CH-1 Overview of Marketing – Marketing : Book Guide

Chapter One: Overview of Marketing TOOLS FOR INSTRUCTORS • Learning Objectives • Annotated Chapter Outline with Instructor’s Notes/Teaching Tips • Answers to End of Chapter Learning Aids Concept Review Marketing Application Questions Net Savvy Chapter Case Study • Video Activities Learning Objectives 1. Define the role of marketing and explain its core concepts 2. Describe how marketers create value for a product or service 3. Summarize the four orientations of marketing 4. Understand the importance of marketing both within and outside the firm Annotated Chapter Outline PowerPoint Slides Instructor’s Notes Opening Vignette: Tim Hortons Tim Hortons is one of Canada’s beloved brands, with a long history of successful new product introductions. In spite of fierce competition in the coffee and donut market, the company continues to build and retain its loyal customer base. It ranked number one in a Reputation Institute’s survey of Canada’s top brands. Tim Hortons gives back to the communities it serves through its Camp Day program and involvement as a minor sports sponsor. Ask students: Describe the value Tim Hortons provides customers. What do you consider are the main reasons for Tim Hortons’ growth and success? Answer: (1) It continually introduces new products and services that appeal to customer, (2) it ranks as a top Canadian brand, (3) it gives back to communities through many corporate social responsibility and sustainability endeavours, (4) it runs many popular promotions, and (5) it connects with consumers through social media initiatives. LO1: What is Marketing? 1. Marketing is a set of business practices designed to plan for and present an organization’s products or services in ways that build effective customer relationships (The Canadian Marketing Association A. The marketing plan is a written document that specifies marketing activities in terms of the 4 P’s, action programs & projected or pro forma income & other financial statements, for a specific period of time. Marketing is used to create value in products & services. The interrelated marketing mix – or the 4 P’s – creates, transacts, communicates & delivers value. Good marketing is not a random activity & it requires thoughtful planning with an emphasis on the ethical implications of decisions made on the consumer and society in general. Marketing is NOT just about buyers and sellers exchanging money for goods and services or about making a profit. Group activity: The chapter opens by pointing out that people engage in marketing every day as both buyers and sellers. Have students make a list of all marketing transactions in which they were involved today. List the types of activities on the board and categorize them as buy or sell. ***Ethics There is a strong ethics orientation in this book. At the start of the semester, stress that marketers’ actions have ethical implications that must be understood and addressed. ***Value is a key theme throughout the textbook, that is, creating value for both a firm and its’ customers. A more in-depth discussion follows later in the chapter. Discuss how the same product can provide lots of value to one consumer but little or no value to another. Use the example of a recent movie that split the audience (e.g., people either loved or hated Tom Cruise in “Edge of Tomorrow.” Why?) B. Marketing consists of six core aspects that work together to create value for customers and the firm. For a shorter lecture, one slide can be used to introduce all six core aspects. More detailed slides can be used for expanded discussion if desired. 2. Marketing Is About Satisfying Customers’ Needs and Wants A. The marketplace can be defined as the world of trade or more narrowly defined by segments. B. It is often not practical to sell the firm’s product to everyone, so marketers focus on the groups or segments that are most profitable (referred to as the market). Ask students if they have ever thought about the number of brands and types of toothpaste available. Group activity: Ask students to list the types and brands of toothpaste they know. Then ask: Why do you think there are so many? Point out that the benefits of each one differ. Ask: Are these differences based on needs or wants or a combination of both? 3. Marketing Entails an Exchange. A. Exchange refers to the trade of things of value between the buyer and seller so that each is better off as a result. Ask students to discuss how these exchanges occur in nonprofit settings. What is the exchange at a museum or a lecture? You might also use the example of a swap or barter page. (An excellent example of swaps can be found on the First Canadian Barter Exchange website http://barterfirst.com/). Each party to the exchange gives up something of value: The customer gives up not only money but also time and information, and the firm gives up the good or service. The exchange in the end is mutually beneficial. You can visit the Chapters/Indigo website to initiate a discussion of what customers give up in exchange for the company’s products. http://www.chapters.indigo.ca/home/ LO2: Marketing Requires Marketing Mix Decisions The marketing mix (4Ps) of product, price, place, and promotion refers to the controllable set of activities the firm uses to respond to the wants and needs of its target market. Stress that the concept of the 4Ps is fundamental to marketing. Remind students that “4Ps” and “the marketing mix” may be used interchangeably to refer to product, price, place, and promotion. Products: Creating value 1. The fundamental purpose of the firm is to create value by developing a variety of offerings, including goods, services, and ideas, to satisfy consumer needs. 2. Goods are items that you can physically touch. 3. Services are intangible customer benefits produced by people or machines that cannot be separated from the producer. 4. Ideas include thoughts, opinions, philosophies, and intellectual concepts that also can be marketed. Students often can relate to goods and services, but the marketing of ideas is a new concept to them. Use the example of drunk- driving prevention. Ask: How is that idea marketed? Organizations such as Mothers Against Drunk Driving or Students Against Drunk Driving often receive support from brewers and distillers in promoting responsible drinking and safe driving. Ask students: What is the exchange these groups are asking consumers to enter? Answer: They want you to consume alcohol in a manner that is consistent with safety, which means giving up some consumption or drinking responsibly – do not get behind the wheel if you drink. Price: Transacting value Price refers to everything the buyer gives up—money, time, and energy— in exchange for the product. This is a good opportunity to remind students that the price paid is more than cash. Also tell them that later in the semester, you will look at how marketers view price, which often differs from the conceptions they may have been taught in finance courses about how to determine price. Place: Delivering value. Place includes all activities undertaken to get the product to the right customer when that customer wants it. Of all the areas in marketing, place is the least recognizable in relation to marketing. Students tend not to think about the importance of getting goods from manufacturers to consumers, which currently requires global approaches. This semester, they will learn about marketing’s role in this crucial process. Distribution strategy can be complex and requires consideration of many factors, as well as a high level of coordination. Promotion: Communicating value Promotion is communication by a marketer that informs, persuades, and reminds potential buyers about a product or service to influence their opinions or elicit a response. Ask students to identify the target audience for an ad from Chapter 1. What value proposition is it offering and to which audience? Answer: For example, the Parasuco jeans ad is targeted at young people who want to look good. The promotion sells youth, style and sex appeal. Social and Mobile Marketing 1.1 Each chapter in the textbook features a social and mobile marketing box that relates to some aspect of the theory. These boxes supplement a new chapter on Social and Mobile Marketing and help to focus attention on this important topic. More than 17 million Canadians now access the mobile web at least once a month according to eMarketer. It is the first time mobile penetration has reached this level. By 2018, eMarketer expects that 66% of Canadians will adopt the behaviour. Ask students how the social and mobile media they use has changed in the past few years. How important is it in their lives? Does it play a role in the products and