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CHAPTER 12 Building Customer Relationships Through Effective Marketing 12.7 TEXTBOOK ANSWER KEYS 12.7a Return to Inside Business Nespresso 1. How do Nespresso’s coffeemakers and capsules provide short-term and long-term utility for customers? Nespresso creates form utility by converting raw materials such as coffee beans, metal, and heating elements into finished products such as single-serve coffee capsules and single-serve coffeemakers, which provide value to customers. It creates place utility by selling its products in convenient locations for customers, including Nespresso boutiques and online. Nespresso creates time utility by offering its products when customers want to buy, such as when they buy a single-serve coffeemaker or when they run out of capsules and need replacements (they can buy while shopping or online at any hour). The company creates possession utility by enabling customers to take ownership of and use its products to satisfy their needs. Customers buy coffeemakers in the short term, but over the long term they need the possession and form utility replacement capsules. Ask students to discuss the long- and short-term value of the other types of utility. For example, is place utility provided over the long term by Nespresso selling replacement capsules in its boutiques and online? 2. Of the six forces in the marketing environment, which do you think have the most effect on Nespresso’s ability to start and continue long-term customer relationships? Students will offer a variety of responses. Technological forces are a major factor because Nespresso relies on production technology to be able to make coffee capsules and coffeemakers that meet the needs of customers. This influences Nespresso’s ability to start a customer relationship and to continue it. Sociocultural forces are also important because drinking espresso and other coffee-based drinks can be influenced by social and cultural trends. The case notes that legal and regulatory forces related to patent expiration are going to push Nespresso and competitors to innovate. Competitive forces come into play because as rivals begin to produce capsules that are compatible with Nespresso’s machines, the company will need to find other ways of maintaining customer relationships—such as by developing unique flavors or new machines that don’t take the same replacement capsules. Finally, political forces may affect Nespresso’s ability to obtain coffee beans exported from other countries. Disruptions could challenge Nespresso’s customer relationships in the short term. 12.7b Review Questions 1. How, specifically, does marketing create place, time, and possession utility? Marketing creates place, time, and possession utility by making a product available at a location where customers wish to purchase it; by making a product available when customers wish to purchase it; and by transferring title (or ownership) of a product to the buyer. 2. What is relationship marketing? Relationship marketing is developing long-term, mutually beneficial arrangements in which both the buyer and seller focus on value enhancement through the creation of more satisfying exchanges. Relationship marketing strives to increase value of the product or service to buyers over time. Initially, relationship marketing continually deepens the buyer’s trust; the more the customer’s loyalty increases, the more the company understands the customer’s needs and desires. By responding to these needs and wants, the marketer can increase the value they provide. 3. How is a marketing-oriented firm different from a production-oriented firm or a sales-oriented firm? A marketing-oriented firm concentrates its efforts on the sale of goods and services that meet customers’ needs. A production-oriented firm emphasizes increased manufacturing output and production efficiency. A sales-oriented firm is characterized by increased advertising, an enlarged sales force, and occasional high-pressure selling techniques. 4. What are the major requirements for a group of individuals and organizations to be a market? How does a consumer market differ from a business-to-business market? A market is a group of individuals and/or organizations that have needs for products in a given category and have the ability, willingness, and authority to purchase such products. Markets are classified as consumer markets or business-to-business markets. Consumer markets consist of purchasers and/or individual household members who intend to consume or benefit from the purchased products and do not buy the products to make a profit. Business-to-business markets purchase specific kinds of products for use in day-to-day operations or in making other products for profit. 5. What are the major components of a marketing strategy? A marketing strategy is a plan that will enable an organization to make the best use of its resources and advantages to meet its objectives. A marketing strategy consists of (1) the selection and analysis of a target market and (2) the creation and maintenance of an appropriate marketing mix, a combination of product, price, distribution, and promotion developed to satisfy a particular target market. 