicles, kitchen appliances, and other durable goods. Reliability Buyers normally will pay a premium for more reliable products. Reliability is a measure of the probability that a product will not malfunction or fail within a specified time period. Repairability Repairability measures the ease of fixing a product when it malfunctions or fails. Ideal repairability would exist if users could fix the product themselves with little cost in money or time. Style Style describes the product's look and feel to the buyer and creates distinctiveness that is hard to copy. Customization As Chapter 9 described, customized products and marketing allow firms to be highly relevant and differentiating by finding out exactly what a person wants—and doesn't want—and delivering on that.

Design the Communications

Formulating the communications to achieve the desired response requires answering three questions: what to say (message strategy), how to say it (creative strategy), and who should say it (message source). Message Strategy In selecting message strategy, management searches for appeals, themes, or ideas that will tie in to the brand positioning and help establish points-of-parity or points-of-difference. Some of these appeals or ideas may relate directly to product or service performance (the quality, economy, or value of the brand); others may relate to more extrinsic considerations (the brand as being contemporary, popular, or traditional). Creative Strategy Communications effectiveness depends on how well a message is expressed as well as on its content. If a communication is ineffective, it may mean the wrong message was used or the right one was poorly expressed. Creative strategies are the way marketers translate their messages into a specific communication. We can broadly classify them as either informational or transformational appeals. An informational appeal elaborates on product or service attributes or benefits. A transformational appeal elaborates on a nonproduct-related benefit or image. Message Source Research has shown that the source's credibility is crucial to a message's acceptance. The three most often identified sources of credibility are expertise, trustworthiness, and likability. Expertise is the specialized knowledge the communicator possesses to back the claim. Trustworthiness describes how objective and honest the source is perceived to be. Friends are trusted more than strangers or salespeople, and people who are not paid to endorse a product are viewed as more trustworthy than people who are paid. Likability describes the source's attractiveness, measured in terms of candor, humor, and naturalness.

Characteristicsof Services

Four distinctive service characteristics greatly affect the design of marketing programs: intangibility, inseparability, variability, and perishability.

Perceptual Map

High Quality Low Price High Price Low Quality

Establish the Marketing Communications Budget

How do companies set their communications budgets? We will describe four common methods: the affordable method, the percentage-of-sales method, the competitive-parity method, and the objective-and-task method. Affordable Method Some companies set the communications budget at what they think they can afford. Percentage-of-Sales Method Some companies set communication expenditures at a specified percentage of current or anticipated sales or of the sales price. Competitive-Parity Method Some companies set their communications budgets to achieve share-of-voice parity with competitors. Objective-and-Task Method The most defensible approach, the objective-and-task method, calls upon marketers to develop communications budgets by defining specific objectives, identifying the tasks that must be performed to achieve these objectives, and estimating the costs of performing them. The sum of these costs is the proposed communications budget.

Sales Force Objectives and Strategy

In performing their jobs, salespeople complete one or more specific tasks: Prospecting. Searching for prospects or leads Targeting. Deciding how to allocate their time among prospects and customers Communicating. Communicating information about the company's products and services Selling. Approaching, presenting, answering questions, overcoming objections, and closing sales Servicing. Providing various services to the customers—consulting on problems, rendering technical assistance, arranging financing, expediting delivery Information gathering. Conducting market research and doing intelligence work Allocating. Deciding which customers will get scarce products during product shortages

Ways to Find New-Product Ideas

Informal customer sessions Time off for technical people to putter Customer brainstorming Survey your customers "Fly on the wall" research Iterative rounds with customers Keyword search to scan trade publications Treat trade shows as intelligence missions Have employees visit supplier labs Set up an idea vault

