CH-11-15 Retailing and Wholesaling – Marketing: The Core : Chapter Notes

This Document Contains Chapters 11 to 15 Chapter 11 Retailing and Wholesaling MARKETING TIP For this chapter we look to White CEO of Ron White Shoes for his MARKETING TIP. You may wish to use this at the start of a class, after a break, or to summarize the material at the end of a session. The quote for this chapter is as follows: “We try to make our messages clear, simple and consistent among all of our points of distribution.” – Aaron Surkis, manager, in-store communications, TELUS LECTURE NOTES CHAPTER 11 OPENING VIGNETTE – TELUS TELUS has delivered innovative telecommunications solutions to Canadians for over 100 years. Starting in British Columbia and Alberta, the company has spanned across Canada to become the country's second-largest telecommunications company. Leveraging the Internet, TELUS offers communications products and services solutions to over 13 million Canadians at home, at work, and on the move. These products and services include voice, data, wireless, entertainment, and video. Using forward integration, TELUS launched its first retail stores, and with its passion for growth, TELUS provides coverage that is available to 97 percent of the Canadian population. • Aaron Surkis has a challenging role. As manager of in-store communications for TELUS, Aaron leads a team of business professionals to communicate consistent messages to consumers through its corporate and franchise stores. • The corporate stores allow for centralized decision-making on marketing initiatives, and the franchises leverage the corporate marketing investment. • Aaron is amazed at how many consumers walk into their stores with a set solution in mind. Although that could be a quick sale at the retail level, the TELUS representatives ensure that they ask, “What do you plan to do with your device?” • After determining how much they plan to use their smartphone, for example, on the Internet or for pictures, TELUS representatives can provide the appropriate advice to consumers during various levels of the conversations. The retail store setup is evolving, and new technology launches will continue to require change at the retail store level. • That is why the overarching philosophy for Aaron’s team is to keep communications to consumers clear and simple while highlighting a consumer benefit. “It’s all about consistent storytelling,” affirms Aaron. “Our goals in-store around the spring, back-to-school, or holiday marketing campaigns are to create a message that resonates with consumers and ties back to our paid advertising campaigns.” • The bottom line, according to Aaron, is that TELUS representatives ensure that the device fits the consumers’ needs. With aggressive competition and the challenges of inventory management, putting the customer first will help TELUS succeed. • Coordination is a key for Aaron’s team to achieve its goals. There are 900 TELUS branches plus 2,000 other points of distribution through which the in-store communications team delivers the corporate message. • Many points of contact can yield differing opinions, all driven by an entrepreneurial spirit. The chief responsibility of Aaron’s team is to be the collaborative voice of dealers and negotiate a corporate message and strategy that all parties will agree to. • Aaron shares that "the key to successful in-store communications is to keep the message clear and simple." Reality Check As you read chapter 11, refer back to the opening vignette to answer the following questions: • What types of form of ownership are the TELUS distribution outlets? Answer: TELUS has stores which are part of the corporate chain as well as franchise stores. • How does Aaron’s team help ensure a consistent message among the different consumer touch points? Answer: The key to Aaron’s team’s success is “consistent storytelling” and being collaborative with the entrepreneurial franchises. I. THE VALUE OF RETAILING Retailing includes all activities involved in selling, renting, and providing goods and services to ultimate customers for personal, family, or household use. A. Consumer Utilities Offered by Retailing. The utilities provided by retailers create value for consumers. Time, place, possession, and form utilities are offered by most retailers in varying degrees, but one utility is often emphasized more than others. B. The Canadian Retail Scene • The retail trade represents Canada’s second largest labour force. • The largest ten Canadian retailers, ranked in descending order, are Loblaw, Alimentation Couche-Tard, Empire Company Limited (Sobeys), Metro, Shoppers Drug Mart, Canadian Tire, Hudson’s Bay Company, Katz Group , Jim Pattison Group, and Rona. C. The Global Retail Picture • In the past few years, the worldwide economy has been challenged by issues such as terrorism, economic downturn, reduced tourism and low consumer confidence. All these issues translate into lower sales for retail. • On a global scale, the largest retailer is Wal-Mart. In 2006 the Wal-Mart Group recorded sales of nearly US$375 billion dollars. • Of the top 250 firms, 86 are American and there are 99 located in Europe. Ask Yourself 1. When Ralph Lauren makes shirts to a customer’s exact preferences, what utility is provided? Answer: Form utility. 2. The customer has different ways to pay for a purchase at the Bay. What utility is provided? Answer: Possession utility D. Classifying Retail Outlets Because of the large number of alternative forms of retailing, it is easier to understand the differences among retail institutions by recognizing that outlets can be classified in several ways: 1. Form of ownership distinguishes retail outlets on the basis of whether individuals, corporate chains, or contractual systems own the outlet. a. Independent Retailer One of the most common forms of retail ownership, the independent store offers customers convenience, quality personal service, and lifestyle compatibility. b. Corporate Chain. • Has buying power that allows it to bargain with manufacturers to obtain good service or volume discounts. • Consumers benefit because there are multiple outlets with similar merchandise and consistent management policies. c. Contractual System. • Contractual systems involve independently owned stores that band together to act like a chain. The three kinds are retailer-sponsored cooperatives, wholesaler-sponsored voluntary chains, and franchises. • Member stores can take advantage of volume discounts commonly available to chains. • In a franchise system, an individual or firm (the franchisee) contracts with a parent company (the franchiser) to set up a business or retail outlet. − The franchiser usually assists in selecting the store location, setting up the store, advertising, training personnel, and providing step-by-step procedures and guidelines for the major aspects of the business. − The franchisee pays a one-time franchise fee and an annual royalty, usually tied to the store’s sales. When the fees are combined with other costs such as real estate and equipment, the total investment can be much higher. 2. Level of service is used to describe the degree of service provided to the customer. 3. Merchandise line describes how many different types of products a store carries and in what assortment. II. TARGET MARKET SELECTION AND POSITIONING A. Selecting a Target Market • The first task in developing a retail strategy is to define a target market, describing it in detail. • The most common descriptors for target market are demographics, psychographics, geography and behaviour. Retailers study these factors and adjust their retail marketing mix accordingly. B. Retail Positioning Just as marketers of packaged goods position their products to differentiate themselves from competitors, so do retailers. C. Shopper Marketing Shopper marketing is a hot trend in marketing today. It is a discipline designed to understand how consumers behave as shoppers in different channels and formats. III. RETAILING MIX A. Products and Services One of the first decisions that retailers make is what they are going to sell. Usually both services and products are offered. McDonalds offers a hamburger which is the tangible product, but the smiles, thank yous and clean washrooms make up some of the service components. The product P of the marketing mix in retailing is expanded in this chapter to include level of service, merchandise assortment and store atmosphere. B. Level of Service Differences in retail outlets are more obvious in terms of level of service, not form of ownership. 1. Self-Service. Is at the extreme end of the level-of-service continuum because the customer performs many functions and little is provided by the outlet. 2. Limited Service. Outlets provide some services, such as credit, and merchandise return. Customers are responsible for most shopping activities, although salespeople are available in selected departments. 3. Full Service. These retailers, which include most specialty and department stores, provide many services to their customers. C. Merchandise Mix Retailers also vary by their merchandise mix, the key distinction being the breadth and depth of items offered to customers. 1. Depth of Line Depth of product line means that the store carries a large assortment of each item. • Stores with large assortment (depth) of a related line of items are limited-line stores. • Stores that carry tremendous depth in one primary line of merchandise are single-line stores. • Both limited- and single-line stores are often referred to as specialty outlets. • Specialty discount outlets focus on one type of product at very competitive prices. These outlets are referred to as category killers because they often dominate the market. 2. Breadth of Line Breadth of product line refers to the variety of different items a store carries. • Stores that carry a broad line, with limited depth, are referred to as general merchandise stores. For example, large department stores carry a wide range of different types of products, but not unusual sizes. • Traditionally, outlets carried related lines of goods. Today scrambled merchandising, offering several unrelated product lines in a single store, is common. • Scrambled merchandising is convenient for consumers because it reduces the number of stops required on a shopping trip. However, for the retailer this merchandising policy means there is competition between very dissimilar types of retail outlets, or intertype competition. Scrambled merchandising and intertype competition make it more difficult to be a retailer. 3. Planograms A planogram is a visual diagram, or drawing of fixtures and products that illustrates how and where retail products should be placed on a store shelf. It also illustrates how many facings should be allocated for each SKU. The planogram is arranged so that the fastest-moving high-margin products get the most space on the shelf. 4. Store Atmosphere Store atmosphere is related to the positioning of a store. For example, Costco has a warehouse appearance that is consistent with the low prices that it offers. Store atmosphere refers to the physical characteristics of a store that provide an overall impression to the consumer. Ask Yourself 1. What are the four components of the retailing mix? Answer: The retailing mix includes product and service considerations, retail pricing, physical location factors, and communications. 2. What are some examples of stores with scrambled merchandising? Answer: The modern drug store and supermarkets. 3. Would a shop for big men’s clothes carrying pants in sizes 40 to 60 have a broad or deep product line? Answer: Deep product line D. Retail Pricing • Markup refers to how much should be added to the cost the retailer paid for a product to reach the final selling price. Retailers decide on the original markup, but by the time the product is sold, they end up with a maintained markup. • The original markup is the difference between the retailer cost and initial selling price. If an item does not sell quickly, the price is reduced. The difference between the final selling price and retailer cost is the maintained markup, which is also called the gross margin. • Discounting a product, or taking a markdown, occurs when a product does not sell at the original price and an adjustment is necessary. • The timing of a markdown can be important. Many stores take a markdown as soon as sales fall off to free up valuable selling space and obtain cash; other stores delay markdowns to discourage bargain hunters and to maintain an image of quality. • Many retailers use price discounts as part of their regular merchandising policy. For example, Wal-Mart and Home Depot emphasize consistently low prices and eliminate most markdowns with a strategy called everyday low pricing. • Another strategy, everyday fair pricing, is advocated by retailers that may not offer the lowest price but try to create value for customers through service and the total buying experience. • A special issue for retailers trying to keep prices low is shrinkage, or breakage and theft of merchandise by customers and employees. • Off-price retailing involves selling brand name merchandise at lower than regular prices. The difference between the off-price retailer and a discount store is that off-price merchandise is bought by the retailer from manufacturers with excess inventory at prices below wholesale, whereas the discounter buys at full wholesale price but takes less of a markup than do traditional department stores. Thus, selection at an off-price retailer is unpredictable, and searching for bargains has become a popular activity for many consumers. E. Physical Location A second aspect of the reailing mix involves deciding where to locate the store and how many stores to have. Most stores today are near several others in one of five settings: • The central business district is the oldest retail setting, the community’s downtown area. • Regional shopping centers consist of 50 to 150 stores that typically attract consumers who live or work within a 5- to 15-kilometre range and often contain two or three anchor stores, which are well-known national or regional stores. • The community shopping centre typically has one primary store (usually a department store branch) and often about 20 to 40 smaller outlets and serve customers within a 2- to5-kilometre drive. • A strip location is a cluster of stores to serve people who are within a 5- to 10-minute drive. Gas station, hardware, laundry, grocery, and pharmacy outlets are commonly found in a strip location, which differs from larger shopping centers in that the composition of these stores is usually unplanned. • A variation of the strip center is the power centre, which is a huge shopping strip with multiple anchor (or national) stores that often have 2 to 5 anchor stores and often contain a supermarket that brings the shopper to the power center. F. Communications Today’s re retailers combine many of the formats to offer a broader spectrum of benefits and experiences. These multichannel retailers utilize and integrate a combination of traditional store formats and nonstore formats such as catalogues, television, and online retailing to make shopping simpler and more convenient. Ask Yourself 1. Explain what shrinkage is. Answer: Shrinkage refers to breakage and theft of merchandise by customers and employees. 