services they learn about and perhaps purchase? Marketing Can Be Performed by Both Individuals and Organizations A. B to C: Business-to- consumer marketing. B. B to B: Business-to-business marketing. C. C to C: Consumer-to-consumer marketing. Students often fail to consider that the products they purchase have changed hands before. Offer them the following example: The computer you recently purchased from Best Buy (B to C) was purchased by Best Buy from the manufacturer (B to B). If you sell your computer to your roommate, you have engaged in C to C selling. Thus, the same product might be a part of all three types of marketing. Marketing impacts many stakeholders: A. Both for-profit and not-for-profit entities use marketing. B. Developing economies can benefit from marketing. C. Entire industries can benefit from marketing. An interesting example of a nonprofit that makes extensive use of marketing is Heifer International (http://www.heifer.org/) Consumers choose from a series of options, ranging from a goat to an ark full of animals, to donate to a family in need, who uses the donation as a source of both income and food, which means the recipients have access to new marketing opportunities. The use of digital tools to easily & quickly create & share content to foster dialogue, social relationships & personal identities. One thing is very clear: social media has quickly become an integral part of marketing & communication strategies. A Facebook application developed by TD Bank for students to allow them to monitor and track expenses that need to be shared (split) with roommates. Of course, when students use the application, it gives TD Bank access to information about the users. Sustainable Marketing 1.1 Greening your Marketing Practices Sustainability is becoming an important aspect of business and marketing practices. However, it seems to mean different things to different people. Ask students what sustainability means to them and to indicate 2 practices that they observe companies are doing. LO3: The Four Orientations of Marketing Helps Create Value 1. Product-oriented era: Belief that the product would sell itself. 2. Sales-oriented era: Overcapacity led to a focus on personal selling and advertising. 3. Market-oriented era: Manufacturers focus on what consumers want and need before design or production. 4. Value-based oriented: Value entails the relationship of benefits to costs, or what you get for what you give up. Ask students to consider each incarnation of the telephone presented in Exhibit 1.4. How has each been an improvement? Walk students through the eras and discuss how the firm’s focus went from the needs of the firm to the needs of the market. How Do Firms Become More Value Driven? Marketers must keep a vigilant eye on the marketplace so they can adjust their offerings to meet customer needs and keep ahead of the competition. A. Share information about customers and competitors across the organization and supply chain. Zara is a Spanish clothing retailer that has aggressively expanded in recent years. For Zara, information is crucial to being able to meet the needs and wants of customers. For firms to compete, they must constantly assess consumers’ perceptions of value. The advent of sophisticated databases has made it easier for firms to track consumers. How can sharing and coordinating information transmit into success? Zara has been able to offer customers the latest fashions in a timely manner by reducing the time it takes to get goods from the manufacturer to stores. The retailer’s methods allow for quick replenishment of fast moving items. Ask students: How many of you have shopped at Zara? B. Balance customers’ benefits and costs. Use customer data to find opportunities to serve customers better and develop long-term loyalties. With information, the firm can understand what are the key benefits customers seek, focus on those and eliminate the cost of providing other less strategic benefits. To follow up on the Zara example, note that its ability to meet the needs of the market consistently has created loyal customers, because customers know they can always find the latest fashions at Zara. C. Build relationships with customers 1. A relational orientation regards the buyer–seller relationship in terms of relationships rather than as a series of individual transactions. A relational orientation suggests buyers and sellers should develop long-term relationships. 2. Customer relationship management (CRM) is a business philosophy and set of strategies, programs, and systems that focus on identifying and building loyalty among the firm’s most valued customers. In early conceptions of marketing (before value-based marketing), firms often viewed the closing of the sale as the termination of their relationship with the customer. Today, firms strive to create lifetime value among customers, hoping they will return to the firm for all their future needs. Marketers steadily embrace new technologies, such as social & mobile media to allow them to better connect with their customers & thereby serve their needs more effectively. LO4: Why is Marketing Important? Marketing has evolved into a major business function that crosses all areas of a firm or organization. This slide introduces the next series of slides or can be used as in or shortened lecture. 1. Marketing Expands Firms’ Global Presence The same skills for understanding customers that allow marketing to be successful in the home country market may allow for global expansion as well. Group activity: Starbucks is one of the fastest expanding global firms. Ask students to brainstorm why Starbucks has been so successful globally. You can visit the Starbucks’ website to identify products being promoted in all of the identified markets. (NOTE: This list varies by season.) Ideas include type of product (beverages are universal), customer need (luxury and convenience items), local product adaptations, etc. Ideas include type of product (beverages are universal), customer need (luxury and convenience items), local product adaptations, etc. 2. Marketing Is Pervasive Across Marketing Channel Members The marketing department must work seamlessly with other functional areas of the company to design, promote, price, and distribute products. A supply chain is the group of firms & set of techniques & approaches firms use to make & deliver a given set of goods & services. Ask students: Have you ever considered how products from all over the world get to your home town? Each step in the supply chain takes the good and increases its value by either improving it or delivering it to the end consumer. Remind students that each step involves an exchange. 3. Marketing Enriches Society Many firms now recognize that their business’s strong social orientation provides a sound strategy in the best interests of both themselves and their customers. The Avon Breast Cancer Crusade is an excellent example of how a firm uses its knowledge of marketing to benefit society. Avon has long supported breast cancer awareness and prevention and, through its distributor network, has been able to educate women about the importance of early detection. Because of its primarily female sales force, Avon’s work was truly women helping women. 4. Marketing Can Be Entrepreneurial Marketing sits at the centre of the successes of numerous ventures initiated by entrepreneurs, or those people who organize, operate, and assume the risk of a business venture. Ask students: Why is marketing so important for entrepreneurs? The examples cited in the chapter of Tim Hortons and lululemon are important examples of successful entrepreneurial endeavours. Entrepreneurial Marketing 1.1 Dragons’ Den by CBC is a popular realty tv show that many students and aspiring entrepreneurs watch. We introduce this theme to the textbook in Chapter 1 and follow with numerous examples and videos throughout the rest of the textbook. Almost every chapter features an entrepreneur who has pitched his or her company on CBC’s Dragons’ Den show. In almost all instances, there are videos to accompany these stories which can be shown in class to help generate discussion around the theory in question. Concept Review Generally, the concept questions are designed to achieve a single purpose – to encourage students to test their knowledge and understanding of the theoretical content of the chapter. These questions encourage recall and reflection, which will better prepare students to answer the marketing applications questions based on their understanding of the theory. 1. What is marketing and why is it important? Answer: Marketing is a set of business practices designed to plan for and present an organization’s products or services in ways that build effective customer relationships. Marketing is important because it helps create value for firms. 