Creative Strategy

Informational appeals One-sided vs. two-sided arguments Transformational appeals Negative/fear vs. positive appeals You might expect one-sided presentations that praise a product to be more effective than two-sided arguments that also mention shortcomings. Yet two-sided messages may be more appropriate, especially when negative associations must be overcome. Two-sided messages are more effective with more educated audiences and those who are initially opposed. The order in which arguments are presented is important. In a one-sided message, presenting the strongest argument first arouses attention and interest, important in media where the audience often does not attend to the whole message. With a captive audience, a climactic presentation might be more effective. For a two-sided message, if the audience is initially opposed, start with the other side's argument and conclude with your strongest argument. Communicators use negative appeals such as fear, guilt, and shame to get people to do things (brush their teeth, have an annual health checkup) or stop doing things (smoking, abusing alcohol, overeating). Fear appeals work best when they are not too strong, when source credibility is high, and when the communication promises, in a believable and efficient way, that the product or service will relieve the fear it arouses. Messages are most persuasive when they moderately disagree with audience beliefs. Stating only what the audience already believes at best just reinforces beliefs, while messages too much at variance with those beliefs will be rejected. Communicators also use positive emotional appeals such as humor, love, pride, and joy. Motivational or "borrowed interest" devices—such as cute babies, frisky puppies, popular music, and provocative sex appeals—are often employed to attract attention and raise involvement with an ad.

Organizing New-Product Development

Large companies often establish a new-product department headed by a manager with substantial authority, access to top management, and responsibility for generating and screening new ideas, working with the R&D department, and carrying out field testing and commercialization. 3M, Dow, and General Mills have assigned new-product development to venture teams, cross-functional groups charged with developing a specific product or business. These "intrapreneurs" are relieved of other duties and given a budget, time frame, and "skunkworks" setting. Skunkworks are informal workplaces, sometimes garages, where intrapreneurial teams work to develop new products. Communities of practice are often housed on internal Web sites where employees from different departments are encouraged to share knowledge and skills with others. The Internet lets companies engage external participants in the new-product development process in rich and meaningful ways. Through crowdsourcing, these paid or unpaid outsiders can offer needed expertise or a different perspective on a task or project that might otherwise be overlooked. Many top companies use the stage-gate system to divide the innovation process into stages, with a gate or checkpoint at the end of each.46 The project leader, working with a cross-functional team, must bring a set of known deliverables to each gate before the project can pass to the next stage. To move from the business plan stage into product development requires a convincing market research study of consumer needs and interest, a competitive analysis, and a technical appraisal. Senior managers review the criteria at each gate to make one of four decisions: go, kill, hold, or recycle.

The communications process models

Macromodel of the communications process Micromodel of consumer responses

Major Media Time Spent Per Day

Marketers must go where the customers are, and increasingly that's online. Of the time U.S. consumers spend with all media, almost half is spent online (see Figure 21.1). Customers define the rules of engagement, however, and insulate themselves with the help of agents and intermediaries if they so choose. They define what information they need, what offerings they're interested in, and what they're willing to pay. Digital advertising continues to show much more rapid growth than traditional media. In fact, total digital ad spending in 2013 was estimated to have grown to $42.8 billion, which meant it surpassed TV advertising (at $40.1 billion) for the first time.

Marketing Channelsand Value Networks

Marketing channels Sets of interdependent organizations participating in the process of making a product or service available for use or consumption Intermediaries: merchants, agents, and facilitators

Components of Marketing Offering

Marketing planning begins with formulating an offering to meet target customers' needs or wants. The customer will judge the offering on three basic elements: product features and quality, service mix and quality, and price

Ways to draw new ideas from customers

Observe customers using product Ask customers about product problems Ask customers about dream products Use customer advisory board Use Web sites Form brand community of enthusiasts Challenge customers to improve product

Ad lib value proposition template

Our _____________ (Products and Services) help(s) __________ (Customer Segment) who want to _________________ (jobs to be done) by ______ ________ (verb (e.g., reducing, avoiding) and a customer pain) and_____________. (verb (e.g., increasing, enabling) and a customer gain) unlike __________