2. A large shopping strip with multiple anchor stores is a centre. Answer: power 3. How do multichannel retailers make shopping simpler and more convenient? Answer: (1) Customers can research choices online or in a catalogue and then make a purchase online, over the telephone, or at the closest store and (2) reach a broader profile of customers. IV. NON-STORE RETAILING Non-store retailing occurs outside a retail outlet through activities that involve varying levels of customer and retailer involvement. A. Automatic Vending Vending machines make it possible to serve customers when and where stores cannot. • Maintaining and operating vending machines is expensive, so product prices tend to be higher than those in stores. • Typically, small convenience products are available in vending machines. • Improved technology for cashless payment and the use of wireless technology to notify retailers when their machines are empty are reasons automatic merchandising sales are expected to increase in the future. B. Television Home Shopping • Television home shopping is possible when consumers watch a shopping channel, select products, and order by telephone or the Internet. • A limitation of TV shopping has been the lack of buyer-seller interaction. New Internet technologies now allow consumers to simultaneously shop, chat, and interact with their favorite show host while watching TV. C. Direct Marketing from a Retailing Perspective • Direct Marketing is an interactive process of marketing that uses advertising media or direct consumer contact to offer products or services. • When a direct communication to a consumer or a business market is intended to generate a response from the recipient, direct marketing is the tactic being used. D. Direct Mail and Catalogues • Direct mail and catalogue retailing eliminate the cost of a store and clerks and improve marketing efficiency through segmentation and targeting. • In addition, catalogues create customer value by providing a fast and convenient means of making a purchase. • Catalogue sales are growing as direct mail purchases have increased and traditional retailers and Internet retailers have added catalogs. • A successful approach used by many catalogue retailers is to send specialty catalogues to market niches identified in their databases. E. Telemarketing • Telemarketing, involves using the telephone to interact with and sell directly to customers. • Compared with direct mail, telemarketing is viewed as a more efficient means of targeting consumers. It has grown in popularity as companies search for ways to cut costs but still provide convenient access to their customers. • As telemarketing grows, consumer privacy has become an issue with consumers. In September 2008, The Canadian Radio-television and Telecommunications Commission (CRTC) instituted The National Do Not Call List (DNCL) which was created to enable Canadian consumers to reduce the number of unsolicited telemarketing calls they receive. Every year, thousands of Canadians raise concerns about receiving unwanted telemarketing calls. F. Direct Selling • Direct selling, sometimes called door-to-door retailing, involves direct sales of goods and services to consumers through personal interactions and demonstrations in their home or office. • Direct selling is growing in international markets where the lack of effective distribution channels increases the importance of door-to-door convenience and where the lack of consumer knowledge about products and brands will increase the need for a person-to-person approach. Ask Yourself 1. Why are catalogue sales growing? Answer: Traditional retailers are adding catalogue operations, as are many Internet retailers. The catalogues are becoming more specialized. 2. Where are direct selling retail sales growing? Why? Answer: Direct-selling retailers are expanding into other global markets due to a lack of effective distribution channels and consumer knowledge about products and brands. V. ONLINE RETAILING • Online retailing allows consumers to search for, evaluate, and order products through the Internet. For many consumers, the advantages are 24-hour access, the ability to comparison shop, in-home privacy, and variety. • There has been a melding of traditional and online retailers—“bricks and clicks”—that are using experiences from both approaches to create better value and experiences for customers. • Online purchases can result from paying dues to an online discount service, using a shopping “bot,” which searches the Web for a desired product and reports on the locations with the best prices, and bidding on a product via an online auction. A. Why Consumers Shop and Buy Online Consumers typically offer six reasons why the shop online: • Convenience. Online shopping and buying is convenient, so websites must be easy to locate and navigate, and image downloads must be fast. • Choice. There are two dimensions to choice: selection - numerous websites for almost anything consumers want and assistance – interactive capabilities of Internet/Web-enabled technologies assist customers to make informed choices. • Customization. Internet/Web-enabled capabilities make possible a highly interactive and individualized information and exchange environment for shoppers and buyers. Consumers get what they want and feel good about the experience. • Communication. Communication can take three forms: Marketer-to-consumer email notification, consumer-to-marketer buying and service requests, and consumer-to consumer chat rooms and instant messaging. • Cost. Many popular items bought online can be purchsed at the same price or cheaper than in a retail store. Lower prices result from Internet/Web-enabled software that permits dynamic pricing, the practice of changing prices for products and services in real time in repsonse to supply and demand conditions. • Control. Online shoppers are empowred. The readily use Internet/Web-enabled technology to seek information, evaluate alternatives, and make purchase decsions on their own time, terms, and condtions. B. When and Where Online Consumers Shop and Buy Shopping and buying happens at different times in the online marketspace than in the traditional marketplace. About 80% of online retail sales occur Monday through Friday. The busiest shopping day is Wednesday. By comparison 35% of retail store sales are registered on the weekend. Saturday is the most popular shopping day. Monday through Friday online shopping and buying often occur during normal work hours. C. Describing the Online Consumer • The average online Canadian now spends more time on the Internet than watching television, according to a survey from Ipsos Reid. • Other research indicates that more than 80% of Canadians over the age of sixteen are now connected to the Internet. • Ninety-four per cent of Canadians said they use the internet to compare prices and 60% go online to read or write reviews. As a result, consumers are becoming smarter, increasingly informed, and demanding. This trend will continue as more and more Canadians are now embracing mobile technologies from smartphones to iPads. D. What Online Consumers Buy Figure 11–8 shows the percentage of online retail sales by product/service category. VI. RETAILER USAGE OF THE MOBILE CHANNEL Retailers are becoming increasingly aware of the value of smartphone-equipped customers. Today, retailers are looking at mobile as another important customer touch point. • Cell phones, smartphones, and other handheld devices are a convenient way for customers to gather more information about a retailer’s products or even conduct transactions on a mobile basis. • In-store shoppers can research products and prices on their handsets using cameras, bar code scanners, and other mobile applications. Retailers can provide immediate incentives by knowing the specific in-store location of the shopper via GPS technology. • VII. WHOLESALING Many retailers depend on intermediaries that engage in wholesaling activities—selling products and services for the purpose of resale or business use. There are several type of intermediaries: A. Merchant Wholesalers Merchant wholesalers are independently owned firms that take title to merchandise they handle. • Merchant wholesalers are classified based on the number of functions performed. 1. Full-service wholesalers. Two types exist: a. General merchandise (or full line) wholesalers carry a broad assortment of merchandise and perform all channel functions but do not maintain much depth of assortment within specific product lines. b. Specialty merchandise (or limited-line) wholesalers offer a relatively narrow range of products but have an extensive assortment within the product lines carried. They perform all channel functions. 2. Limited-service wholesalers. Four types exist: a. Rack jobbers furnish the racks or shelves that display merchandise in retail stores, perform all channel functions, and sell on consignment to retailers, which means they retain the title to the products displayed and bill retailers only for the merchandise sold. b. Cash and carry wholesalers take title to merchandise but sell only to buyers who call on them, pay cash for it, and furnish their own transportation for it. c. Drop shippers, or desk jobbers, are wholesalers who own the merchandise they sell but do not physically handle, stock, or deliver it. They simply solicit orders from retailers and other wholesalers and have the merchandise shipped directly from producer to buyer. d. Truck jobbers are small wholesalers who have a small warehouse from which they stock their trucks for distribution to retailers. They usually handle limited assortments of fast-moving or perishable items that are sold for cash directly from trucks. B. Agents and Brokers Unlike merchant wholesalers, agents and brokers do not take title to merchandise and typically provide fewer channel functions. They make their profit from commissions or fees paid for their services, whereas merchant wholesalers make their profit from the sale of the merchandise they own. • Manufacturer’s agents, or manufacturer’s representatives: a. Work for several producers and carry noncompetitive, complementary merchandise in an exclusive territory. b. Act as a producer’s sales arm in an exclusive territory. c. Are resonsible for the transactional channel functions, primarily selling. • Selling agents represent a single producer and are responsible for the entire marketing function of that producer. • Brokers are independent firms or individuals whose principal function is to bring buyers and sellers together to make sales. Unlike agents, brokers have no continuous relationship with buyer or seller but negotiate a contract between the two parties and then move on. C. Manufacturer’s Branches and Offices Manufacturer’s branches and sales offices are wholly owned extensions of the producer that perform wholesaling activities: • A manufacturer’s branch office carries a producer’s inventory and performs the functions of a full-service wholesaler. • A manufacturer’s sales office does not carry inventory, typically performs only a sales function, and serves as an alternative to agents and brokers. Ask Yourself 1. Describe how smartphones are being used by retailers to engage consumers and help them make better shopping choices. Answer: Retailers are becoming increasingly aware of the value of smartphone-equipped customers. In-store shoppers can research products and prices on their handsets using cameras, bar code scanners, and other mobile applications. Retailers can provide immediate incentives by knowing the specific in-store location of the shopper via GPS technology. 