Week 3

Marketing Mix – 4P’s

Marketing Plan Elements

SWOT Analysis ©South-Western College Publishing S S W W O O T T Things the company does well. Things the company does not do well. Conditions in the external environment that favor strengths. Conditions in the external environment that do not relate to existing strengths or favor areas of current weakness. Internal External

Scanning the Marketing Environment The process of continually acquiring/interpreti ng info on the events occurring outside the organization to identify and interpret potential trends.

Scanning the Marketing Environment

Political and Legal Environment of Marketing

Federal Legislation Sherman Act Clayton Act Federal Trade Commission Act Celler-Kefauver Antimerger Act Hart-Scott-Rodino Act Sherman Act Clayton Act Federal Trade Commission Act Celler-Kefauver Antimerger Act Hart-Scott-Rodino Act Regulate competitive environment Robinson-Patman Act Regulate pricing practices Wheeler-Lea Act Control false advertising

Regulatory Agencies Consumer Product Safety Commission Federal Trade Commission Food & Drug Administration Protects consumer safety in and around their homes Prevents unfair methods of competition in commerce Enforces safety regulations for food and drug products

Chapter 5: Developing a Global Vision

Rewards of Global Marketing Having a global vision means… Recognizing and reacting to international marketing opportunities Using effective global marketing strategies Being aware of threats from foreign competitors

Importance of Global Marketing to the U. S. U.S. exports a fifth of industrial production. One of every 5 jobs in U.S. is supported by exports. Every U.S. state has realized net employment gains directly attributed to foreign trade. U.S. businesses export over $800 billion in goods. Exports account for 25 percent of U.S. economic growth. U.S. is world’s leading exporter of farm products. Chemicals, office machinery and computers, automobiles, aircraft, and electrical and industrial machinery make up almost half of all nonagricultural exports About half of U.S. merchandise imports are raw materials, capital goods, and industrial products

The Fear of Trade and Globalization Millions of Americans have lost jobs Millions fear losing jobs Threat of outsourcing if workers do not accept pay cuts Vulnerability to operations moving offshore

Benefits of Globalization Expands economic freedom Spurs competition Raises productivity and living standards Offers access to foreign capital, global export markets, and advanced technology Promotes higher labor and environmental standards Acts as a check on government power

Stages of Global Business Development Companies operate in one country and sell into others Set up foreign subsidiaries to handle sales Virtual operation Operate an entire line of business in another country

External Environment Facing Global Marketers Natural Resources Demographic Makeup Economic and Technological Development Culture Political Structure

External Environment Facing Global Marketers

Political Structure and Actions No private ownership Minimal individual freedom Little central government Maximum personal freedom Government policies

Legal Considerations Tariff Quota Boycott Exchange Control Market Grouping Trade Agreement A tax levied on goods entering a country Limit on the amount of a product entering a country Exclusion of products from a country Foreign exchange must be sold to a control agency Common trade alliance An agreement to stimulate international trade

The Uruguay Round made changes in world trading practices: Political and Legal Considerations Entertainment, pharmaceuticals, integrated circuits, and software Financial, legal, and accounting services Agriculture Textiles and apparel Created a new trade organization: The World Trade Organization

Political and Legal Considerations CAFTA NAFTA European Union Agreements and Organizations

Demographic Makeup Marketing Considerations: Population density Urban or rural Personal income Age

Natural Resources Petroleum Foodstuffs Precious metal Timber Water

Shortages in Natural Resources Create… International dependencies Shifts of wealth Inflation and recession Export opportunities if resources are abundant Stimulus for military intervention

Global Marketing Questions What are our options in selling abroad? How difficult is global marketing? What are the potential risks and returns?

Why “Go Global”? Earn additional profits Leverage a unique product or technological advantage Possess exclusive market information Saturated domestic markets Excess capacity Utilize “economies of scale”

Risk Levels for Global Entry Return Risk

Entering the Global Marketplace Licensing Legal process allowing use of manufacturing/patents/knowledge Contract Manufacturing Private-label manufacturing by a foreign country Joint Venture Domestic firm buys/joins a foreign company to create new entity Export Sell domestically produced products to buyers in other countries Direct Investment Active ownership of a foreign company/manufacturing facility

Export Intermediaries Buyer for Export Assumes all ownership risks and sells globally for its own account. Export Broker Plays the traditional broker’s role by bringing buyer and seller together. Export Agent Acts like a manufacturer’s agent for the exporter in the foreign market.

Global Marketing Mix One Product One Message Product Adaptation Promotion Adaptation Product InventionSameProductSameMessage ChangeMessageChangeProduct

Place (Distribution) Adequate distribution is necessary for success in global markets – Some countries have complicated systems – Lack of distribution infrastructure and cultural differences create problems Innovative distribution systems can create competitive advantage

Pricing Must consider transportation and insurance costs, taxes, and tariffs Determine what customers will spend Ensure that foreign buyers will pay price May need to simplify a product to lower price Don’t assume that low-income countries are willing to accept lower quality

The Impact of the Internet

Chapter 6: Consumer Decision Making

Understanding Consumer Behavior Consumer behavior consumers make purchase decisions consumers use and dispose of product = HOW Processes a consumer uses to make purchase decisions, as well as to use and dispose of purchased goods or services, also includes factors that influence purchase decisions and the product use.