Select the communications channels

Personal communications channels let two or more persons communicate face to face or person to audience through a phone, surface mail, or e-mail. They derive their effectiveness from individualized presentation and feedback and include direct marketing, personal selling, and word of mouth. We can draw a further distinction between advocate, expert, and social communications channels. Advocate channels consist of company salespeople contacting buyers in the target market. Expert channels consist of independent experts making statements to target buyers. Social channels consist of neighbors, friends, family members, and associates talking to target buyers. Nonpersonal channels are communications directed to more than one person and include advertising, sales promotions, events and experiences, and public relations. Integration of Communications Channels Although personal communication is often more effective than mass communication, mass media might be the major means of stimulating it. Mass communications affect personal attitudes and behavior through a two-step process. Ideas often first flow from radio, television, and print to opinion leaders or consumers highly engaged with media and then from these influencers to less media-involved population groups.

Determining Demand

Price Sensitivity The demand curve shows the market's probable purchase quantity at alternative prices, summing the reactions of many individuals with different price sensitivities. The first step in estimating demand is to understand what affects price sensitivity. Generally speaking, customers are less price sensitive to low-cost items or items they buy infrequently. They are also less price sensitive when (1) there are few or no substitutes or competitors; (2) they do not readily notice the higher price; (3) they are slow to change their buying habits; (4) they think the higher prices are justified; and (5) price is only a small part of the total cost of obtaining, operating, and servicing the product over its lifetime. Estimating Demand Curves Most companies attempt to measure their demand curves using several different methods. Surveys can explore how many units consumers would buy at different proposed prices. Price experiments can vary the prices of different products in a store or of the same product in similar territories to see how the change affects sales. Statistical analysis of past prices, quantities sold, and other factors can reveal their relationships. Price Elasticity of Demand Marketers need to know how responsive, or elastic, demand is to a change in price.

Durability and Tangibility

Products fall into three groups according to durability and tangibility: 1. Nondurable goods are tangible goods normally consumed in one or a few uses, such as beer and shampoo. Because these goods are purchased frequently, the appropriate strategy is to make them available in many locations, charge only a small markup, and advertise heavily to induce trial and build preference. 2. Durable goods are tangible goods that normally survive many uses: refrigerators, machine tools, and clothing. They normally require more personal selling and service, command a higher margin, and require more seller guarantees. 3. Services are intangible, inseparable, variable, and perishable products that normally require more quality control, supplier credibility, and adaptability. Examples include haircuts, legal advice, and appliance repairs.

Consumer Psychology and Pricing

Purchase decisions are based on how consumers perceive prices and what they consider the current actual price to be—not on the marketer's stated price. Customers may have a lower price threshold, below which prices signal inferior or unacceptable quality, and an upper price threshold, above which prices are prohibitive and the product appears not worth the money. Different people interpret prices in different ways. Reference Prices Although consumers may have fairly good knowledge of price ranges, surprisingly few can accurately recall specific prices. When examining products, however, they often employ reference prices, comparing an observed price to an internal reference price they remember or an external frame of reference such as a posted "regular retail price." When consumers evoke one or more of these frames of reference, their perceived price can vary from the stated price. Fair price, typical price, last price paid, competitor price All types of reference prices are possible (see Table 16.1), and sellers often attempt to manipulate them. For example, a seller can situate its product among expensive competitors to imply that it belongs in the same class. Department stores will display women's apparel in separate departments differentiated by price; dresses in the more expensive department are assumed to be of better quality. Marketers also encourage reference-price thinking by stating a high manufacturer's suggested price, indicating that the price was much higher originally, or by pointing to a competitor's high price. Price-Quality Inferences Many consumers use price as an indicator of quality. Image pricing is especially effective with ego-sensitive products such as perfumes, expensive cars, and designer clothing. Price Endings Many sellers believe prices should end in an odd number. Customers perceive an item priced at $299 to be in the $200 rather than the $300 range; they tend to process prices "left to right" rather than by rounding.24 Price encoding in this fashion is important if there is a mental price break at the higher, rounded price. Another explanation for the popularity of "9" endings is that they suggest a discount or bargain, so if a company wants a high-price image, it should probably avoid the odd-ending tactic.