2. What is the difference between merchant wholesalers and agents? Answer: Merchant wholesalers are independently owned firms that take title to the merchandise they handle, whereas agents do not take title to merchandise and typically provide fewer channel functions. Chapter 12 Marketing Communications MARKETING TIP For this chapter we look to Rosanne Caron, president of the Out-of-Home Marketing Association of Canada for her MARKETING TIP. You may wish to use this at the start of a class, after a break, or to summarize the material at the end of a session. The quote for this chapter is as follows: “Marketers can creatively use out-of-home media with other marketing communication tools to get measurable results.” LECTURE NOTES CHAPTER 12 OPENING VIGNETTE – WESTERN UNION The money transfer company Western Union is the focus on this opening vignette, demonstrating a creative IMC program that involves out-of-home, social media, radio, print, TV, and mobile marketing components. Western Union with service to over 200 countries is the dominant player in Canada, but not the cheapest. Its objective with its Spread the Cheer campaign was to boost business during the holiday season, a peak time for sending money overseas. The campaign focused on multicultural communities in Vancouver, Saskatoon, Halifax, Toronto, and Montreal and invited people to send free e-cards to loved ones and if they wished a gift of $50 for a $5 fee, for a total price of $55. The campaign included the following: Shopping centre elements: Oversized posters were placed in shopping centres as virtual holiday card-shops. The graphics showed holiday e-cards with QR codes for easy scanning. These codes took users to a microsite, www.spreadthecheer.ca, to personalize and send the free e-card. Once the e-card was sent, users were asked if they wanted to send a gift of $50 for a $5 fee (total cost $55), a $3 discount off Western Union’s regular rates. Event marketing: Carolers with “Spread the Cheer,” buttons and song books sang holiday songs in shopping malls in close to the promotional posters. Transit components: Interior transit ads with e-cards and QR codes were placed in buses and street cars and posters were placed in transit stations. Online elements: A microsite was created at www.sharethecheer.ca and ads were placed in online ethnic newspapers and on Facebook targeting multicultural communities. Multicultural Community outreach: Western Union sponsored seasonal community events with prizes and giveaways and placed signage in independent food stores in multicultural communities. TV and radio ads were also broadcast on local ethnic stations. Results: The “Spread the Cheer,” campaign resulted in 130,000+ page visits to its microsite (versus a 50,000 objective), a sales lift of 30 percent (versus an expected 10 percent), and QR code interactions of over 4,400 scans. The campaign won a 2013 Cassie Award for campaigns that build seasonal business. Reality Check As you read chapter 12, refer back to the opening vignette to answer the following questions: • Why was out-of-home media a good choice for this campaign? Answer: During the holiday season people shop for gifts, often in shopping malls. Placing ads in these shopping malls and in accompanying transit is a good way to reach this target group. Since the program focuses on multicultural communities, out-of-home media allows marketers to carefully select ad placement so that ads appear only in these communities. Other media options do not have this flexibility. • What forms of media were not used by Western Union in this campaign? Suggest the reasons why they were not considered appropriate? Answer: Western Union did not use mass media approaches (such as broad-reach TV and print campaigns) since these are expensive and wasteful options for this campaign - they would reach a wide group of consumers who are not in the target market. I. DEVELOPMENTS IN MARKETING COMMUNICATIONS Chapter 12 focuses on marketing communications and takes students through the latest developments and approaches used by the industry. Here are some of the latest developments: • The marketing communications industry is now in the age of selective reception where consumers are in control of what messages they see and whether they will interact with them. We see a changing consumer, an evolving media, and a changing advertiser. • Technology is embraced by consumers who now use multiple platforms to consumer media: TV programs can now be watched on laptops and tablet computers; Music can be downloaded onto iPods; Magazines can be read on eReaders and tablet computers; and smartphones are used to search for local deals and interact with messages through quick response codes and apps. • People are spending less time with offline media and more time with online media. Internet advertising is now the second largest form of advertising in Canada. • The media is responding by developing Internet options and features that complement their offline offerings. Advertisers are adjusting their approaches by integrating online approaches into their mix. • New and evolving marketing communications approaches include real-time marketing, content marketing, social media marketing, and mobile marketing.  Real-time marketing is a planned tactical approach where brands make themselves relevant online during events or newsworthy occurrences by diving into conversations as they occur with aligned short-term messaging that takes advantage of the current buzz  Content marketing involves creating and sharing information and expertise that is designed to inform and engage with tools such as research papers, e-books, infographics, how-to videos, blogs, webinars, e-newsletters, case studies, and events that can readily be found by the search engines  Social media marketing involves reaching out to consumers online through social networks where people connect with friends and contacts to share messages, comments, videos, and images as a form of self-expression  Mobile marketing is a set of practices that enables organizations to communicate and engage with their audiences in an interactive and relevant manner through any mobile device or network II. THE MARKETING COMMUNICATIONS INDUSTRY The marketing communications industry consists of five main areas that work together to form an industry that is ethical, trustworthy, cohesive and measurable. These areas include; (1) the media, (2) marketing communication agencies, (3) research companies, (4) associations, and (5) regulatory bodies. These areas have all been impacted by the digital era. • The Media: The main forms of media are TV, Internet, newspaper, magazine, radio, out-of-home, and mobile. Over the years, the media has evolved from a rudimentary word-of-mouth-dependent era to today’s Internet era where social media spreads messages and allows for interactivity. New media terms have surfaced in the Internet era - paid media, owned media and earned media.  Paid media - the media time that is purchased such as TV advertising.  Owned media - the media channels a company controls such as a website, microsite, or a social media page  Earned media - the free publicity secured through unpaid media or social media Successful campaigns use paid and owned media as springboards into securing earned media. • Marketing Communication Agencies: These organizations provide marketers with expertise on how to communicate messages. They can be broad and offer a variety of services or they can be specialty agencies providing expertise in media, creative, PR, event marketing, product placement and branded integration, direct marketing, or sales promotion. • Research Companies: Data on audience measurement, readership, consumer trends, and the quality of communication messages is provided by independent research companies and studies created by vendors in the industry. Some of these companies include:  Alliance for Audited Media (AAM) www.auditedmedia.com/  BBM Media Research (BBM) www.bbm.ca  Canadian Out-of-Home Measurement Bureau (COMB) www.comb.org  comScore www.comscore.com  Forrester Research www.forrester.com  Interactive Advertising Bureau of Canada (IAB) www.iabcanada.com  Media Digest cmdc.ca  Newspaper Audience Databank (NADBank) www.nadbank.com  Nielsen Company ca.nielsen.com  Print Measurement Bureau (PMB) www.pmb.ca  Television Bureau of Canada (TVB) www.tvb.ca • Associations: A number of active associations provide research data and host informative events and educational workshops. Top events include the MIXX Canada Conference Series, and FFWD Marketing and Advertising Week. • Regulations: There are four main regulatory groups that regulate marketing communications: (1) Advertising Standards Canada (ASC), (2) the Competition Bureau, (3) the Canadian Radio-television and Telecommunications Commission (CRTC), (4) the Canadian Marketing Association (CMA), and (5) the Canadian Wireless Telecommunications Association (CWTA). Specialist areas and industry groups such as the public relations industry also have associations that provide codes of ethics and guidelines on best practices to assist its members. (See chapter 2 for more details.) Advertising Standards Canada (ASC): This self-regulatory, non-government association uses a consumer complaint process to review questionable ads that are withdrawn if they contravene its guidelines. Its guidelines discourage untrue, vague, fraudulent ads and those against the standards of public decency. Detailed guidelines can be seen at www.asc.ca. The Competition Bureau: This independent government agency looks at fraudulent advertising and misleading representation to sell products, including price and warrantee claims. The Canadian Radio-television and Telecommunications Commission (CRTC): This government agency regulates the broadcast and telecommunications industry, including the licensing of stations, Canadian content guidelines, and limitations on advertising permitted during broadcasts. It oversees the advertising of alcohol beverages and works with the ASC on advertising to children. The Canadian Marketing Association (CMA): This association uses a Code of Ethics and Standards of Practice to guide the marketing industry in Canada on telemarketing, email marketing, mobile marketing, Internet marketing, promotional contests, fundraising, database marketing, and marketing to children and teenagers. It also provides guidelines on privacy issues and anti-spam practices. The Canadian Wireless Telecommunications Association (CWTA) administers the CWTA Short Code Guidelines, a strict set of guidelines on pricing and practices for mobile text messaging. This includes pricing guidelines, the use of keyword protocols, opt-in rules, privacy requirements, and terms and conditions. Ask Yourself 1. How has social media changed marketing communications? Answer: Social media allows consumers to respond to marketers for all to see. This puts marketers on alert and makes marketing more transparent and accountable. 2. How are newspapers adapting to evolving media habits? Answer: Newspapers are adapting by creating online platforms that allow newspapers to be read on tablet computers, laptops, cellphones, and eReaders. 3. How much time do you spend weekly with each form of media? Answer: People typically spend varying amounts of time with different media types each week. For example, they might spend 10 hours on social media, 5 hours reading news online, 7 hours watching TV, and 3 hours listening to podcasts, though these figures can vary greatly by individual. III. APPROACHES TO MARKETING COMMUNICATIONS There are two basic approaches in marketing communications; outbound marketing and inbound marketing which are often used in combination to create IMC programs. Outbound marketing - a marketing approach that broadcasts messages to a wide audience using advertising, direct mail, e-mail, telemarketing, or personal selling approaches. Inbound marketing - an approach where consumers find the product and its messaging by using online techniques that marketers facilitate such as search engine optimization, pay-per-click ads, social media, and microsites. Integrated Marketing Communications - coordinates all promotional activities to provide a consistent message to a target audience. Ask Yourself 1. How is marketing communications regulated in Canada? Answer: It is regulated by (1) Advertising Standards Canada (ASC), (2) the Competition Bureau, (3) the Canadian Radio-television and Telecommunications Commission (CRTC), and (4) the Canadian Marketing Association (CMA 2. What is the role of the ASC? Answer: The ASC sets guidelines through a code and regulates the industry through a complaint process. It also provides clearance services. 3. What is IMC? Answer: Integrated marketing communications refers to a communications program that uses a combination of tools that communicate a consistent message in a visually consistent manner. IV. MARKETING COMMUNCIATION TOOLS Marketing communication tools include advertising, public relations, sales promotion, direct response, event marketing and sponsorship, and personal selling Advertising - a paid form of media that includes TV, Internet, newspaper, magazine, radio, outdoor/transit. Ask Yourself 1. What types of advertising opportunities are available on the Internet? Answer: Advertising on the Internet can use pay-per-click advertising and display advertising. 2. How are newspapers in Canada dealing with the decline in advertising revenues? Answer: Newspapers are creating online websites with pay walls to help monetize content. 3. What are the reasons online advertising is the largest forms of media in Canada? Answer: Internet advertising has become so large as this is where people spend so much of their time. Public relations - a communications tool that seeks to influence the opinions and attitudes of target groups through the use of unpaid media exposure. It uses press releases, press conferences, special events, company reports, social media releases, and social networking tools. Ask Yourself 1. What are the advantages and disadvantages of using public relations? Answer: Public relations has the advantages of being relatively low cost. Messages that are spread by the media are also seen as highly credible by the public. Media messages picked up from public relations activities cannot be controlled by the company. 2. What is a social media release? Answer: A social media release is an online press release that incorporates text, video, images, and the opportunity for people to share the release through sharing¬ buttons and to also add comments to the release. 3. What role do company reports play in public relations? Answer: Company reports often target external investors and internal company employees and suppliers with updates on the financial state of the company, it progress in realizing goals, and its future direction. Company reports also target the financial press. Sales promotion - a communications tool that provides short-term incentives to generate interest in a product or cause and encourages purchase or support. It includes consumer promotions such as coupons, premiums, contests, sweepstakes, samples, continuity programs, point-of-purchase materials, and rebates. It also includes trade promotions which are short-term promotional tools that generate support with wholesalers, distributors, or retailers. Common approaches include trade shows, trade allowances and discounts, and cooperative advertising. Ask Yourself 1. What types of consumer promotions are available to marketers? Answer: Consumer promotional tools include coupons, premiums, contests, sweepstakes, samples and free trials, loyalty programs, rebates, bonus packs, and point-of-sale materials. 