2. Is the marketing mix (4Ps) enough to guarantee successful marketing? Explain. Answer: The controllable set of interrelated decisions known as the marketing mix, (Product, Price, Place, and Promotion) is central to all marketing activities. However, they are never a guarantee of successful marketing. Making the right marketing decisions and executing them properly simply maximize a product or company’s potential for success. Marketers can substantially increase their chances for success if they have a deep understanding of their environment and their competition, build strong relationships with suppliers, customers, and other marketing intermediaries, establish a corporate culture that places the customer at the centre of the firm’s marketing activities, and above all, offer customers products and services that satisfies their needs and wants, i.e. deliver strong value. 3. Explain how a strike at one of the company’s supplier firms or a new technology would influence the company’s marketing efforts? Answer: Marketing is shaped by external forces and players. A supplier strike or a new technology might change how the company deliver value to its customers. A strike at a supplier plant may lead to shortage of inputs – raw material or parts – that could restrict the ability of the company to produce sufficient quantity of products to meet demand. For example, a prolonged strike at a parts supplier may reduce the ability of Ford or GM to manufacture enough vehicles to meet demand because they don’t have necessary parts for their vehicles. Technology can have both positive and negative effects on a company’s marketing efforts. Some types of technology may render a company’s existing technology obsolete while creating opportunities for companies with the new technology. For example, the Internet has changed the way marketers interact and communicate with their customers, suppliers and others companies. 4. Discuss the main elements of value-based marketing. List four ways in which marketing helps to create value. Answer: There are two main elements to value-based marketing: value, and cost. The central goal is to provide consumers with value or benefits that are perceived to be much greater than their costs. Value can mean different things to different people and is constantly changing in today’s marketplace. Depending on the product, it may include size, speed, convenience, colour, or taste. Costs often reflect time, effort and money sacrificed. Ways in which marketing helps to create value include, 1) coordinating across the organisation, 2) coordinating across the supply chain, 3) expanding a firms’ global presence, 4) making life easier, 5) providing employment opportunities and 6) enriching society. 5. Explain the relationship between customer value and customer satisfaction. Answer: Customers naturally seek options that provide the greatest benefits at the lowest costs. A satisfied customer is one who has received value greater than the costs incurred. Value is derived from the 4Ps: product creates value, price transacts value, place delivers value and promotion communicates value. Costs to a customer can include the price paid, information given or time lost. Customer value is the difference between the benefits earned and cost paid. Customer satisfaction is when a customer’s expectations of value or benefits are met – usually when costs are less then benefits derived, and in a fair way. Customer satisfaction may be described in two ways – satisfaction with individual transactions or satisfaction derived over a period of time from an accumulation of transactions. 6. Generally, all companies are in business to generate profits and increase shareholder value. Yet, the Canadian Marketing Association definition of marketing does not explicitly mention profits or shareholder value. Why do you think these are not included in the definition? Should they be included? Answer: Profits and value to the shareholder are not included because they define success too narrowly as monetary profits – and do not account for all aspects of value. The marketing function can create value that is not reflected in dollars and cents, such as building strong, trust-based relationships with loyal customers, or performing detailed market research that uncovers new consumer wants, needs and behaviours. Marketing can often be a cost centre whereas sales is a profit centre, and therefore profit need not be included as part of the definition of marketing. Moreover, the definition implies that firms that consistently deliver good value to customers and build strong relationships will eventually becomes successful and profitable. 7. Today, many marketers are not interested in selling their products and services to everyone who wants it, but only to selected target markets. What do you think the main reasons are for targeting specific market segments? Answer: In order to plan and execute marketing communications that reached and attracted every single consumer, one would require a budget so large it would not be feasible. Although marketers would prefer to sell their products and services to everyone, it is not practical to do so. Companies identify target groups who they expect to respond to their marketing efforts similarly. By targeting specific market segments a company can develop marketing programs that specifically address the needs and wants of each chosen segment, thereby increase the chance of success of their marketing programs. This way also, marketers can ensure their scarce resources are allocated and used maximally. 8. Give reasons that you think understanding customer needs and wants is fundamental to marketing success. How can marketers go about understanding customer needs and wants? Answer: Customer needs and wants are fundamental to marketing success because they are the primary motivator for action. When an unsatisfied need is recognised, the customer desire is to go from their actual, needy state to a different, desired state. Understanding customer needs help marketers develop marketing mixes to satisfy those needs in ways customers prefer. Building strong relationships with customers is important to obtaining information, creating value and is the central concept of the relational orientation. This is known as customer relationship management (CRM), and maximizes the long-term value of the buyer-seller relationship rather than trying to maximize the profit from each transaction. CRM often includes collecting customer information in order to target specific promotions or offers to customers who would benefit most. Generally, market research discussed in greater detail in Chapter 4 describes the range of methods marketers use to better understand customer needs and deliver strong value when trying to satisfy those needs. 9. Which marketing orientation would most likely help a company build strong customer relationships that are profitable? Why? Answer: Value-based marketing allows for the strongest relationships to be built with customers. This is because it starts with understanding what customers needs and want and delivering strong value to satisfy those needs/wants. In this respect, the value-based orientation encourages the collection and organisation-wide sharing of customer information, balancing benefits with costs, and strives to develop strong customer relationships. Keeping close contact with customers in an attempt to encourage customer-marketer dialogue, customer satisfaction and customer loyalties are fundamental to the value-based orientation. The value-based orientation does not view each customer-marketer contact as a series of individual transactions where the marketer must maximise profits. Rather, each customer-marketer contact as an opportunity to satisfy the customer and strengthen their relationships, which over the long-term will generate customer loyalty and ultimately increased profitability. 