Organizational Arrangements

R&D outcomes are so uncertain that it is difficult to use normal investment criteria when budgeting for new- product development. Some companies simply finance as many projects as possible, hoping to achieve a few winners. Others apply a conventional percentage-of-sales figure or spend what the competition spends. Still others decide how many successful new products they need and work backward to estimate the required investment. Table 15.1 shows how a company might calculate the cost of new-product development.

Designing the Sales Force

Salespeople are the company's personal link to its customers. In designing the sales force, the company must develop sales force objectives, strategy, structure, size, and compensation

positioning

The act of designing a company's offering and image to occupy a distinctive place in the minds of the target market

Service distinctions

Services are equipment-based (automated car washes, vending machines) or people-based (window washing, accounting services). People-based services vary by whether unskilled, skilled, or professional workers provide them. • Service companies can choose among different processes to deliver their service. Restaurants offer cafeteriastyle, fast-food, buffet, and candlelight service formats. • Some services need the client's presence. Brain surgery requires the client's presence; a car repair does not. If the client must be present, the service provider must be considerate of his or her needs. Thus beauty salon operators will invest in décor, play background music, and engage in light conversation with the client. • Services may meet a personal need (personal services) or a business need (business services). Service providers typically develop different marketing programs for these markets. • Service providers differ in their objectives (profit or nonprofit) and ownership (private or public). These two characteristics, when crossed, produce four quite different types of organizations. The marketing programs of a private investor hospital will differ from those of a private charity hospital or a Veterans Administration hospital.

Perishability

Services cannot be stored, so their perishability can be a problem when demand fluctuates. Demand or yield management is critical—the right services must be available to the right customers at the right places at the right times and right prices to maximize profitability. Several strategies can produce a better match between service demand and supply.20 On the demand (customer) side: • Differential pricing will shift some demand from peak to off-peak periods. Examples include low matinee movie prices and weekend discounts for car rentals. • Nonpeak demand can be cultivated. McDonald's pushes breakfast service, and hotels promote minivacation weekends. • Complementary services can provide alternatives to waiting customers, such as cocktail lounges in restaurants and automated teller machines in banks. • Reservation systems are a way to manage the demand level. Airlines, hotels, and physicians employ them extensively. On the supply side: • Part-time employees can serve peak demand. Colleges add part-time teachers when enrollment goes up; stores hire extra clerks during holiday periods. • Peak-time efficiency routines can allow employees to perform only essential tasks during peak periods. Paramedics assist physicians during busy periods. • Increased consumer participation frees service providers' time. Consumers fill out their own medical records or bag their own groceries. • Shared services can improve offerings. Several hospitals can share medical-equipment purchases. • Facilities for future expansion can be a good investment. An amusement park might buy surrounding land for later development.