2. How do trade promotions differ from consumer promotions? Answer: Trade promotions target distributors, wholesalers and retailers, while consumer promotions target the final end-consumer. 3. What trade promotional tools are available to marketers? Answer: Trade promotions include tradeshows, off-invoice allowances, merchandising allowances, and co-op advertising programs. Direct response - an offline and online marketing communications tool designed to communicate with consumers one-on-one and elicit a direct action. Approaches include face-to-face selling, direct mail, catalogues, telemarketing, and direct response advertising on TV, radio, or print, as well as email campaigns, online display ads, pay-per-click ads, and social media interactions. Event marketing and sponsorship - event marketing refers to the creation or involvement of a brand in an experience or occasion that will heighten its awareness, create positive associations, and generate a desired response. Sponsorship involves an advertiser paying a fee in exchange for inclusion in an event, involvement in its advertising opportunities, or exposure within the event itself. Personal selling - the two-way flow of communication between a buyer and seller, designed to influence a purchase decision. It usually includes face-to-face communication. Alternative marketing communication approaches - non-traditional alternative approaches include word-of-mouth marketing techniques and product placement or branded entertainment initiatives. Unique online tools - the Internet has a number of online tools marketers use such as search engine marketing, social network marketing, affiliate marketing, email marketing, and mobile marketing. Ask Yourself 1. What are the differences between advertising and public relations? Answer: Advertising is paid media messaging while public relations is unpaid media exposure. 2. Which promotional tools can generate immediate, short-term responses? Answer: Sales promotions are designed to trigger short-term response. Other tools that can also assist in this goal are public relations, direct response, and personal selling. Advertising tends to have longer-term goals. 3. What are the stages in the personal selling process? Answer: The stages in the personal selling process include prospecting, pre-approach, approach, presentation, close, and follow-up. V. PLANNING AND EVALUATION Developing the promotional program requires a marketer to set the strategic direction of the programs and then follow the steps to compete the program. Designing the program: Marketers often use agencies and experts to help create marketing communications programs. Marketers guide strategy development, creative development, and media planning and buying, as well as program evaluation. Considerations in communication planning: Marketers need to consider whether they are taking a push or pull strategy and what stage in the Customer Advocacy Funnel needs to be considered. Push strategy: When messaging focuses on the wholesalers, distributors, or retailers. Pull strategy: When messaging focuses on the ultimate consumer. Customer Advocacy Funnel; A communication approach that takes consumers down a path of initial product awareness through to brand advocacy. The following six steps are involved in the marketing communications process: 1. Specify the IMC objectives: Objectives identify what the program should accomplish such as increase awareness, generate trial, or to encourage repeat purchase. 2. Identify the target audience: Information on demographics, psychographics geographics, and behaviouristics should be provided. 3. Set the promotional budget: A budget needs to be set. This is usually done by looking at previous years’ spending and adjusting it based on current year programs. 4. Design the promotional program: The promotional mix is now set using creativity, experience, and an analytical approach. 5. Schedule and run the elements: Each element of the promotional program needs to be sequenced and scheduled to meet the overall program objectives. 6. Evaluate the Program: Some promotional programs are pre-tested to allow for messaging changes before fully launching them. All programs need to be evaluated while they are running and fully evaluated once they are completed against the promotional objectives. Ask Yourself 1. What are the stages in the Customer Advocacy Funnel? Answer: Awareness, interest, engagement, trial, purchase, loyalty, and advocacy. 2. What approaches are used to set the promotional budget? Answer: Common approaches are percentage of sales, competitive parity, all you can afford, and the objective and task method. 3. How are marketing communications programs evaluated? Answer: Programs should be evaluated against objectives which can include sales levels, product awareness benchmarks, market share levels, profitability targets, and ROI. Other factors to be considered are message likability, message comprehension, message awareness, and changes in attitudes post message exposure. Specific metrics for the promotion should also be considered such as contest entries, coupon redemption, email open rates, and website traffic, etc. Chapter 13 Mobile Marketing and Social Media Marketing MARKETING TIP For this chapter we look to Jake Rich, president and founder of Rich Media for his MARKETING TIP. You may wish to use this at the start of a class, after a break, or to summarize the material at the end of a session. The quote for this chapter is as follows: “Follow your passions, work hard, and be creative.” LECTURE NOTES CHAPTER 13 OPENING VIGNETTE – RICH MEDIA Canadian digital marketing agency Rich Media is the focus on this opening vignette, providing a glimpse into mobile marketing as well as two mobile marketing tools that were created for Scotiabank and Samsung. The vignette is summarized as follows: Rich Media: Rich Media is an innovative digital marketing agency with expertise in designing interactive website discovery tools, apps, mobile web, and video animation. Each project at Rich Media adheres to its three pillared approach of meshing strategy, creativity, and technology. Rich Media takes projects from start to finish, including in-house testing and full creative development. Its team includes designers, coders, writers, videographers, and client services experts that collaborate on projects. Rich Media’s clients include Scotiabank, Samsung, Sun Life Financial, as well as ING Direct, TD Insurance, Great West Life, and RBC Financial Group. Mobile marketing: Rich Media sees mobile marketing as a new marketing communications channel that presents opportunities to communicate with individuals on their personal devices. The challenge is to understand how consumers use mobile devices and to create marketing programs that are engaging as well as useful. The Scotiabank Dream Home Finder The Scotiabank Dream Home Finder is a mobile app that is designed for prospective home buyers. It makes house hunting easier by providing house hunters with a mobile app that saves information on a mobile device including the prospective homes they have visited, home features, price ranges, images, personal notes, and information on the neighbourhoods. Homes are also plotted on Google Maps, rated against the user’s dream home criteria, and a mortgage calculator is provided for handy calculations. The Samsung TV selector tool: The Samsung TV selector tool can be accessed on a computer or mobile device. It is designed to help consumers choose the best Samsung TV that fits their needs. Consumers answer a few questions about TV location, room dimensions, lighting, TV usage, pricing, and Internet applications which then results in a TV recommendation. Reality Check As you read chapter 13, refer back to the opening vignette to answer the following questions: • Why is it important that the Samsung TV selector tool be mobile-friendly? Answer: Consumers today are connected throughout the day on their mobile devises and being able to connect with consumers when and where they choose is important. This TV selector tool can be used anywhere, including in a retail setting, which can be an important factor in the final purchase decision. • Download the Scotiabank Dream Home Finder app and identify what mobile marketing tools and social media marketing tools are used to engage users. Answer: This tool uses mobile web as well as a native mobile application. The Scotiabank Dream Home Finder app uses mobile marketing tools such as push notifications and in-app messaging to engage users, while leveraging social media marketing tools by integrating sharing features and social media login options for broader reach and user interaction. I. THE MOBILE MARKETING LANDSCAPE Marketers need to understand the elements that drive the mobile market in Canada and so this section reviews the mobile market, mobile devices, and how consumers use mobile devices. • The mobile market Mobile devices are central connectors to other forms of media and used by consumers to help manage the daily bustle as well as to make purchase decisions. They are used to communicate, to gather information, and to for entertainment purposes. Unlike other platforms, mobile devices are personal, portable, and are usually on. They accompany people in the home, at work, and into their social spaces. Marketing spending in the mobile area is lagging behind its usage due to its newness - a phenomenon that was also seen in the early days of Internet marketing. Smartphone penetration in Canada has reached over 62 percent. • Mobile marketing Mobile marketing is the set of practices that enables organizations to communicate and engage with audiences in an interactive manner through any mobile device or network. Mobile marketing can use the following tools: the mobile web, mobile apps, mobile advertising, mobile sales promotional tools, and proximity marketing. • Mobile devices Mobile devices are cellphones, tablets, e-readers, handheld gaming devices, or portable MP3 players that are used to communicate with consumers. • Consumers and mobile devices Consumers that use mobile devices are almost equally male and female (49% / 51%), between the ages of 18-55 years, with an annual household income over $50 thousand. They are platform agnostic, switching seamlessly between smartphones, tablets, and other portable devices throughout the day. A typical consumer starts the day at home checking e-mails on a smartphone, uses a desktop or laptop computer at work for business purposes, and returns home in the evening where relaxation often occurs in front of a TV, with a tablet and smartphone close at hand to respond to text messages, connect on social media, surf the Internet, and check apps. The top five activities conducted on a smartphone are #1 e-mailing, #2 Internet browsing, #3 social networking, #4 playing a game, and #5 listening to music. They are also used for showrooming, a practice where a mobile device is used in-store to check competitive online product reviews and prices and to then purchase the cheaper product online. Ask Yourself 1. What is mobile marketing? Answer: Mobile marketing is the set of practices that enables organizations to communicate and engage with audiences in an interactive manner through any mobile device or network. 2. How does consumer behaviour differ on mobile devices throughout the day? Answer: A typical consumer starts the day at home checking e-mails on a smartphone, uses a desktop or laptop computer at work for business purposes, and returns home in the evening where relaxation often occurs in front of a TV, with a tablet and smartphone close at hand to respond to text messages, connect on social media, surf the Internet, and check apps. 3. What is showrooming? Answer: Showrooming is a practice where a mobile device is used in-store to check competitive online product reviews and prices and to then purchase the cheaper product online. II. MOBILE MARKETING TOOLS Mobile marketing engages consumers using various tools - mobile web, mobile apps, mobile advertising, and mobile sales promotional tools. Mobile sales promotional tools include mobile messaging, matrix 2D barcodes, and proximity marketing. These are outlined below: • Mobile web: This is when a website is designed for the smaller screens of mobile devices. • Mobile apps: These are software programs designed for mobile devices so that with a quick tap or click, they engage with information, entertainment, or other forms of interactivity. Three types of apps exist; native apps that are accessed through app stores and are specifically designed to be run and hosted on a mobile device and use its features; web apps that run off a browser and do not interact with a mobile device and cannot be accessed through an app store; and hybrid apps that integrated both approaches. • Mobile advertising: This refers to advertising that renders on mobile devices and includes mobile website display ads, in app ads, pay-per-click search ads, and pre-roll video ads. • Mobile sales promotional tools: Sales promotions provide short term incentives for people to interact with brands. In the mobile space these can be communicate through mobile ads or more directly through mobile messaging, matrix 2D bar codes, and proximity marketing approaches. - Mobile messaging comes in five forms. There are (1) Common Short Codes (CSC), (2) Short Messaging Services (SMS), (3) Multimedia Messaging Services (MMS), (4) e-mail messaging, and (5) in-person voice phone calls and voice messaging. - Matrix 2D barcodes are two-dimensional square or rectangular response codes that when scanned by a mobile barcode reader or