10. Explain how customer value is created or increased when the company’s marketing department works closely with other departments within the firm as well as with the firm’s suppliers and customers. Answer: In value-based marketing firms, the marketing department works seamlessly with other functional areas of the company to design, promote, price, and distribute products. As well, for the supply chain to provide significant value to the ultimate customer, the parties must establish long-term relationships with one another and cooperate to share data, make joint forecasts, and coordinate shipments. Effectively managing supply chain relationships often has a huge impact on a firm’s ability to satisfy the consumer, which results in increased profitability for all parties. The more the marketing department can work closely with other departments, and share information across the supply chain, the more the firm can understand and better satisfy the needs and wants of its customers, therefore increasing the value to the customer. Marketing Applications 1. When apparel manufacturers develop marketing strategies, do they concentrate on satisfying their customers’ needs or wants? What about a utility company? A cellular phone company? Instructor’s Notes: This question is intended to make students think about the difference between customer needs and wants, as well as how companies might address one or both. It also challenges students to explore whether different types of companies address the needs and wants of consumers differently. An apparel company might focus more on a customer’s wants while providing for the customer’s basic clothing needs—for example, a coat designer might cover the basics of a customer’s need for a coat by offering one appropriate for the season but strongly appeal to that customer’s wants by offering many seasonal coat selections in unique colours and styles that provide more fashion-forward coat choices. Firms also must respond to competitors’ offerings. An electric utility company might have a strong imperative to satisfy customers’ needs for reliable electricity but not focus as much on customer wants because it faces little market competition. Example answers: For an apparel manufacturer to develop a successful marketing strategy, it must take into account both needs and wants of customers. The degree to which the apparel manufacturer fulfills both needs and wants heavily influences whether it successfully sells its products. - A utility company might consider its customers’ needs more (e.g., reliable water or electric supply to homes and businesses) but also consider customers’ wants (e.g., how they wish to receive the service, how they prefer to be billed) to achieve higher customer satisfaction and provide offers that go beyond basic needs. - A cellular phone company must focus on both the customers’ needs (e.g., basic, reliable service) and wants (e.g., providing the latest, hottest phones, Internet access) to market its products successfully in today’s highly competitive cellular phone market. When developing marketing strategies, companies typically focus on both satisfying their customers' needs and wants, but the emphasis can vary depending on the industry and specific circumstances: 1. Apparel Manufacturers: • Needs vs. Wants: Apparel manufacturers often cater to both needs and wants. Basic needs include clothing for protection and modesty, which are essential. Wants include fashion trends, style preferences, and brand identity, which are more discretionary. • Marketing Strategy: Manufacturers in this industry may emphasize both functional attributes (meeting the need for clothing) and emotional desires (fulfilling fashion wants, status, etc.). Strategies might involve highlighting quality, comfort, style, and brand image to appeal to both aspects. 2. Utility Company (e.g., Electricity, Water): • Needs vs. Wants: Utility companies primarily focus on satisfying basic needs. Customers need reliable and affordable access to essential services like electricity, water, and gas for daily living. • Marketing Strategy: Marketing strategies for utility companies typically revolve around reliability, affordability, customer service, and sometimes sustainability. They focus heavily on meeting regulatory requirements, ensuring service continuity, and communicating effectively during outages or service disruptions. 3. Cellular Phone Company: • Needs vs. Wants: Cellular phone companies address both needs and wants. Basic needs include communication and connectivity, which are critical in today's connected world. Wants include the desire for advanced features, the latest technology, and personalized service plans. • Marketing Strategy: These companies often emphasize both functional benefits (coverage, reliability) and emotional desires (innovation, status, customization). Strategies might include promoting network strength, data plans, device offerings, customer support, and exclusive services to appeal to both needs and wants. In summary, while the degree of emphasis on needs versus wants varies across industries, successful marketing strategies generally consider and address both aspects to effectively attract and retain customers. 2. Choose a product that you use every day. Describe its 4Ps. Instructor’s Notes: This question is designed to personalize the four major marketing elements for students. Choosing a product that he or she uses everyday and analyzing its 4Ps (product, price, place, and promotion) forces the student to think about how the four elements might come together to make it attractive. This exercise takes the product away from the realm of something that the student simply uses and enjoys and into a better understanding of what makes the product appealing to the student personally. Example Answer #1 Crest Product Crest toothpaste Place Drugstores, grocery stores, wholesale clubs (Shoppers Drug Mart, Loblaws, Costco) Promotion Newspaper and magazine advertisements, supported by moderate TV and cable advertising. “Healthy beautiful smiles for life” (www.crest.com)  promotes beauty, vitality, and life-long benefits Price Suggested retail price, but with price promotions depending on retail channel and new product release schedule (e.g., newspaper coupon inserts for new products) Example Answer #2 Honda Product Honda Civic sedan Place Honda dealerships, preowned vehicle dealers Promotion Heavy TV and cable advertising, as well as full-colour magazine advertisements. “Evolution. Revolution. This is no time to stand still—the all-new Honda Civic is ready to take you places you’ve only imagined” (www.honda.com)  promotes freshness of design, speed, and dream fulfillment. Price Manufacturer’s recommended pricing, with potential promotions at the dealership level. “Build-your-own-Civic” functionality via the Honda Web site, which allows customers to see the price of a car with their own option selections. Example Answer #3 McDonald’s Product burgers, fries, soft drinks, milk shakes, Combo meals Place widespread distribution in all major cities in the world Promotion uses a mix of advertising, sales promotion (e.g. Happy Meals), public relations (Ronald McDonald charities), personal selling (at the point of purchase) Price low cost to appeal to target markets This table provides a concise overview of how the 4Ps framework applies to smartphones, illustrating how each element contributes to the overall marketing strategy for this product. 3. One of your friends was recently watching TV and saw an advertisement that she liked. She said, “Wow, that was great marketing!” Was the ad in fact marketing? Why? Instructor’s Notes: Students frequently associate advertising with marketing, but fail to recognize that advertising is just one part of all the functions encompassed by marketing. Example answer: - Student responses should acknowledge that marketing is made up of product, price, place, and promotion decisions and advertising is one of the promotional tools available to marketers. Yes, the advertisement your friend saw on TV is indeed a form of marketing. Marketing encompasses a broad range of activities that aim to promote products, services, or brands to consumers. Advertising, which includes TV commercials, is a specific component of marketing that focuses on communicating messages to target audiences through various media channels. Here’s why the TV advertisement qualifies as marketing: 1. Purpose: The primary goal of marketing is to communicate the value of a product or service to potential customers. Advertisements are crafted to create awareness, generate interest, and ultimately persuade consumers to consider or purchase a product. 2. Components: Advertising is one of the key components of marketing, alongside other elements such as market research, product development, pricing strategies, and distribution channels. It plays a crucial role in the promotional aspect of the marketing mix. 3. Reach and Impact: TV advertisements, in particular, have a wide reach and can influence a large audience. They are designed to capture attention, convey a message effectively, and evoke emotions or actions that align with the brand’s objectives. 