Selecting the Pricing Objective

The company first decides where it wants to position its market offering. The clearer a firm's objectives, the easier it is to set price. Five major objectives are: survival, maximum current profit, maximum market share, maximum market skimming, and product-quality leadership. Survival Companies pursue survival as their major objective if they are plagued with overcapacity, intense competition, or changing consumer wants. As long as prices cover variable costs and some fixed costs, the company stays in business. Maximum Current Profit Many companies try to set a price that will maximize current profits. They estimate the demand and costs associated with alternative prices and choose the price that produces maximum current profit, cash flow, or rate of return on investment. Maximum Market Share Some companies want to maximize their market share. They believe a higher sales volume will lead to lower unit costs and higher long-run profit, so they set the lowest price, assuming the market is price sensitive. Texas Instruments famously practiced this market-penetration pricing for years. The company would build a large plant, set its price as low as possible, win a large market share, experience falling costs, and cut its price further as costs fell. Maximum Market Skimming Companies unveiling a new technology favor setting high prices to maximize market skimming. Sony has been a frequent practitioner of market-skimming pricing, in which prices start high and slowly drop over time. Product-Quality Leadership A company might aim to be the product-quality leader in the market. Many brands strive to be "affordable luxuries"—products or services characterized by high levels of perceived quality, taste, and status with a price just high enough not to be out of consumers' reach. Other Objectives Nonprofit and public organizations may have other pricing objectives. A university aims for partial cost recovery, knowing that it must rely on private gifts and public grants to cover its remaining costs. A nonprofit hospital may aim for full cost recovery in its pricing. A nonprofit theater company may price its productions to fill the maximum number of seats. A social service agency may set a service price geared to client income.

Services Differentiation

The main service differentiators are ordering ease, delivery, installation, customer training, customer consulting, maintenance and repair, and returns. Ordering Ease Ordering ease describes how easy it is for the customer to place an order with the company. Delivery Delivery refers to how well the product or service is brought to the customer, including speed, accuracy, and care throughout the process. Installation Installation refers to the work done to make a product operational in its planned location. Customer Training Customer training helps the customer's employees use the vendor's equipment properly and efficiently. Customer Consulting Customer consulting includes data, information systems, and advice services the seller offers to buyers. Maintenance and Repair Maintenance and repair programs help customers keep purchased products in good working order. These services are critical in business-to-business settings. Returns A nuisance to customers, manufacturers, retailers, and distributors alike, product returns are also an unavoidable reality of doing business, especially in online purchases. Free shipping, growing more popular, makes it easier for customers to try out an item, but it also increases the likelihood of returns. Controllable returns result from problems or errors made by the seller or customer and can mostly be eliminated with improved handling or storage, better packaging, and improved transportation and forward logistics by the seller or its supply chain partners. Uncontrollable returns result from the need for customers to actually see, try, or experience products in person to determine suitability and can't be eliminated by the company in the short run.

Marketing Communications Mix

The marketing communications mix consists of eight major modes of communication: 1. Advertising—Any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor via print media (newspapers and magazines), broadcast media (radio and television), network media (telephone, cable, satellite, wireless), electronic media (audiotape, videotape, videodisk, CD-ROM, Web page), and display media (billboards, signs, posters). 2. Sales promotion—A variety of short-term incentives to encourage trial or purchase of a product or service including consumer promotions (such as samples, coupons, and premiums), trade promotions (such as advertising and display allowances), and business and sales force promotions (contests for sales reps). 3. Events and experiences—Company-sponsored activities and programs designed to create daily or special brand-related interactions with consumers, including sports, arts, entertainment, and cause events as well as less formal activities. 4. Public relations and publicity—A variety of programs directed internally to employees of the company or externally to consumers, other firms, the government, and media to promote or protect a company's image or its individual product communications. 5. Online and social media marketing—Online activities and programs designed to engage customers or prospects and directly or indirectly raise awareness, improve image, or elicit sales of products and services. 6. Mobile marketing—A special form of online marketing that places communications on consumer's cell phones, smart phones, or tablets. 7. Direct and database marketing—Use of mail, telephone, fax, e-mail, or Internet to communicate directly with or solicit response or dialogue from specific customers and prospects. 8. Personal selling—Face-to-face interaction with one or more prospective purchasers for the purpose of making presentations, answering questions, and procuring orders.