app, provide additional information, launch websites, prompt downloads, or send SMS or e-mail messages. A popular brand of matrix 2D bar code is the QR-code - Proximity marketing is the local distribution of marketing content to mobile devices that have opted-in at a specific geo-location. It can use Bluetooth technology, Near Field Communications (NFC), Radio Frequency Identification (RFID) tags, and Augmented Reality (AR). These approaches are explained below: o Bluetooth technology - low-power radio waves that wirelessly transfer text, images, and audio or video data through a local hotspot to Bluetooth enabled and activated devices o Near Field Communications - two-way radio communication between smartphones and smartphone-type devices that can transfer images, documents, or monetary transactions when the two devices touch or are within a few inches of each other. Mobile wallet apps such as Google Wallet is an example o Radio Frequency Identification Tags (RFID) - physical tags that use radio signals to provide information the form of text, images, or video. These tags are commonly embedded in pets, and were used in baby monitors. They are now also used by marketers to trigger product information o Augmented Reality (AR)- uses a webcam or mobile device to capture an image or GPS signal that is then supplemented with graphics, audio, video, or location data to provide additional information o Mobile check-in services - when consumers check into locations using apps such as Foursquare or Yelp to post their whereabouts and then receive offers from local merchants on their mobile devices o Mobile discovery - the use of mobile apps such as Google maps, Yelp, or Urbanspoon to find local services that are rated in the area Ask Yourself 1. What types of apps exist and how do they differ? Answer: There are three types of apps; native apps that are accessed through app stores and are specifically designed to be run and hosted on a mobile device and use its features; web apps that run off a browser and do not interact with a mobile device and cannot be accessed through an app store; and hybrid apps that integrate both approaches. 2. What are common short codes (CSC) and how are they used in mobile marketing? Answer: CSC are dedicated short messaging codes of typically 5-6 digits that trigger subscriptions, donations, alerts, downloads, or promotional content. Mobile marketers often use these codes in conjunction with keywords to involve consumers in a program such as text REDCROSS to 30333 to automatically donate $5. 3. What forms of advertising are used on mobile devices? Answer: Mobile advertising includes mobile website display ads, in app ads, pay-per-click search ads, and pre-roll video ads. III. MOBILE MARKETING REGULATIONS AND BEST PRACTICES • Mobile marketing regulations The mobile marketing industry is regulated by the same guidelines that apply to the marketing industry in general (discussed in chapter 2), but with the addition of further regulations for mobile marketing. These additional regulations are spearheaded by the Canadian Radio-television and Telecommunications Commission (CRTC), the Canadian Wireless Telecommunications Association (CWTA), and the Mobile Marketing Association (MMA) as follows: - The Wireless Code is the CRTC’s mandatory code of conduct for all wireless service providers that was created to ensure wireless contracts are easy to understand, that contracts can be cancelled after two years, that data overages are capped at $50 per month, and roaming fees are capped at $100 per month - Common Short Code (CSC) guidelines are administered by the CWTA on CSC pricing and marketing practices. Mobile marketers must provide participants with mandatory keyword protocols, use double opt-in subscriptions, and ensure that terms of service, conditions, and pricing are clear. - The MMA Global Code of Conduct is administered by the MMA and requires that mobile marketing programs have clear privacy policies and terms of use. Opt-in and opt-out protocols must be used and mobile messaging should be limited to its initial purpose. Personal data must also be protected, and all MMA members must demonstrate compliance with the code. • Mobile marketing best practices Mobile marketing best practices see marketers abiding by marketing regulations and using a mobile first approach to make connections which means that mobile is a central element in a marketing program and is not added as an after-thought. The following best practices are recommended by the MMA:  Think mobile first and start with a mobile perspective  Leverage concurrent multi-screen usage  Utilize a full spectrum of mobile tools  Integrate mobile marketing programs into traditional marketing campaigns  Create campaigns that work across multiple screens and devices  Leverage mobile throughout the sales funnel as mobile is used for search, discovery, connecting, and purchasing  Test your way to success by tracking, measuring, and making adjustments to improve results Ask Yourself 1. What is proximity marketing? Answer: Proximity marketing is the local distribution of marketing content to mobile devices that have opted-in at a specific geo-location. It can use Bluetooth technology, Near Field Communications (NFC), Radio Frequency Identification (RFID) tags, and Augmented Reality (AR). 2. Which associations and commissions regulate mobile marketing in Canada? Answer: Mobile marketing is covered by the regular marketing regulations that are discussed in chapter 2. Additional regulations that govern mobile marketing are spearheaded by the Canadian Radio-television and Telecommunications Commission (CRTC), the Canadian Wireless Telecommunications Association (CWTA), and the Mobile Marketing Association (MMA). 3. What best practices have surfaced in mobile marketing? Answer: Mobile marketing best practices include using a mobile first approach and integrating it into traditional marketing communication programs to leverage a full spectrum of tools across multiple screens and devices. Mobile marketing programs should consider that mobile devices are used by consumers for search, discovery, connecting, and purchasing products. Mobile marketing programs should be measured and tested to make improvements. IV. THE SOCIAL MEDIA LANDSCAPE Social media marketing requires an understanding of what social media offers consumers and marketers. These elements are outlined below: • Social media Social media is a form of online media that allows members to create their own network of friends and contacts to share comments, articles, opinions, videos, and images. It falls into five areas: - social communities such as Facebook, Twitter, Google+, and LinkedIn for sharing opinions, articles, images, and videos with friends, contacts, and associates - social bookmarking sites such as Pinterest for primarily sharing images - social review sites such as Urbanspoon and Yelp for posting reviews on local restaurants and services - social gaming sites such as Xbox Live for video games and Zynga for social games (Draw Something) - social creation and discovery sites such as YouTube, Tumblr, and Instagram for sharing video or image-based content. Social media differs from other forms of media in that is inexpensive, easy to use, and advertising on these platforms is relatively cheap. It needs dedicated attention so that messaging is fresh, current, and responsive. It is labour intensive in terms of real-time monitoring and nurturing. Questions and comments should not go unanswered on social media and advocates should be noted. Social media is a public forum and all interactions need to be handled professionally and in a delicate manner. • Characteristics of social media There is an abundance of social media networks that are used by consumers and marketers. They share the following characteristics: - Cloud-based software - they run off the cloud - Mobile and desktop compatible - they can be accessed from a desktop or mobile device - Apps - they have mobile apps for easy mobile access - Free - most are free to use - Interactive - members can share content, and post comments and opinions. - Searchable - content is easily searchable - Evolving - the platforms are continuously evolving with new features - Advertising options - many social networks have an advertising platform • Social media marketing Social media marketing is when brands reach out to consumers online through social networks. Brands engage on these platforms by hiring experts and social media community managers to create brand pages on social media platforms, to join online conversations, to monitor and respond to questions and comments, to use metrics to measure performance and engagement, and to send out updates and offers. Brands may also place ads on social networks that accept advertising. Ask Yourself 1. What are the characteristics of social media? Answer: The characteristics of social media are that they use cloud-based software, they are mobile and desktop compatible, they use apps, and they are usually free to use. They are also interactive, searchable, and continuously evolving. They often have advertising platforms for marketers. 2. What is social media marketing? Answer: Social media marketing is when brands reach out to consumers online through social networks where people connect with friends and contacts to share messages, comments, videos, and images as a form of self- expression. 3. How does social media differ from other forms of media? Answer: Social media differs in that it is inexpensive, easy to use, and advertising on these platforms is relatively cheap. It needs dedicated attention so that messaging is fresh, current, and responsive. It is labour intensive in terms of real-time monitoring and nurturing. Questions and comments should not go unanswered on social media and advocates should be noted. Social media is a public forum and all interactions need to be handled professionally and in a delicate manner. V. SOCIAL MEDIA MARKETING TOOLS Social media marketing requires a marketing to understand the tools that are available to use in the social media space as well as the specific nuances of individual social media platforms. These are outlined below: • Social media networks in Canada In 2014 the most popular social networks in Canada are Facebook, YouTube, Google+, Twitter, LinkedIn, Instagram, Tumblr, and Pinterest. - Facebook: Facebook is the largest social network with 1.23 billion global monthly active users. It was founded in 2004 and today is a free social network where people can connect with friends and family, share what matters to them. It is used by 98 percent of Interbrand’s top 100 brands. Due to its dominance and well developed platform, Facebook is usually the centre of a brand’s social media programs and accounts for most of its social media audience. Marketers create Pages on Facebook to interact with followers and can place ads on the network to increase awareness. - YouTube: YouTube is the second largest social network with more than 1 billion global users. It was launched in 2005 and was purchased by Google in 2006. It is a free video sharing social network for people to discover and be inspired by interesting, entertaining, and informative videos. YouTube is widely used by marketers who create YouTube channels and upload short films, how-to videos, and ads on their products, relying on the platform to engage with story-telling. Marketers can also purchase advertising on this site. - Google+: Google+ is a free social networking site that was launched in 2011 and is becoming more widely used. It currently has over 300 million global users, although the number of actual engaged users is judged to be substantially lower as Google automatically creates Google+ accounts for people with Google or YouTube accounts. Marketers create business pages and communities on Google+ to share content and engage with consumers. They can also use its hangout features to profile expertise and to enhance its brand image. Google+ is starting to introduce advertising opportunities for brands. - Twitter: Twitter was launched in 2006 as a free social media site that focuses on short newsworthy updates that are limited to 140 characters. Its advantage is the speed with which people can scan updates and decide whether they want to click on a link to read more. Marketers create profiles on Twitter and engage followers with newsworthy updates. Marketers also use Twitter as a customer service platform where questions, queries, and complaints are answered. Marketers can purchase advertising on this platform through promoted tweets and promoted accounts. Twitter has over 243 million global users. - LinkedIn: LinkedIn is a freemium business networking social media site for professionals that was launched in 2003. Basic LinkedIn resume posting services are free with more complex options available for a monthly or annual fee. LinkedIn is used by organizations to profile their expertise and to target individuals, companies, and sectors on their services. LinkedIn allows companies to create company pages and to create groups that profile expertise. Companies can also run ads on LinkedIn. - Instagram: Instagram is a free social network that was launched in 2010 as a mobile app and purchased by Facebook in 2012. It is the world’s largest photo-sharing site with over 150 million active users that quickly and easily share their lives through photos and short videos that are taken with a mobile device. Marketers use Instagram to share visual content and run contests. Ads can also be purchased on this platform. - Tumblr: Tumblr was launched in 2007 and purchased by Yahoo! in 2013. It stands primarily as a visual micro blogging site and social network for youth and people under 35 years. It focuses on discovery and creativity. On Tumblr people creatively share the things they love with short posts that often reblog visual images from the Internet. Tumblr blog posts are generally short, very visual, and contain little text. Tumblr has over 108 million active accounts. Tumblr is not widely used by marketers as it requires exceptionally creative content to resonate with this audience. Ads can be run on Tumblr. - Pinterest: Pinterest is a free virtual bookmarking and network that was launched in 2010 and has over 70 million global users. Users visually bookmark (pin) and share inspiring images or videos of their favorite things on digital boards. Marketers create business accounts on Pinterest to pin interesting product-related images and to run contests. They also create group boards where others can pin content which can build community around a brand. Marketers can purchase promoted pins on Pinterest to increase awareness. • Creating Social Media Marketing Programs Companies that want to enter the social media marketing space need to ask themselves the following questions: 1. What are your company's social media policies and guidelines? 