4. Integration: While the term "marketing" often conjures up a broader strategic context, including market analysis, segmentation, and positioning, advertising is an integral part of executing marketing strategies. It serves as a direct method of reaching consumers and reinforcing brand positioning in the market. Therefore, when your friend praised the TV advertisement as "great marketing," she correctly identified it as a powerful and effective promotional tool within the broader field of marketing. The advertisement she saw was designed to engage viewers, communicate a message about a product or service, and ultimately contribute to achieving marketing objectives such as increasing sales or enhancing brand perception. 4. Mercedes-Benz manufactures the Smart Car, which sells for around $16,000, and the SL 65 AMG 2-door Roadster for over $100,000. Is Mercedes providing the target markets for these cars with good value? Explain why. Instructor’s Notes: This application question seeks to encourage students to recognize that different market segments want different product attributes. Example answer: - Mercedes-Benz has exemplified this principle by offering a range of brands and models at different price points in order to reach several market segments. Urbanites with a desire to make an environmental (and fashionable) statement while driving an expensive car with excellent gas mileage are targeted with the Smart Car while the Roadster targets hip and high income professionals. Value is in the eye of the beholder so ultimately sales of the two models are the best judge of whether Mercedes has succeeded in offering a good value. Mercedes-Benz offers a range of vehicles that cater to different segments of the market, including the Smart Car at a lower price point of around $16,000 and the SL 65 AMG 2-door Roadster priced over $100,000. Evaluating whether Mercedes-Benz provides good value to their target markets for these cars involves considering several factors specific to each model: Smart Car (around $16,000): • Value Proposition: The Smart Car is positioned as an economical, compact vehicle suitable for urban environments. It emphasizes fuel efficiency, ease of parking, and a lower cost of ownership compared to larger vehicles. • Target Market: The target market typically includes urban dwellers, young professionals, and individuals looking for an affordable, practical transportation solution. • Value Assessment: For its target market, the Smart Car offers good value by providing a balance of affordability, compactness, and efficiency. It meets the basic transportation needs of urban residents while offering distinct advantages in terms of ease of maneuverability and reduced fuel consumption. SL 65 AMG 2-door Roadster (over $100,000): • Value Proposition: The SL 65 AMG is a high-performance luxury sports car known for its powerful engine, advanced technology features, luxurious interior, and exceptional driving dynamics. • Target Market: The target market includes affluent consumers who prioritize luxury, prestige, and high-performance driving experiences. Buyers may also value exclusivity and cutting-edge automotive technology. • Value Assessment: Despite its high price tag, the SL 65 AMG provides good value for its target market. It offers unparalleled performance, craftsmanship, and prestige that are commensurate with its premium pricing. Buyers are willing to pay a premium for the superior engineering, bespoke customization options, and the status associated with owning a Mercedes-Benz AMG vehicle. Conclusion: Mercedes-Benz effectively provides good value to their respective target markets for the Smart Car and the SL 65 AMG 2-door Roadster by tailoring each model to meet specific customer needs and preferences: • Smart Car: Offers practicality, efficiency, and affordability, appealing to urban residents and cost-conscious consumers. • SL 65 AMG 2-door Roadster: Delivers exceptional performance, luxury, and exclusivity, satisfying the desires of affluent buyers seeking top-tier automotive engineering and prestige. By carefully aligning their product offerings with the expectations and purchasing motivations of their target markets, Mercedes-Benz ensures that both the Smart Car and the SL 65 AMG 2-door Roadster provide compelling value propositions that resonate effectively with their intended audiences. 5. Assume you have been hired by the marketing department of a major consumer products manufacturer, such as Colgate-Palmolive. You are having lunch with some new colleagues in the finance, manufacturing, and logistics departments. They are arguing that the company could save millions of dollars if it just got rid of the marketing department. Develop an argument that would persuade them otherwise. Instructor’s Notes: This scenario forces students to think about the purpose and value of marketing in an organizational context and allows for a variety of justifications. For example, a student could use an internal or external perspective and argue that finance, manufacturing, and logistics tend to worry less about the customer and more about internal processes, whereas the marketing and sales functions constantly focus outward on the customers the company serves. Using this argument, the student might question whether other departments are willing or prepared to take on customer relations and develop an understanding of how and why customers buy the company’s product or service. Another argument might simply demand how customers will even know about the company’s products if the marketing department doesn’t broadcast their features, benefits, and value outward. Example answer: Marketing is a necessary function for three reasons: • It focuses on understanding what the company’s customers actually want and need, as well as how to derive value from the company’s products and services. A department dedicated to this function frees other departments to focus on what they do best—be it finance, manufacturing, or logistics. • It can act as a buffer between external customers and internal company functions, save other departments from customers’ direct demands, and cut down on the amount of churn within the organization. • It understands how to communicate the breadth and value of the company’s products to an external audience and ensures the audience knows that the company and its products even exist. Without this communication and the subsequent knowledge gained by the customer, there would be no sales revenue and, consequently, no company! 6. Why do marketers find it important to embrace societal needs and ethical business practices? Provide an example of a societal need or ethical business practice being addressed by a specific marketer. Instructor’s Notes: This question centres on the role of social and ethical issues in a marketing context. Students might mention efforts such as keeping the environment clean and offering fair wages to workers, then argue why a marketer should be concerned about those issues. Example answers: - Ben & Jerry’s donate a percentage of its proceeds from certain products to worthy causes. - Starbucks Coffee promotes its fair trade coffee blends and bottled water sales that support third-world water purification programs. - The Body Shop commits to no animal testing for its cosmetics line. Marketers find it crucial to embrace societal needs and ethical business practices for several reasons, including fostering long-term brand loyalty, meeting consumer expectations, enhancing corporate reputation, and contributing positively to society. Here’s a breakdown of why these aspects are important, along with an example of how a marketer addressed a societal need through ethical business practices: Importance of Embracing Societal Needs and Ethical Business Practices: 1. Enhanced Brand Loyalty: Consumers increasingly prefer brands that demonstrate a commitment to social and environmental responsibility. By addressing societal needs and practicing ethics, marketers can build trust and loyalty among their customer base. 2. Meeting Consumer Expectations: Modern consumers are more informed and conscientious about where they spend their money. They expect businesses to operate ethically and contribute positively to society. 3. Reputation Management: Ethical business practices help protect and enhance a company's reputation. A positive reputation can attract top talent, strengthen investor confidence, and mitigate risks associated with negative publicity. 4. Legal and Regulatory Compliance: Adhering to ethical standards ensures compliance with laws and regulations, reducing the risk of legal issues or penalties. 