Marketing communications

The means by which firms attempt to inform, persuade, and remind consumers about the products and brands they sell

Message source

The most credible source will score high on all three dimensions—expertise, trustworthiness, and likability. If a person has a positive attitude toward a source and a message or a negative attitude toward both, a state of congruity is said to exist. But what happens if a consumer hears a likable celebrity praise a brand she dislikes? Charles Osgood and Percy Tannenbaum believe attitude change will take place that increases the amount of congruity between the two evaluations. The consumer will end up respecting the celebrity somewhat less or the brand somewhat more. If she encounters the same celebrity praising other disliked brands, she will eventually develop a negative view of the celebrity and maintain negative attitudes toward the brands. The principle of congruity implies that communicators can use their good image to reduce some negative feelings toward a brand but in the process might lose some esteem with the audience.

Generating Ideas

The new-product development process starts with the search for ideas. Some marketing experts believe we find the greatest opportunities and highest leverage for new products by uncovering the best possible set of unmet customer needs or technological innovation. New-product ideas can in fact come from interacting with various groups and using creativity-generating techniques. Employees can be a source of ideas for improving production, products, and services. Top management can be another major source of ideas. Encouraged by the open innovation movement, many firms are going outside their bounds to tap external sources of new ideas, including customers, scientists, engineers, patent attorneys, university and commercial laboratories, industrial consultants and publications, channel members, marketing and advertising agencies, and even competitors. Companies can find good ideas by researching the products and services of competitors and other companies. They can find out what customers like and dislike about competitors' products. They can buy their competitors' products, take them apart, and build better ones. They can ask their own sales representatives and intermediaries for ideas. Internal brainstorming sessions also can be quite effective—if conducted correctly.

A marketing channel system

The particular set of marketing channels a firm employs Push vs. pull strategy One of the chief roles of marketing channels is to convert potential buyers into profitable customers. Marketing channels must not just serve markets, they must also make them. In managing its intermediaries, the firm must decide how much effort to devote to push and to pull marketing. A push strategy uses the manufacturer's sales force, trade promotion money, or other means to induce intermediaries to carry, promote, and sell the product to end users. In a pull strategy the manufacturer uses advertising, promotion, and other forms of communication to persuade consumers to demand the product from intermediaries, thus inducing the intermediaries to order it.

Developing Effective Communications

The process must start with a clear target audience in mind: potential buyers of the company's products, current users, deciders, or influencers, as well as individuals, groups, particular publics, or the general public. The target audience is a critical influence on the communicator's decisions about what to say, how, when, where, and to whom. Set the Communications Objectives Establish need for category—Establishing a product or service category as necessary for removing or satisfying a perceived discrepancy between a current motivational state and a desired motivational state. 2. Build brand awareness—Fostering the consumer's ability to recognize or recall the brand in sufficient detail to make a purchase. 3. Build brand attitude—Helping consumers evaluate the brand's perceived ability to meet a currently relevant need. 4. Influence brand purchase intention—Moving consumers to decide to purchase the brand or take purchase-related action.

Variability

The quality of services depends on who provides them, when and where, and to whom As such, services are highly variable

Direct Marketing

The use of consumer-direct (CD) channels to reach and deliver goods and services to customers without using marketing middlemen Direct marketers can use a number of channels to reach individual prospects and customers: direct mail, catalog marketing, telemarketing, interactive TV, kiosks, Web sites, and mobile devices. They often seek a measurable response, typically a customer order, through direct-order marketing. Direct marketing can reach prospects at the moment they want a solicitation and therefore be noticed by more highly interested prospects. It lets marketers test alternate media and messages to find the most cost-effective approach. Direct marketing also makes the company's offer and strategy less visible to competitors. Finally, direct marketers can measure responses to their campaigns to decide which have been the most profitable. Direct-mail marketing means sending an offer, announcement, reminder, or other item to an individual consumer. Using highly selective mailing lists, direct marketers send out millions of mail pieces each year—letters, fliers, foldouts, and other "salespeople with wings." In catalog marketing, companies may send full-line merchandise catalogs, specialty consumer catalogs, and business catalogs, usually in print form but also as DVDs or online. Telemarketing is the use of the telephone and call centers to attract prospects, sell to existing customers, and provide service by taking orders and answering questions. It helps companies increase revenue, reduce selling costs, and improve customer satisfaction. Companies use call centers for inbound telemarketing—receiving calls from customers—and outbound telemarketing—initiating calls to prospects and customers. Direct marketers use all the major media. Newspapers and magazines carry ads offering books, clothing, appliances, vacations, and other goods and services that individuals can order via toll-free numbers. Radio ads present offers 24 hours a day. Some companies prepare 30- and 60-minute infomercials to combine the selling power of television commercials with the draw of information and entertainment. At-home shopping channels are dedicated to selling goods and services through a toll-free number or via the Internet for delivery within 48 hours.