Consumer Decision-Making Process Postpurchase Behavior Postpurchase Behavior Purchase Evaluation of Alternatives Evaluation of Alternatives Information Search Need Recognition Cultural, Social, Individual and Psychological Factors affect all steps Cultural, Social, Individual and Psychological Factors affect all steps

Need Recognition Marketing helps consumers recognize an imbalance between present status and preferred state. Present Status Present Status Preferred State Internal Stimuli External Stimuli

Recognition of Unfulfilled Wants When a current product isn’t performing properly When the consumer is running out of a product When another product seems superior to the one currently used

Information Search Internal Information Search  Recall information in memory External Information search  Seek information in outside environment  Nonmarketing controlled  Marketing controlled

External Information Searches Need More Information More Risk Less knowledge Less product experience High level of interest Lack of confidence Less Risk More knowledge More product experience Low level of interest Confidence in decision Need Less Information

Evaluation of Alternatives and Purchase Evoked Set Purchase! Analyze product attributes Rank attributes by importance Rank attributes by importance Use cutoff criteria

Consumer Decision-Making Process CULTURAL SOCIAL PSYCHOLOGICAL INDIVIDUAL Need Recognition 1 Information Search 2 Evaluate Alternatives 3 Purchase 4

Consumer postpurchase evaluation process Marketers can minimize cognitive dissonance through:  Effective Communication Follow-up  Guarantees, Warranties  Service during and after the sale

Consumer Buying Decisions and Consumer Involvement More Involvement Less Involvement Routine Response Behavior Routine Response Behavior Limited Decision Making Limited Decision Making Extensive Decision Making Extensive Decision Making

Five Factors of Consumer Involvement 1. Level of consumer involvement 2. Length of time to make decision 3. Cost of good or service 4. Degree of information search 5. Number of alternatives considered

Continuum of Consumer Buying Decisions

Routine Response Behavior Little involvement in selection process Frequently purchased low cost goods May stick with one brand Buy first/evaluate later Quick decision

Limited Decision Making Low levels of involvement Low to moderate cost goods Evaluation of a few alternative brands Short to moderate time to decide

Extensive Decision Making High levels of involvement High cost goods Evaluation of many brands Long time to decide May experience cognitive dissonance

Factors Determining the Level of Consumer Involvement Situation Social Visibility Interest Perceived Risk of Negative Consequences Previous Experience

Marketing Implications of Involvement High-involvement purchases require: Extensive and informative promotion to target market Low-involvement purchases require: In-store promotion, eye-catching package design, and good displays. Coupons, cents-off, 2-for-1 offers

Factors Influencing Buying Decisions Social Factors Individual Factors Psycho- logical Factors Cultural Factors CONSUMER DECISION- MAKING PROCESS BUY / DON’T BUY

Components of Culture Sets of values, norms, attitudes, and other meaningful symbols that shape human behavior and the artifacts, or products, of that behavior as they are transmitted from one generation to the next. Values Language Myths Customs Rituals Laws Material artifacts It is… Pervasive Functional Learned Dynamic

Value Enduring belief that a specific mode of conduct is personally or socially preferable to another mode of conduct. American Values Success Materialism Freedom Progress Youth Capitalism

Subculture A homogeneous group of people who share elements of the overall culture as well as unique elements of their own group.

Social Class A group of people in a society who are considered nearly equal in status or community esteem, who regularly socialize among themselves both formally and informally, and who share behavioral norms. Occupation Income Education Wealth Other variables 1.Indicates which medium to use for advertising 2.Helps determine the best distribution for products

Social Class and Education Source: U.S. Census, available at May 2005.

Social Influences on Consumer Buying Decisions Identify and understand the social factors that affect consumer buying decisions. Reference groups Opinion leaders Family members

Reference Groups Direct Indirect Primary Secondary Aspirational Nonaspirational

Social Factors DirectIndirect Reference Groups PrimarySecondaryAspirationalNonaspirational Opinion Leaders People you know Socialization Process Family Celebrities InitiatorsDecision MakersConsumers InfluencersPurchasers

Relationships among Purchasers and Consumers in the Family

Individual Influences on Consumer Buying Decisions Gender Age Life cycle Personality, self- concept Lifestyle Perception Motivation Learning Beliefs & Attitudes

Marketing Implications of Perception Important attributes Price Brand names Quality and reliability Threshold level of perception Product or repositioning changes Foreign consumer perception Subliminal perception

Motivation: Maslow’s Hierarchy of Needs

Discussion Wrap Up Assignments due next week Review schedule