5. Long-Term Sustainability: Businesses that prioritize societal needs and ethics are often better positioned for long-term success. They can adapt to changing consumer preferences and regulatory environments more effectively. Example of Societal Need or Ethical Business Practice: Patagonia's Commitment to Environmental Sustainability: • Company: Patagonia, an outdoor apparel company. • Societal Need Addressed: Environmental sustainability and responsible consumption. • Ethical Business Practice: Patagonia has been a leader in sustainable business practices. They have implemented initiatives such as using recycled materials in their products, promoting fair labor practices, and advocating for environmental conservation. • Example Initiative: In 2011, Patagonia launched their "Don't Buy This Jacket" campaign on Black Friday, urging consumers to consider the environmental impact of their purchases and to repair and reuse their clothing instead of buying new. This campaign highlighted Patagonia's commitment to reducing consumerism and promoting responsible consumption. By embracing societal needs like environmental sustainability and practicing ethical business behaviors, Patagonia not only aligns with their core values but also strengthens their brand reputation. This approach resonates well with consumers who prioritize sustainability and ethical consumption, thereby contributing to Patagonia's long-term success in the competitive retail market. 7. Visit the website of Rogers Communications (http://rogers.com/) and compare the 4Ps marketing mix for its BlackBerry Bold Series and BlackBerry Tour Series. What factors might explain the differences you observe? Instructor’s Notes: This question encourages students to not only identify the 4Ps from the tons of information on a company’s website but also to think how a company develops marketing mixes for different market segments. They must also be able to link the differences in the marketing mix to the characteristics or needs/wants of the different customer segments. Example answer: 4Ps BlackBerry Q10 Apple iPhone 5 Product Design and features - more business/professional look, feel, and functionality Design and features - more consumer look, feel, and functionality Price From $49.95 on a 2 year term plus charges for rate plans From $229.95 on a 2 year term plus charges for rate plans Promotion Websites of BlackBerry, Bell, Rogers Communications, and national newspapers, network TV business channels Websites of Apple, Bell, Rogers Communications, newspapers, national TV stations Place Available through Bell, Rogers Communications, Telus, etc. Available through Bell, Rogers Communications, Telus, etc. Users Business Professionals Consumers and small business owners Factors Explaining Differences: 1. Target Market Segmentation: Each series is tailored to different consumer segments with distinct needs (business professionals vs. travelers/consumers), influencing product features and marketing strategies. 2. Product Features: Variances such as keyboard type, security features, multimedia capabilities align with specific customer preferences and usage contexts. 3. Price Strategy: Reflects the perceived value and positioning within the smartphone market, balancing features with competitive pricing strategies. 4. Distribution: Leveraging Rogers Communications' retail network and partnerships to ensure availability and accessibility to target customers. 5. Promotion: Marketing messages and campaigns are crafted to highlight unique benefits and appeal to the motivations and lifestyles of each target segment. This table illustrates how the marketing mix elements differ between the BlackBerry Bold Series and BlackBerry Tour Series, reflecting strategic decisions to effectively meet the needs and preferences of their respective target markets within the smartphone industry. 8. For many consumers the difference between Dasani water made by Coca-Cola (http://www.dasani.com/) and Aquafina made by Pepsi (http://www.aquafina.com/) is hardly noticeable. However, both companies and their loyal customers would argue that there are many differences between these two brands of water. What is your view? Explain how customer perceptions and emotions may influence the way they value a company’s product. Instructor’s Notes: This question centres on the subjective bases consumers use to assign and evaluate value to competing products and services. Students will realise that value is not always determined by objective measures such as product features, prices, etc. Example answers: Students’ answers may vary but focus on ideas such as loyalty to a brand, company reputation, look and feel of product, experience, attitude to bottled water, and pricing. Generally, the stronger and more positive the customer’s feelings, emotions and experiences with a particular brand, the more likely they will assign a greater value to that brand of water. Customer perceptions and emotions play a significant role in how consumers value and differentiate between brands, even when products appear similar on the surface. Let's explore how perceptions and emotions influence the way customers view and distinguish between Dasani water from Coca-Cola and Aquafina water from Pepsi: 1. Brand Perception: • Branding and Image: Both Coca-Cola and Pepsi are global beverage giants with strong brand identities. These brands extend their credibility and consumer trust from their flagship products (sodas) to other beverage lines like bottled water. • Marketing Messages: Each brand communicates unique attributes and values through marketing campaigns, which can shape consumer perceptions. For example, Coca-Cola's Dasani might emphasize purity, hydration, or sustainability, while Pepsi's Aquafina may focus on freshness, quality of source water, or environmental stewardship. 2. Emotional Connection: • Brand Loyalty: Many consumers develop emotional attachments to brands based on personal experiences, family traditions, or perceived values. This loyalty can influence purchasing decisions and brand preference despite similar product offerings. • Trust and Familiarity: Consumers often choose products they trust or are familiar with. Positive past experiences or recommendations from friends and family can reinforce perceptions of quality and reliability. 3. Product Differentiation: • Taste and Perception: Even with purified water, subtle differences in taste or mouthfeel can affect consumer preferences. These sensory experiences contribute to how consumers perceive the quality and value of the product. • Packaging and Design: Brand packaging, bottle design, and labeling can also influence consumer perception. Aesthetic appeal, ease of use, and environmental considerations (e.g., recyclability) may sway purchasing decisions. 4. Perceived Value: • Price Sensitivity: Consumers may perceive higher-priced products as having better quality or exclusivity, influencing their willingness to pay. • Added Value: Factors beyond the product itself, such as customer service, brand reputation, and community involvement (e.g., corporate social responsibility initiatives), can enhance perceived value. Example Application: • Perception vs. Reality: While Dasani and Aquafina may use similar purification processes and quality standards, consumers may perceive differences based on brand reputation, personal preferences, or marketing influences. These perceptions can lead to varied emotional responses and loyalty behaviors. Conclusion: Customer perceptions and emotions are powerful drivers in how individuals evaluate and differentiate between brands like Dasani and Aquafina. Despite both being bottled water products, factors such as brand image, emotional connections, perceived quality, and overall brand experience significantly influence consumer preferences and purchasing decisions. Marketers must understand these dynamics to effectively position their products and cultivate strong relationships with consumers based on trust, satisfaction, and shared values. 9. As described in this chapter, customer relationship management is a very important aspect of value-based marketing. Pick any one of Canada’s major retailers, e.g. The Bay (http://www.hbc.com/), Loblaws (http://www.loblaws.ca/), or Shoppers Drug Mart (http://www.shoppersdrugmart.ca/), and explain how they go about building strong customer relationships with their customers. Instructor’s Notes: This question asks students to think about the ways in which marketers try to build strong customer relationships. Students should discuss how the techniques identified are actually used by marketers to build customer relationships and to what extent they think these measures are successful in influencing their own individual purchasing behaviour. Example answers: Students may identify a variety of methods based on their individual experiences. However, most will likely focus on customer loyalty programs (and the many variations) as well as various marketing communication that are either general in nature or personalised. Ask students to discuss to what extent their purchase decisions are influenced by these techniques and whether or not they think they benefit from the various methods. Real practical examples should be solicited from the students. Let's take Shoppers Drug Mart as an example and explore how they build strong customer relationships through effective customer relationship management (CRM) practices: Shoppers Drug Mart (http://www.shoppersdrugmart.ca/) 1. Shoppers Optimum Program: • Shoppers Drug Mart operates the Shoppers Optimum program, which is a loyalty rewards program designed to enhance customer engagement and loyalty. • Points System: Customers earn points on purchases, which can be redeemed for discounts on future purchases or for free merchandise. • Personalized Offers: Through data analytics, Shoppers Drug Mart customizes offers and promotions based on customers' purchasing behaviors and preferences. This personalization enhances relevance and increases the likelihood of repeat visits. 