6. What is the purpose of market segmentation? What is the relationship between market segmentation and the selection of target markets? The purpose of market segmentation is to divide markets on the basis of reasons for customers wanting a product, such as income and geographic location. The relationship between market segmentation and the selection of target markets is that segmentation refers to the reasons producers divide markets, whereas target markets are the markets themselves. 7. What are the four elements of the marketing mix? In what sense are they “controllable”? The four elements of the marketing mix are product, price, distribution, and promotion. They are controllable in the sense that a firm can vary each element to suit its organizational goals, marketing goals, and target markets. 8. Describe the forces in the marketing environment that affect an organization’s marketing decisions. A firm has control over such organizational resources as finances and information in addition to the elements contained in the marketing mix (product, price, distribution, and promotion). However, the firm’s marketing activities are also affected by a number of external—and generally uncontrollable—forces. As Figure 12.3 illustrates, the forces that make up the external marketing environment are: (1) economic forces, (2) sociocultural forces, (3) comp-etitive forces, (4) political forces, (5) technological forces, and (6) legal and regulatory forces. 9. What is a marketing plan, and what are its major components? A marketing plan is a written document that specifies the resources, objectives, marketing strategy, and implementation and control efforts an organization can use in marketing a specific product or product group. The major components of a marketing plan include the executive summary, environmental analysis, strengths and weaknesses, opportunities and threats, marketing objectives, marketing strategies, marketing implementation, and methods of evaluation and control. 10. What major issues should be specified before conducting a sales forecast? A company sales forecast is the amount of a product an organization expects to sell during a certain period of time, based on a specified level of marketing effort. Before conducting a sales forecast, management must decide on the methods to be used to forecast sales. The specific methods used depend on the cost involved, type of product, characteristics of the market, time span of the forecast, purposes for which the forecast is used, stability of historical sales data, availability of the required information, and expertise and experience of the forecasters. 11. What is the difference between a marketing information system and a marketing research project? How might the two be related? A marketing information system is a computer-based system for managing marketing information that is gathered continually from internal and external sources. Marketing research is the process of systematically gathering, recording, and analyzing data concerning a particular marketing problem. A marketing information system provides information on a continuing basis, whereas marketing research is used to obtain information for specific marketing projects. 12. What new information technologies are changing the ways that marketers keep track of business trends and customers? The Internet, online information services, and databases are technologies that help firms analyze marketing information by tracking market trends and purchase behavior of customers. 13. What are the major sources of secondary information? Major sources of secondary information include government sources, trade associations, general publications, news sources, and corporate information. 14. Why do marketers need to understand buying behavior? Buying behavior is the decisions and actions of people involved in buying and using products. Since a firm’s success depends greatly on buyers’ reactions to a particular marketing strategy, it is important to understand buying behavior. Marketing managers are better able to predict consumer responses to marketing strategies and to develop a satisfying marketing mix if they are aware of the factors that affect buying behavior. 15. How are personal income, disposable income, and discretionary income related? Which is the best indicator of consumer purchasing power? Personal income is the income an individual receives from all sources less the Social Security taxes the individual pays. Disposable income is personal income less all additional taxes. Discretionary income is disposable income less savings and expenditures on food, clothing, and housing. Discretionary income is of particular interest to marketers because customers have the most choice in spending it. 12.7c Discussion Questions 1. What problems might face a company that focuses mainly on its most profitable customers? Focusing on the most profitable customers allows a firm to focus on the customers based on their customer lifetime value. The higher the value, the more loyal the customers are to the company. Also, by managing a customer relationship, the firm is more likely to retain a valuable customer and prevent lowering of profits. 