2. What voice and tone do you want to use for your brand? 3. How does your target market use social media and what drives engagement? 4. What social media networks are appropriate for your brand and target group? 5. What type of content is suitable for your brand on your selected social media sites? 6. Who will be creating social media content for your brand and what is the budget? 7. What are your daily/weekly targets for social media posts and interactions? 8. Who will be running the social media programs? 9. What analytics platforms will be used to deploy, monitor, measure, engage, and evaluate social media programs? 10. How will social media be integrated into other brand marketing programs? • Measuring Social Media Marketing Programs Basic social media analytics data is available from the social networks but this often does not provide the required detail. Third party analytics platforms can be purchased by marketers to measure and manage multiple social media platforms. Often these platforms will identify online brand mentions and monitor consumer sentiment, buzz, engagement, and amplification. They also allow marketers to respond in real time to customer questions, pre-schedule posts, and identify brand advocates with strong influence scores. Examples of third party platforms are Hootsuite, Salesforce Marketing Cloud Radian6, and Simply Measured. Marketing metrics for social media include: - Cost-per-thousand (CPM), the cost of reaching one thousand people - Cost-per-acquisition (CPA), the cost of acquiring a new follower or sale - Cost-per-click (CPC), the cost of getting someone to click on a link, image, or ad. - Followers - Views - Comments - Likes - Shares - Sentiment - Engagement - Return on investment (ROI) Additional website metrics will be used if the intent is to drive people to a website VI. BEST PRACTICES IN SOCIAL MEDIA MARKETING The following best practices are used when using social media for marketing purposes:  Obtain senior management commitment  Set company-wide governance for social media  Create detailed social media policies, guidelines, and rules of engagement  Set clearly defined and measurable social media marketing objectives  Select a scalable platform that will be used to deploy, monitor, and measure social media activity  Identify the social networks that will be used  Establish metrics that will be used to evaluate approaches  Dedicate, train, and hire social media marketing experts  Understand that negative comments will surface on social networks  Realize that mistakes will be made  Integrate social media programs into marketing practices Ask Yourself 1. What two approaches are used to measure social media marketing programs? Answer: Marketers can access the analytics provided by the social network or use analytics’ software from social media analytics’ companies 2. What cost metrics are used to measure social media marketing programs? Answer: Marketers will look at cost-per-thousand (CPM), the cost of reaching one thousand people; cost-per-acquisitions (CPA), the cost of acquiring a new follower or sale; and cost- per-click (CPC), the cost of getting someone to click on a link or ad. Chapter 14 Customer Relationship Marketing MARKETING TIP For this chapter we look to Marci Maddox, senior director, customer experience management, OpenText for her MARKETING TIP. You may wish to use this at the start of a class, after a break, or to summarize the material at the end of a session. The quote for this chapter is as follows: “Making sure you understand how your rich media gets created, how it’s being used, and where it has already been sent is critical to creating a successful and exciting customer experience.” LECTURE NOTES CHAPTER 13 OPENING VIGNETTE – OPENTEXT In order to enhance customer relationships, organizations turn to two key strategies: customer relationship management (CRM) and customer experience management (CEM). By leveraging CRM data, organizations place their customers in the centre of all business decisions. Furthermore, organizations need to ensure that they have an effective customer experience management (CEM) strategy in place. By creating positive experiences at all customer touch points, CEM facilitates a personalized experience for consumers. In essence, the two strategies work together to help organizations deepen relationships and retain customers. • As the senior director of customer experience management at OpenText, Marci Maddox has the opportunity to see first-hand the CRM and CEM strategies her company develops. Realizing the implementation of such strategies requires integration with a company’s culture, Marci believes. “There should be a shared emphasis between investing in the right technology and ensuring your workforce uses it to enhance the customer experience effectively.” • With so many touch points for customers to engage with, companies need “to evolve the one-to-one message into a multi-dimensional relationship driven by the customer.” • By placing the customer in the centre and allowing the customer to customize the information experience, organizations will create deeper relationships and better experiences. • OpenText solutions have helped a leading global interactive entertainment software company. By delivering games and content online, the reach of this company and its client base seemed endless. The challenge for the company was to establish control over its global brand by offering a consistent look-and-feel for local markets. Since there was so much content that could be shared, OpenText offered a strategy to send the right content to the right user. The OpenText solution involved creating a warehouse of digital content, allowing its global users to access the content for their specific needs. Now, marketers of games from all over the world can customize their solutions specifically to the needs of their local markets. • The benefits of the OpenText solution is explained best by Marci: “From a marketing perspective, organizations are looking at ways to elevate their brand and increase the loyalty and advocacy they have with their customers.” Reality Check As you read chapter 14, refer back to opening vignette to answer the following questions: - What exactly do you think is meant by companies needing to take approach considering a CRM or CEM solution? Answer: Organizations need to ensure that both CRM and CEM are in place. By placing the customer in the centre and understanding what is seen through their eyes, acquisition and retention strategies will be more effective. - How much personal data would you share to have a better customer experience? Answer: I would share personal data up to a point where it enhances my customer experience without compromising my privacy. For instance, sharing preferences and purchase history can improve product recommendations, but I would avoid disclosing sensitive information like financial details or personal identifiers. Balancing convenience with privacy is key to ensuring a secure and enjoyable experience. - How should organizations use data in the public domain, such as tweets or uploaded videos, to enhance the customer experience? Answer: These answers will differ from student to student, but keep the answers in consideration to give context to the Infographic exercise at the end of the chapter. Organizations should analyze public domain data like tweets and uploaded videos to understand customer sentiments, preferences, and trends. By monitoring this content, they can tailor their marketing strategies, address customer concerns in real-time, and engage with their audience more effectively. This proactive approach helps personalize interactions and improve overall customer satisfaction. I. CUSTOMER RELATIONSHIP MANAGEMENT Customer relationship management (CRM) is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. • CRM focuses on using information about customers to create marketing programs that result in customer satisfaction. • However, for CRM to be successful there must be attitude changes in the organization. • Generally, CRM is seen as a system for funneling information to one place that otherwise would be dispersed in a big company. This allows all employees to access one customer profile instead of bits and pieces of information about the customer scattered throughout the company. • A concept similar to CRM is a process called Customer Experience Management (CEM). It’s defined as managing customer interactions to build brand equity and improve long-term profitability. • CEM’s main focus is exclusively on customer interactions or touch points. Touch points are just another way to describe customer interactions with the brand or company. • Cultural Changes 1. A company’s failure with CRM is often a result of approaching CRM as a software project rather than an overall company strategy. 2. A company may spend millions of dollars on software, but doesn’t bother changing the cultural attitudes of the organization. 3. CRM requires a top-down long run commitment by management to change cultural attitudes. 4. A CRM culture does not come in a box of software. Before installing the tools of CRM, companies need to make sure they are on their way to establishing a CRM culture. 5. Here are some questions to assess how close the company is to developing a CRM culture: a. Does the company’s vision and mission statement reflect a customer-centric sentiment? b. What percentage of employees can state what the company’s vision or mission statement is? c. Do employees complain about customers? d. To what degree do employees feel that they are rewarded for behaving in a way that has the customer’s interests at heart? e. Would the company feel comfortable talking to ten randomly chosen customers about their sales and after-care experience? The company should consider the answers to these questions to evaluate the state of the firm’s cultural attitudes. A. Customer Service Component of CRM at TD Canada Trust • Customer relationship management entails building and maintaining profitable customer relationships. For this to happen, customer service must be addressed. • Businesses are constantly looking for ways to show customers that they care, such as through reward programs. Many customers appreciate the perks, but according to the findings of the TD Canada Trust loyalty poll, TD customers want to be treated well. • When asked which form of appreciation they are most interested in, 49 percent of TD customers ranked “just good customer service” as number one. • II. SOCIAL MEDIA and CRM • A growing number of companies are keeping track of what's said about their brands on social media platforms such as Facebook and Twitter. • A single Twitter message—known informally as a tweet—sent in frustration over a product or a service's performance, can be read by hundreds or thousands of people. Similarly, positive interaction with a representative of the company can help turn an unhappy customer into a more loyal one. A. Airlines and Social Media • Hotels and airlines were among the first industries to recognize the value of social media platforms such as Twitter and Facebook, and monitor them to respond to angry customers. • Increasingly, companies are taking the tactic to a new level, trying to listen in on every mention of their brands, for a real-time gauge of what people think of their offerings, competitors and industry trends. B. Credibility Issues of Social Media • One of the temptations for a company is to encourage consumers to say positive things about their brand on a social media platform. Credibility can suffer as a result if people are compensated by the company and then say positive things about the product. III. CUSTOMER ACQUISITION AND RETENTION Data-driven programs can examine the profiles of a company’s most popular customers and use these characteristics to find prospective customers. 1. A company that builds strong relationships with customers will retain these customers, resulting in more sales and profits than the company would have if it focused only on getting new customers. 2. Some B2B companies are now making a special effort to ask customers when and how they would like to be contacted by the company. 3. Satisfied buyers tend to buy from the same seller each time a purchase decision arises. 4. The increased profitability that is associated with customer retention is due to several factors that occur once a relationship has been established with a customer. • The cost of acquiring a customer occurs only at the beginning of a relationship, so the longer the relationship, the lower the amortized cost. • Long-term customers tend to be less inclined to switch, and also tend to be less price sensitive. • Long term customers may initiate word of mouth activity and referrals. Ask Yourself 1. What is customer relationship management all about? Answer: CRM focuses on using information about customers to create marketing programs that result in customer satisfaction. 