A Sales Marketing Exchange

Too often marketing and sales are in conflict: the sales force complains marketing isn't generating enough leads, and marketers complain the sales force isn't converting them. Improved collaboration and communication between these two can increase revenues and profits.

Elements in Communication Process

Two represent the major parties—sender and receiver. Two represent the major tools—message and media. Four represent major communication functions—encoding, decoding, response, and feedback. The last element in the system is noise, random and competing messages that may interfere with the intended communication. Senders must know what audiences they want to reach and what responses they want to get. They must encode their messages so the target audience can successfully decode them. They must transmit the message through media that reach the target audience and develop feedback channels to monitor the responses. The more the sender's field of experience overlaps that of the receiver, the more effective the message is likely to be. Note that selective attention, distortion, and retention processes—first introduced in Chapter 6—may be operating.

Intangibility

Unlike physical products, services cannot be seen, tasted, felt, heard, or smelled before they are bought. A person getting cosmetic surgery cannot see the results before the purchase, and the patient in the psychiatrist's office cannot know the exact outcome of treatment. To reduce uncertainty, buyers will look for evidence of quality by drawing inferences from the place, people, equipment, communication material, symbols, and price. Service companies can try to demonstrate their service quality through physical evidence and presentation. Disney is a master at "tangibilizing the intangible" and creating magical fantasies in its theme parks; so are retailers such as Toys "R" Us and Bass Pro Shops. Table 14.1 measures brand experiences along sensory, affective, behavioral, and intellectual dimensions. Applications to services are clear.

Multichannel marketing

Using two or more marketing channels to reach customer segments in one market area Omnichannel marketing Each channel can target a different segment of buyers, or different need states for one buyer, to deliver the right products in the right places in the right way at the least cost. When this doesn't happen, channel conflict, excessive cost, or insufficient demand can result. Research has shown that multichannel customers can be more valuable to marketers. Most companies today have adopted multichannel marketing. Nike - direct on website; and in Finish Line; and in Kohl's. Companies are increasingly employing digital distribution strategies, selling directly online to customers or through e-merchants who have their own Web sites. In doing so, these companies are seeking to achieve omnichannel marketing, in which multiple channels work seamlessly together and match each target customer's preferred ways of doing business, delivering the right product information and customer service regardless of whether customers are online, in the store, or on the phone. Ex: Kohls - online order, pickup in store; Home Depot An integrated marketing channel system is one in which the strategies and tactics of selling through one channel reflect the strategies and tactics of selling through one or more other channels.

Categories of online marketing communications

Web sites Search ads Display ads e-mail

Inseparability

Whereas physical goods are manufactured, then inventoried, then distributed, and later consumed, services are typically produced and consumed simultaneously. A haircut can't be stored— or produced without the barber. Several strategies exist for getting around the limitations of inseparability. The service provider can work with larger groups. The service organization can train more service providers and build up client confidence, as H&R Block has done with its national network of trained tax consultants.

Channel levels

Zero-level channel (direct) One/two/three-level channels (intermediaries)

Value proposition

examples: company- hertz ( rental car) target customers- busy professionals value proposition- fast and convenient way to rent the right type of car at the airport company- dominos target customers- convenience minded pizza lovers value prop- delicious hot pizza delivered promptly at your door