2. In what way is each of the following a marketing activity? (a) The provision of sufficient parking space for customers at a suburban shopping mall. (b) The purchase by a clothing store of seven dozen sweaters in assorted sizes and colors. (c) The inclusion of a longer and more comprehensive warranty on an automobile. The provision of adequate parking places is an example of place utility. It is one way retailers can make the shopping process as convenient as possible. The purchase of seven dozen sweaters in assorted sizes and colors provides customers with choices to meet their individual needs. The inclusion of a longer and more comprehensive warranty provides customers with assurance that the company will repair the car if there is a problem. 3. How might adoption of the marketing concept benefit a firm? How might it benefit the firm’s customers? The marketing concept is a total approach to marketing that includes the entire business organization in the process of satisfying customers’ needs while achieving the organization’s goals. The marketing concept benefits the firm because it is much easier to market a product or service that satisfies a customer’s needs. The marketing concept benefits the customer because the customer’s needs are considered when a product or service is developed. Thus, the marketing concept leads to increased consumer satisfaction while simultaneously realizing the firm’s goals. 4. Is marketing information as important to small firms as it is to larger firms? Explain. Yes, although the marketing information may serve different purposes. Marketing information helps the larger organization to maintain a premium spot in the market. It allows the smaller firm to increase its chances for success. 5. How does the marketing environment affect a firm’s marketing strategy? The marketing environment affects a firm’s marketing strategy because ever-changing conditions demand ever-changing combinations of product, price, distribution, and promotion to achieve product desirability and ultimate purchase. 12.7d Comments on Video Case 12.1 Suggestions for using this video case are provided in the Pride/Hughes/Kapoor Video Guide. Raleigh Wheels Out Steel Bicycle Marketing 1. Is Raleigh using the marketing concept? Explain. Raleigh is using the marketing concept. With a marketing concept, the organization first determines what the customers need and then develops goods and services to fill those particular needs. Raleigh noted that many of its customers do not wear special racing outfits; they dress casually, in T-shirts and jeans. Raleigh recognized that this demands a different type of bike. In order to familiarize new markets with its bicycles, Raleigh brings samples to cities around the world and lets people ride the bikes. The company also makes a special effort to remain in touch with its target and to provide the products that customers want. It has a Facebook page and blogs and uses Twitter to keep customers informed and answer questions about its bicycles and upcoming demonstrations. 2. What type of approach does Raleigh use to select target markets? Raleigh markets a wide variety of bicycles to consumers in Europe, Canada and the United States. Its U.S. division has been researching new bicycles for “contemporary consumers.” The company has noted that everyday bicycle riders dress casually, in T-shirts and jeans, rather than in special racing outfits designed for speed, and its marketers are focusing on consumers who enjoy riding bicycles as a lifestyle. 3. Of the four categories of segmentation variables, which is most important to Raleigh’s segmentation strategy, and why? According to the case, psychographic variables such as lifestyles are most important to Raleigh’s segmentation strategy. The company focuses on consumers who enjoy riding bicycles as a lifestyle. These consumers ride for fun, rather than as serious racers. Applying psychographic variables allows Raleigh to identify and focus its marketing on this specific group of consumers. 12.7e Comments on Case 12.2 PepsiCo Tailors Tastes to Tantalize Tastebuds of Target Markets 1. What is PepsiCo’s approach to target marketing? PepsiCo is using a differentiated market segmentation approach to target specific customer groups. The case indicates that PepsiCo is reducing salt, fat, and sugar levels as it targets consumers who want healthier snack foods. It is also using digital media in targeting teenagers and young adults who buy snacks and beverages. Introducing new products geared to local flavor preferences helps PepsiCo satisfy the needs of consumers in different geographic areas. Students may mention other aspects of PepsiCo’s targeting as well. 2. How are forces in the marketing environment affecting PepsiCo’s marketing strategy? PepsiCo must plan its marketing strategy with sociocultural forces in mind, ensuring that its marketing mixes fit with the cultural customs, values, and lifestyles of each target market. Technological forces such as digital media are changing the way PepsiCo communicates about its products, as the case indicates. Political, legal, and regulatory forces—such as U.S. and U.K. health officials mounting campaigns to help consumers eat healthier foods—play a role in PepsiCo’s marketing strategy for new and improved food and beverage products. Although the case doesn’t discuss competitive forces, students will understand that PepsiCo faces considerable competition from Coca-Cola and other marketers. The case doesn’t address economic forces, but students will certainly understand that customers’ ability to buy non-essential snacks and beverages will affect PepsiCo’s marketing. 