2. Describe how companies are using social media in their relationships with customers. Answer: A growing number of companies are keeping track of what's said about their brands on social media platforms such as Facebook and Twitter. This activity falls into line with the process of CRM, because it’s an excellent way to build and maintain a relationship with customers. Loyalty Programs • According to Pareto’s Rule, 80% of a brand’s sales come from 20% of its customers. Heavy users should be rewarded differently than light users. The implication here is to take special care of the 20% by offering them better rewards than the remaining 80%. • The oldest and best known loyalty program in Canada is Canadian Tire money. The Air Miles reward program is Canada’s largest loyalty program. • Another large Canadian loyalty program that has been around for a long time is the HBC Rewards program first started by Zellers under the name Club Z. • Loblaws offers the President’s Choice Financial MasterCard in which consumers can get PC points that can be redeemed for groceries. • The Shoppers Drug Mart Optimum card is a very successful loyalty program. Loyalty programs have become a way for one company to differentiate itself from another. IV. DATABASE MARKETING A. Data Mining • It is a process of analyzing customer patterns and insights to make better marketing decisions. • Data mining can spot trends and other nuggets of information that the company may not have been aware of. • Data mining can help marketers with customer segmentation. • An example of using data mining is in the grocery industry. Supermarkets should identify the most profitable ways to build and maintain loyal customer relationships. • Data mining techniques are used in an effort to help supermarkets understand their customers’ shopping behaviour. Ask Yourself 1. What is Pareto’s Rule? Answer: 80% of a brand’s sales come from 20% of its customers 2. Give some examples of loyalty programs. Answer: HBC Rewards program, Shoppers Drug Mart Optimum card, Air Miles 3. What is data mining? Answer: It is a process of analyzing customer patterns and insights to make better marketing decisions. B. Customer Lifetime Value • Companies are starting to focus on the value of a customer if that customer remains loyal to the firm over the customer’s lifetime. • Customer lifetime value is the potential sales that will be generated if that customer remains loyal to that company for a lifetime. • A concept very close to customer lifetime value is share of wallet. CRM techniques can help marketers get a larger share of a customer’s purchases from that company. Share of wallet is the percentage of a customer’s purchases that a company has in a specific product category. Ask Yourself 1. Why is customer lifetime value important for companies to calculate? Answer: Companies are starting to focus on the value of a customer if that customer remains loyal to the firm over the customer’s lifetime. The customer can be looked upon as an investment to the company. The higher the investment, the more incentive there is to retain that customer. 2. What does share of wallet mean? Answer: The percentage of a consumer’s purchases that a company has in a specific category. C. The Worth of Retaining Marginal Customers CRM allows firms to use information technology to quantify the value of individual customers in terms of sales and profits. • CRM analysis shows that a small proportion of customers contribute to a large percentage of profits, and that many customers are unprofitable. • Many firms are beginning to jettison or fire their low-value customers and are focusing their time on their high-valued customers. V. CRM and CUSTOMER REACQUISITION • Companies are realizing that losing a customer means more than losing a sale. It means losing the entire future stream of purchases that the customer would make over a lifetime of patronage. • The longer customers stay away from a business, the less likely they are to return. • Because customer databases capture purchases, computers can be programmed to periodically examine transaction frequencies and create a list of all customers who have not made a purchase within a set period of time. • Because each customer generally has a certain purchase frequency, software can determine when each customer’s purchase frequency has been broken. • Once lapsed customers are identified, the next step is to contact them to determine why they have stopped buying. Ask Yourself 1. What does firing a customer mean? Answer: Many firms are beginning to jettison or fire their low-value customers and are focusing their time on their high-valued customers. 2. Describe the two steps in customer recovery. Answer: The first step in customer recovery is to find the customer who is in jeopardy of being lost to the company. After lapsed customers are identified, the next step is to contact them to determine why they have stopped buying. If the problem is resolved, the lapsed customer may become a very loyal customer because the firm has shown interest in the customer. Chapter 15 Strategic Marketing Planning MARKETING TIP For this chapter we look to Mike Jackson, vice president, strategy, webTactics for his MARKETING TIP. You may wish to use this at the start of a class, after a break, or to summarize the material at the end of a session. The quote for this chapter is as follows: “We use the metrics to quickly adjust our plan and get closer to our desired results.” LECTURE NOTES CHAPTER 15 OPENING VIGNETTE – webTactics Strategic planning is a continuous process used by large and small companies to set direction and organizational objectives. Businesses and not-for-profit organizations use this approach to help set, and then work towards, achieving a long-term vision for an organization and to satisfy stakeholders’ expectations. • More and more companies see talent as an important component to executing strategy. Finding the right people to execute business strategy well is a challenging and rewarding task, as the effective utilization of people, processes, and capital helps organizations achieve their long-term vision. • As vice president of strategy with webTactics, Mike Jackson reviews the strategic planning process with business leaders and helps them develop marketing plans specific to talent acquisition. • Creating a strategic marketing plan for talent acquisition has many steps. The first step begins with under- standing the target audience. This is complemented by an analysis of the organization’s culture. • One of the key questions Mike asks is, “What is your employee value proposition?” If the client can articulate this well, Mike’s team determines how the value proposition was derived. • Mike invests a lot of time helping clients under- stand the importance of the four key elements in the discovery phase of a marketing plan. It begins with an understanding of the existing recruitment brand to determine the company’s strengths, weaknesses, opportunities, and threats against the talent pool. • “The digital age we are in right now allows us to execute recruitment marketing plans with an aim-fire-adjust approach.” To illustrate this further, Mike clarifies, “After we execute a part of the recruitment marketing plan, we use the metrics to quickly adjust our plan and get closer to our desired result. This will lead to adjustments to and revised investments in the campaigns.” Reality Check As you read chapter 15, refer back to the opening vignette to answer the following questions: • How is the strategic marketing process described by Mike Jackson aligned with the process described in the chapter? Answer: The strategic marketing process described by Mike is in line with the process in the chapter. He combines a few of the steps involved as he is summarizing the overall strategy. Each area can be fleshed out further to provide more detail for the strategy. • If Mike Jackson was helping organizations create more loyal customers, what modifications (if any) would you make to its strategic marketing process? Answer: Although the audience and desired result would be different, the strategic marketing process used to develop loyal customers would be very similar to those that companies use to attract potential employees. Instead of interviewing employees for insight, for example, customers could be interviewed during the Situation Analysis phase. I. ORGANIZATIONS AND THEIR LEVELS OF STRATEGY There are two basic kinds of organizations: • A business firm is a privately owned organization that serves its customers in order to earn a profit, which is both: – the reward to a business firm for the risk it undertakes in offering a product for sale, and – the money left over after a firm’s total expenses are subtracted from its total sales. • A nonprofit organization is a nongovernmental organization that serves its customers but does not have profit as an organizational goal. Some examples: museums, orchestras, and private hospitals. A. Levels in Organizations and How Marketing Links to Them There are three levels in large organizations: 1. The corporate level, where top management directs overall strategy for the entire organization and creates value for its shareholders. 2. The business unit level (also termed strategic business units or SBUs), which is the part of an organization that markets a set of related products to a clearly defined group of customers. 3. The functional level, where groups of specialists actually create value for the organization. The term department refers to these specialized functions. Examples of functional units are finance, human resources, marketing, and research and development. B. Strategy Issues in Organizations Organizations need a reason for existence and a direction. This is where their business, mission, and goals converge. Business and mission apply to the corporate and business unit levels; goals relate to all three levels. 1. The Business. Organizations exist for a purpose—to accomplish something for someone. But over time, its purpose gets fuzzy. One guideline in defining the company’s business: Try to understand the people served by the organization and the value they receive, which emphasizes the critical customer-driven focus that successful organizations have. In a famous article by Harvard professor Theodore Levitt (Marketing Myopia), organizations must not define their business and customer focus too narrowly. Some examples: • Railroads are in the “transportation” business, not the railroad business. • Disney is in the entertainment business, not movie or theme park businesses. 2. The Mission. By understanding its business, an organization can define its mission, which is a statement of the organization’s scope, often identifying its customers, markets, products, technology, and values. Star Trek has probably the best-known mission statement in America: “To explore strange new worlds, to seek out new life and new civilizations, to boldly go where no one has gone before.” Organizations must connect not just with their customers but with all their stakeholders, the people who are affected by what the organization does and how well it performs. Stakeholders include employees, owners, board members, suppliers, distributors, unions, local communities, and customers. 3. Goals. Goals or objectives convert the mission into targeted levels of performance to be achieved, often by a specific time. Goals measure how well the mission is being accomplished. Business firms pursue several different types of goals: • Profit. According economic theory, a firm seeks as much profit as possible. • Sales (dollars or units). A firm may elect to maintain or increase sales even though profits may not be maximized. • Market share. Market share is the ratio of sales revenue of the firm to the total sales revenue of all firms in the industry, including the firm itself. • Quality. A firm may choose to focus on high quality. • Customer satisfaction. Customers are the reason an organization exists. Firms can monitor their satisfaction through surveys or complaints. • Employee welfare. A firm may recognize the critical role employees play in its success. • Social responsibility. A firm may seek to balance conflicting goals of consumers, employees, and stockholders to promote overall welfare of all these groups, even at the expense of profits. Nonprofit organizations also set goals: • Private organizations strive to serve customers efficiently. • Government agencies try to serve the public good. Ask Yourself 1. What are the three levels of organization in today’s large corporations? Answer: The three levels are the corporate, business unit, and functional. 2. What is the purpose of an organization’s mission? Answer: A mission is a statement of the organization’s scope, often identifying its customers, markets, products, technology, and values. 3. What are stakeholders? Answer: Stakeholders are the people who are affected by what the company does and how well it performs. C. Tracking Strategic Directions with Marketing Dashboards Marketing dashboards allow marketing managers to know whether they are making progress regarding their strategic direction. 1. Car Dashboards and Marketing Dashboards a. A marketing dashboard is the visual computer display of the essential information related to achieving a marketing objective. b. A marketing dashboard can also be an Internet-based display with real-time information, and active hyperlinks to provide further detail. c. On a car’s dashboard, we glance at the fuel gauge and take action when our gas is getting low. d. With a marketing dashboard, a marketing manager glances at a graph or table and makes a decision whether to: − Take action. − Do more analysis to understand the problem better. 2. Dashboards, Metrics, and Plans a. In Figure 15-2, Mountain Equipment Co-ops’s marketing dashboard graphically displays the company’s social responsibility efforts. b. Each performance variable in a marketing dashboard is a marketing metric, a measure of the quantitative value or trend of a marketing activity or result. c. Only a few metrics should be shown on a marketing dashboard so that managers aren’t overwhelmed with too much information. II. SETTING STRATEGIC DIRECTIONS Setting strategic directions involves answering two questions: Where are we now? Where do we want to go? A. Look Around: Where Are We Now? Asking an organization where it is at the present time involves identifying its customers, competencies, and competitors. 