2. Personalized Communication: • Shoppers Drug Mart communicates with customers through personalized emails, SMS messages, and notifications via their mobile app. • Special Offers: Customers receive exclusive offers tailored to their shopping habits, birthdays, or special events, fostering a sense of recognition and appreciation. 3. Customer Service Excellence: • Shoppers Drug Mart places a strong emphasis on customer service across its stores. • Pharmacy Services: Beyond retail, their pharmacy services offer personalized health advice and medication management, establishing a deeper connection with customers' well-being. • In-Store Experience: Well-trained staff provide assistance, advice, and ensure a pleasant shopping experience, contributing to customer satisfaction and loyalty. 4. Community Engagement: • Shoppers Drug Mart engages with local communities through initiatives like the Shoppers LOVE. YOU. program. • Health and Wellness: They support various health-related causes, promoting community involvement and reinforcing their brand as a caring and responsible retailer. 5. Digital Transformation: • Shoppers Drug Mart has invested in digital channels, including their mobile app and online platform, to enhance convenience and engagement. • Mobile App Benefits: Customers can refill prescriptions, browse products, check Optimum points balances, and receive personalized offers directly through the app, creating a seamless and personalized shopping experience. 6. Feedback Mechanisms: • Shoppers Drug Mart actively seeks feedback from customers through surveys, online reviews, and in-store feedback forms. • Continuous Improvement: They use customer insights to improve service delivery, product assortment, and overall customer experience, demonstrating responsiveness to customer needs and preferences. In conclusion, Shoppers Drug Mart builds strong customer relationships through a comprehensive approach that combines a robust loyalty program, personalized communication, exceptional customer service, community engagement, digital innovation, and continuous feedback mechanisms. These strategies not only enhance customer satisfaction but also foster long-term loyalty and advocacy among their customer base. 10. When first introduced, BlackBerry’s PlayBook was seen as a competitor to Apple’s iPad. Visit Apple’s website (http://www.apple.com/) and the BlackBerry website (www.blackberry.com) to learn more about these two products. What do you think the main value proposition is for each product? Why do you think the iPad has come out as the winner? Instructor’s Notes: This question encourages students to think about the value proposition of competing products from two highly reputable global companies – one Canadian and one American. Most students would have experience with Apple’s products but not as likely with BlackBerry’s products. This could be an interesting avenue to explore in terms of how this experience influence their thinking about value proposition beyond price as well as which company will likely come out the winner. Example answers: Students will compare these two products on things such as look and feel (design), features, price, company’s reputation (for quality products and services, reliability, innovation, etc.), compatibility with their iPods and other devices, etc. Students may even rate the products differently based on various tasks, e.g., iPad may be seen as offering more apps and more fun than the BlackBerry PlayBook. Students may say that BlackBerry rushed the PlayBook to market too early and positioned it as a consumer product when the company should have targeted business professionals with the smaller product with more business functionality. BlackBerry made a number of missteps that eventually killed the PlayBook and allowed the iPad to thrive. In summary: BlackBerry PlayBook: • Emphasized productivity, security, and integration with BlackBerry devices. • Targeted professional users with multitasking capabilities and portability. Apple iPad: • Offers seamless integration within the Apple ecosystem (iPhone, Mac). • Extensive app ecosystem, high-quality entertainment options, and intuitive user interface. • Strong brand reputation, design excellence, and continuous innovation. Reasons for iPad's Success: • Superior ecosystem integration and app support. • Strong brand appeal and consumer loyalty. • Design leadership, user experience, and continuous improvement. • Effective marketing and early market establishment. These factors have contributed to the iPad's dominance over competitors like the BlackBerry PlayBook in the tablet market. Net Savvy 1. Happy Planet (http://www.happyplanet.com/), a Vancouver-based organic juice producer is an emerging player in the organic beverage market supplying all of Canada and some of the U.S. with organic juice. Visit its Web site and describe how it delivers value above and beyond that provided by traditional grocery retailers. Describe the ways in which the company communicates this value through its Web site. Instructor’s Notes: This exercise allows students to analyze how a socially responsible grocery retailer creates value and communicates that value to its customers. Students might examine the images and words Happy Planet uses to express its message, the breadth of the appeal of those elements to different customer segments, which elements appear most prominently on the Web site, and what that selective prominence says about the priority of value being expressed. Example answers: - The company gives an overview of not just the nature of the company but also its social values. To reinforce that message, the company has chosen to include its mission statement in the centre of its homepage and discusses it contribution to the community through its Community Partners Program. Happy Planet (http://www.happyplanet.com/) Delivering Value: • Organic and Sustainable Sourcing: Happy Planet emphasizes organic ingredients sourced sustainably, appealing to health-conscious consumers concerned about environmental impact. • Freshness and Quality: Focuses on fresh, high-quality juices without additives or preservatives, offering a healthier alternative to processed beverages. • Community and Social Responsibility: Supports local communities and sustainable practices, enhancing its brand image as a socially responsible company. Communication of Value on Website: • Transparency: Detailed information about sourcing practices, organic certifications, and sustainability efforts. • Product Quality: Highlights the freshness, taste, and health benefits of organic ingredients. • Community Engagement: Shares stories of partnerships with local farmers and environmental initiatives, showcasing commitment beyond profit. Conclusion: Happy Planet effectively communicates its value proposition through transparency, emphasizing organic sourcing, product quality, and social responsibility on its website. These efforts differentiate it from traditional grocery retailers by appealing to consumers seeking healthier, environmentally conscious options. 2. Montreal’s Biodome (http://www2.ville.montreal.qc.ca/biodome) has developed an excellent reputation in international scientific and cultural circles for the diversity of its collection. Visit its Web site and describe the ways in which it creates value for patrons. Instructor’s Notes: This exercise is intended to get students to determine the value non-profit organizations offer their patrons. Example answers: - The Biodome provides its patrons with a wide variety of animals (292 species), plants (288 species) and birds from across the world, which they can observe on a visit to the Biodome. In addition, the Biodome provides a wide variety of interactive activities for patrons, especially kids and younger children, to learn about the planet and the world’s ecosystem. It offers shows and demonstration activities. The facility is modern and offer all the convenience needed for a family day out or a school tour. Its website offers a wide variety of information – text, audio, and videos - about its collection. It offers a range of affordable pricing plans for entry to the facility. The service is very friendly and professional. Montreal’s Biodome (http://www2.ville.montreal.qc.ca/biodome) Creating Value for Patrons: • Educational Experiences: Offers immersive exhibits that educate visitors about diverse ecosystems, biodiversity, and conservation efforts. • Interactive Learning: Engages patrons through interactive displays, live animal encounters, and informative presentations. • Scientific Research: Contributes to scientific knowledge through research and conservation initiatives, enhancing its credibility and educational impact. • Cultural Enrichment: Showcases the beauty and importance of natural environments, fostering appreciation for biodiversity and environmental stewardship. Communication of Value on Website: • Detailed Exhibits: Descriptions of exhibits, highlighting the diversity of species and ecosystems represented. • Educational Resources: Provides resources for teachers and students, supporting curriculum-based learning. • Conservation Efforts: Highlights ongoing research, conservation projects, and partnerships focused on sustainability and biodiversity preservation. • Visitor Experience: Information on ticketing, special events, and visitor services, promoting a memorable and enriching experience. Conclusion: Montreal’s Biodome creates value for patrons through educational, interactive, and cultural experiences focused on biodiversity and conservation. Its website effectively communicates these values through detailed exhibit descriptions, educational resources, and insights into ongoing scientific research and conservation efforts. End-of-Chapter Case Study: Lululemon: Revolutionizing the Global Athletics and Sports Apparel Industry Questions: 1. What factors do you think are responsible for the phenomenal success of lululemon? Are the reasons for its success sustainable over the next decade? Instructor’s Notes: Students’ answers may vary but may tend to gravitate towards the strong brand image, unique style and comfort, and quality of clothing. In addition to these, the following should be offered. Example answers: - The primary reason for its success is the fact that it was the first time that an apparel manufacturer designed high-quality functional and fashionable clothing for a neglected segment - women. - The product was sufficiently differentiated from its main rivals whose athletic apparel was always functional and rarely fashionable. - It tapped into a growing trend towards healthy living and meditation – Yoga. - It developed close relationships with the user community and seeks their input. Lululemon's success is attributed to several key factors: 1. High-Quality Products: Offering durable, stylish, and functional athletic wear. 2. Brand Loyalty and Community: Building a strong, loyal customer base through community engagement and events. 3. Innovative Retail Experience: Creating immersive and inviting retail spaces that encourage customer interaction. 4. Strategic Marketing: Utilizing influencer marketing and word-of-mouth to build brand prestige. 5. Focus on Well-Being: Aligning products with the growing trend of health and wellness. Sustainability over the next decade will depend on maintaining product quality, evolving with consumer preferences, continuing innovation in both products and customer experience, and addressing any market shifts or competitive pressures effectively. 2. Why do you think that the fallout from The New York Times story regarding lululemon’s misleading claims was short-lived? Instructor’s Notes: Students may offer a wide variety of responses to this question but it is designed to get students to think about the strength of the brand and what customer loyalty really means in a practical sense. . Example answers: - The unique nature of lululemon’s brand – the strong brand promise - Consumers prior experience with the brand - The company’s quick and frank response and subsequent testing - The apparel design, fit and comfort are the main reasons why consumers bought the brand rather than the nature of the fabrics - Its close relationship with the communities which it serves - A loyal group of customers who love the brand and are willing to trust the company than the critics The fallout from The New York Times story regarding Lululemon’s misleading claims was short-lived because: 1. Strong Brand Loyalty: Loyal customers remained supportive despite the controversy. 2. Effective Crisis Management: Lululemon quickly addressed the issues and took corrective actions. 3. Quality Products: Continued to deliver high-quality products that met customer expectations. 4. Market Position: The company's established market presence and reputation for innovation helped weather the storm. 5. Consumer Trust: Customers valued the overall brand experience and trusted future improvements. 3. As stated at the end of the case, management is faced with two major decisions regarding the future of lululemon. One decision pertains to the mode of entry into new global markets i.e., establish company-owned stores, franchises, or joint ventures). The second decision concerns where to focus its efforts for revenue growth (i.e., first at existing stores, then at e-commerce, and then at new stores). Discuss the advantages and disadvantages of the various options. What course of action would you recommend? Instructor’s Notes: Students must show that they understand the pros and cons of each type of entry strategy as well as the pros and cons of growing revenues through different means. Example answers: Students recommendations may likely be establishing an e-commerce website or open a new store but they should be pressed to provide justification for their answers and see the extent to which they understand lululemon’s business strategy. Entry Strategy Pros Cons Company-owned stores (FDI) Company maintains 100% ownership; far greater control of foreign operations, higher potential returns Requires high levels of investments and risks Franchises Lower risks, less capital investments than direct investment Reduced control of operations in foreign markets, profit has to be split with franchisee, and franchisee can break away and start their own competing business Joint Ventures Quick market access; greater understanding of the market; shared financial burden; Ownership, control, and profits are shared; conflicts can arise between partners, especially when the partnership is unequal (between a small and a large partner), differences in culture, management styles, etc. Store Formats Existing Stores Could increase sales by offering promotions and intensifying advertising; incremental cost is low and does not require additional resources The particular geographic region served by existing store may be saturated; promotion may run against the brand promise or cheapen the brand E-commerce May provide access to a larger market at reduced costs and possibly higher margin due to low “real estate” cost. Lululemon is not currently setup to sell its products in any major way online and so this would require substantial investments, a change in strategy, and increased risks to the brand New Stores Could bring in new customers and additional revenues relative to existing stores. Expensive to establish new stores; takes time and requires substantial market research and assessments Video Activities Video: M&Ms Learning Objective: LO2 Description: This video demonstrates how M&Ms has applied various marketing principles and tactics to satisfy consumers needs/wants while generating benefits for the firm. M&Ms has sold its candy via intermediaries since 1941. A new distribution channel for the company is a direct to consumer model where they sell in their own stores. Key Words: marketing mix; segments; advertising; marketing channels; and distribution. Activity: Ask students to select a simple product like carbonated drinks or energy drinks or energy bars. Now ask students to (1) identify what consumer needs and wants these products satisfy; (2) list the market segments their chosen product is targeted to; (3) list all the different versions (e.g. size, flavour) of their chosen product and the price associated with each version; (4) list the different types of advertising and promotions they have seen for their chosen product; (5) list all the different places where their chosen product is sold; and (6) list the factors that they think account for the success of their chosen product. Solution Manual for Marketing Dhruv Grewal, Michael Levy, Shirley Lichti, Ajax Persaud 9781259030659, 9781259104312