1. Customers. Strategic directions must be customer-focused and provide genuine value and benefits to present and prospective customers. 2. Competencies. Answers the question, “What do we do best?” • Competencies are an organization’s special capabilities, including skills, technologies, and resources that distinguish it from other organizations. Exploiting them can lead to success. • Competitive advantage is a unique strength relative to competitors, often based on quality, time, cost, or innovation. 3. Competitors. In global competition, the lines among competitive sectors are increasingly blurred, so successful firms continuously assess both who the competitors are and how they are changing in order to respond with their own strategies. • Loblaws competes directly with other supermarkets such as Sobeys and Safeway. At the same time, it also competes against mass merchandisers such as Wal-Mart superstores which also carry groceries and it also competes with warehouse clubs such as Costco. Loblaws also carries many pharmacy items which put it into direct competition with pharmacies such as Shoppers Drug Mart and Pharma Plus. • Shoppers Drug Mart is beginning to carry many new lines of cosmetics, which puts it into direct competition with department stores such as the Bay, which traditionally carries many lines of cosmetics. B. Growth Strategies: Where Do We Want to Go? Knowing where the organization is at the present time enables managers to set a direction for the firm and allocate resources to move in that direction. Two techniques to aid in these decisions are the (1) business portfolio analysis and (2) market-product analysis. 1. The Business Portfolio Analysis. The Boston Consulting Group’s (BCG) business portfolio analysis uses quantified performance measures and growth targets to analyze a firm’s business units (called strategic business units or SBUs by BCG) as though they were a collection of separate investments. This analysis has also been applied at the product line or individual product or brand level. The SBUs are positioned on a growth-share matrix, in which: • The vertical axis is the market growth rate, which is the annual rate of growth of the specific market or industry in which a given SBU is competing. • The horizontal axis is the relative market share, defined as the sales of the SBU divided by the sales of the largest firm in the industry. BCG has given names and descriptions to the four resulting quadrants in its growth-share matrix based on the amount of cash they generate or require from the firm: • Cash cows (lower left). SBUs that have a dominant share of slow-growth market. Generates large amounts of cash to pay company overhead and to invest in other SBUs. • Stars (upper left). SBUs with a high share of high-growth market that needs extra cash to finance their future growth. • Question marks or problem children (upper right). SBUs with a low share of high-growth markets. Requires a lot of cash to maintain or increase market share. Management must choose which to invest in and phase out the rest. • Dogs (lower right). SBUs with a low share of low-growth markets. May generate enough cash to sustain but do not hold promise of becoming winners for the firm. Consider dropping unless relationships with other SBUs, competition, or potential strategic alliances exist that benefit the firm. • Note: The area of the circles in a growth-share matrix is proportional to the corresponding SBU’s annual sales revenue. Management often makes decisions on the role of its SBUs in the future and either injects or removes cash from it. As a result, four alternative strategies are available for each SBU: • Build. Invest cash in question marks to increase market share and turn them into stars. • Hold. Invest just enough cash in cash cows to maintain market share at their current levels. • Harvest. Remove cash from cash cows in the short-term even though they may lose market share and become dogs in the longer run. • Divest. Phase out dogs by withholding cash or actually selling them to gain cash for other SBUs. 2. The Market-Product Analysis. Firms view growth opportunities via markets and products. • For any product there is both a current market (existing customers) and a new market (potential customers). • For any market there is both a current product (what existing customers now use) and a new product (something customers might use if developed). Firms consider four alternative market-product strategies: • Market penetration. Increase sales of present products in existing markets. There is no change in the basic product line or the market served, but increased sales are possible by selling by selling more ice cream by better promotion or distribution, for example. • Market development. Sell existing products to new markets (such as geographically). Example: Selling existing Ben & Jerry’s super premium ice cream to Brazil for the first time. • Product development. Sell a new product to existing markets. Example: Unilever could try selling a new product such as frozen yogurt under the Ben & Jerry’s brand in North America • Diversification. Develop new products and sell them in new markets. Example: Sell a brand of breakfast cereal in China. This is a potentially high-risk strategy because the company has neither previous production experience nor marketing experience on which to draw. Ask Yourself 1. What are competencies and why are they important? Answer: Competencies are an organization’s special capabilities, including skills, technologies, and resources that distinguish it from other organizations. They are important because exploiting these competencies can lead to the organization’s success. 2. What is business portfolio analysis? Answer: Business portfolio analysis studies a firm’s business units as though they were a collection of separate investments. 3. What are the four market-product strategies? Answer: The four market-product strategies are: (1) market penetration, (2) market development, (3) product development, and (4) diversification. III. THE STRATEGIC MARKETING PROCESS After the organization assesses where it’s at and where it wants to go, other questions emerge: • How do we allocate our resources to get to where we want to go? • How do we convert our plans into actions? • How do our results compare with our plans, and do deviations require new plans and actions? This approach is used when: • Engaging in the strategic marketing process, whereby an organization allocates its marketing mix resources to reach its target markets. This process is divided into three phases: planning, implementation, and control. • Developing a marketing plan, which is a road map for the marketing activities of an organization for a specified future period of time, such as one year or five years. A. Strategic Marketing Process: The Planning Phase of The Marketing Plan The planning phase consists of three steps: • Situation analysis. • Market-product focus and goal setting. • The marketing program. 1. Step 1: Situation Analysis • A situation analysis involves taking stock of where the firm or product has been recently, where it is now, and where it is headed in light of the organization’s plans and the external factors and trends affecting it. • A short-hand summary of the situation analysis is a SWOT analysis, an acronym describing an organization’s appraisal of its internal strengths and weaknesses and its external opportunities and threats. • A SWOT analysis helps a firm to identify the strategy-related factors to help the firm grow and succeed by building on vital strengths, correcting glaring weaknesses, exploiting significant opportunities, and avoiding disaster-laden threats. • A SWOT analysis is based on an exhaustive study of the four areas in Step 1 of the planning phase and forms the foundation on which the firm builds its marketing program: – Identifying trends in the firm’s industry. – Analyzing the firm’s competitors. – Assessing the firm itself. – Researching the firm’s present/prospective customers. 2. Step 2: Market-Product Focus and Goal Setting. Determining which products will be directed toward which customers is essential to develop an effective marketing program. This decision often based on market segmentation, which involves considering prospective buyers into groups, or segments, that (1) have common needs and (2) will respond similarly to a marketing action. Goal setting involves setting measurable marketing objectives to be achieved. For an entire marketing program, the objective is often a series of actions to be implemented over several years. Example: Using the strategic marketing process, let’s examine Step 2 by way of using Sleep Country Canada as an example: • Set marketing and product goals. One of Sleep Country’s marketing goals may be to increase its market share by a certain percentage in the retail¬ing mattress business in Canada. • Select target markets. Sleep Country Canada tar¬gets consumers who want a quality mattress as well as a positive customer service experience. • Determine competitive advantages. Competitive advantages are those characteristics of a product that make it superior to competitive substitutes. Sleep Country Canada offers the mattress purchaser an enjoyable customer service experience unparal¬leled in this market. • Position the product. Sleep Country Canada is posi¬tioned as a mattress specialist that offers quality products with the added benefit of courteous and knowledgeable staff, an attractive in-store setting, and a convenient delivery service. 3. Step 3: Marketing Program. This aspect of the planning phase involves developing the marketing plan’s marketing mix and the budget. Example: Sleep Country Canada: • Product strategy. Offer consumers one of the larg¬est selections of top, name-brand mattresses. • Price strategy. Offer consumers a low-price guar¬antee. If consumers find comparable product at a competitor that is equal to or lower than Sleep Country Canada’s price, the company will beat that figure by 5 percent. • Promotion strategy. Sleep Country Canada uses mass media advertising to communicate its unique retail experience to prospective and current customers. • Place (distribution) strategy. Sleep Country Canada is conveniently located in five Canadian provinces with 148 stores in total • Budget. After developing a sales forecast, a budget is developed that must be approved by top management. Ask Yourself 1. What is the difference between strength and an opportunity in a SWOT analysis? Answer: Both are positive factors for the organization, but strength is an internal factor whereas an opportunity is an external one. 2. What is market segmentation? Answer: Market segmentation involves considering prospective buyers into groups, or segments, that (1) have common needs and (2) will respond similarly to a marketing action. 3. What are competitive advantages and why are they important? Answer: Competitive advantages are those characteristics of a product that make it superior to competitive substitutes. They are the single most important factor in the success or failure of a new product. B. The Implementation Phase of the Marketing Plan Implementation involves executing the marketing plan. The four components of the implementation phase are: 1. Obtaining Resources. The responsible marketing manager must obtain the people and money necessary to succeed. 2. Designing the Marketing Organization. A marketing program needs a marketing organization to implement it. The responsibilities of all individuals within the marketing organization need to be specified. 3. Developing Schedules. Effective implementation requires deadlines—scheduling important milestones and meeting them. 4. Executing the Marketing Program. Effective execution requires attention to detail for both marketing strategies and marketing tactics. • A marketing strategy is the means by which a goal is to be achieved, usually characterized by a specified target market and a marketing program to reach it. • Marketing tactics are detailed day-to-day operational decisions essential to the overall success of marketing strategies. C. The Evaluation Phase: The Marketing Plan (For Internal Purposes) The evaluation phase of the marketing plan seeks to keep the marketing program moving in the direction set for it. It has two key elements: 1. Compare the results of the marketing program with the goals in the written plans to identify deviations. • Can reveal a planning gap, which is the difference between the projection of the path to reach a new goal and the projection of the path of the results of a plan already in place. • The ultimate purpose of the firm’s marketing program is to “fill in” this planning gap. 2. Act on these deviations by: • Exploiting a positive deviation. When actual results are far better than the plan called for, creative managers find ways to exploit the situation. • Correcting a negative deviation. Sometimes, the marketing program falls short of its goals. When this occurs, managers need to take corrective action. Ask Yourself 1. How would you distinguish a marketing strategy from a marketing tactic? Answer: A marketing strategy is the means by which a goal is to be achieved, usually characterized by a specified target market and a marketing program to reach it. Marketing tactics are detailed day-to-day operational decisions essential to the overall success of marketing strategies. 2. Describe the four components of the implementation phase of the marketing plan. Answer: The four components of the implementation phase are as follows: obtaining resources, designing the marketing organization, developing schedules, and actually executing the marketing program. The planning phase objectives are used as the benchmarks with which the actual performance results are compared in the evaluation phase. Instructor Manual for Marketing: The Core Roger A. Kerin, Steven W. Hartley, William Rudelius, Christina Clements, Harvey Skolnick, Arsenio Bonifacio 9781259030703, 9781259269264, 9781259107108