3. Which influences on consumer buying behavior should PepsiCo pay particular attention to, and why? Students’ answers will vary. Some may say that because PepsiCo is marketing a nonessential product, it should pay attention to situational influences such as social surroundings, time, and buyer’s mood/condition, all of which can affect customers’ choices of beverages and snacks. Other students may cite psychological influences such as perception (is that beverage refreshing?), attitudes (is that beverage trendy?), and lifestyles (consumers seeking grab-and-go snacks). Some students may say it is particularly important for Pepsico to understand and adapt to social influences—especially peer groups and culture. 12.7f Building Skills for Career Success 1. Social Media Exercise 1. After reviewing Comcastcares on Twitter, do you think that this helps with customer service? Why or why not? It would appear that this application would help customer service. For example, Comcast can keep customers apprised of service interruptions due to weather and advise on the status of repairs. Comcast also uses its Twitter account to let customers know about free previews and other events. However, it is also important for Comcast—or any other company—to recognize that Twitter does not replace customer service; it merely enhances it. 2. Do you see other applications for Twitter for a communications giant like Comcast? Comcastcares is used to deal with customer service issues—service outages, billing problems, etc. Comcast can use Twitter in any number of other ways. For example: • If Comcast holds free workshops or Web meetings that provide customers with instructions about their DVRs, resetting their modems, etc., Twitter would be an excellent way to let its followers know about these opportunities. Using Twitter is a way to help direct people to know more about the company’s products and build credibility. • Comcast can use Twitter to notify customers when new products, features, packages, etc., are available. • Comcast can use Twitter to offer incentives to those who follow it on Twitter. For example, it may offer a free preview of a channel or a coupon for a discount on a package. • Comcast can use Twitter to find out what customers are saying about it and then work to fix those problems. One tweet on Comcast cares says it all: “Don’t delete online criticism. Embrace it.” 2. Journaling for Success 1. Think about the businesses from which you have purchased goods or services. Select the organization that you believe has adopted the marketing concept. Discuss the reasons why you believe that this company has adopted the marketing concept. While the businesses selected by students will vary, the reasons they chose those businesses will most likely all focus on the active satisfaction of customer needs, the addition of value, and the pursuit of excellent customer relationships. 2. Describe the marketing mix this company has created for the brand that you purchase from this company. Again, while the company/brand will vary, students should address each one of the marketing mix factors: product, price, place, and promotion. 3. Which two companies are the strongest competitors of this organization? Explain why. The answer will vary depending on the industry chosen. To identify the two strongest competitors of a specific organization, I'd need to know the company's name and industry. However, in general, the strongest competitors are those that: 1. Offer similar products or services – Competing in the same market segment and targeting the same customer base. 2. Have comparable market share and resources – Companies with similar scale, technology, and brand recognition pose significant competitive pressure. 4. Besides competition, which environmental forces have the greatest impact on this company for which you are a customer? The answer will vary depending on the company chosen. The environmental forces that have the greatest impact on a company, aside from competition, include: 1. Economic Factors – Market conditions, inflation, and economic stability can influence purchasing behavior and costs. 2. Technological Advancements – Innovations can create new opportunities or disrupt existing business models. 3. Regulatory Environment – Laws, policies, and regulations (e.g., labor, environmental, data protection) affect operations. 4. Sociocultural Trends – Changing consumer preferences, cultural shifts, and social values influence demand. 5. Environmental Factors – Climate change, resource availability, and sustainability concerns can affect production and supply chains. 5. Calculate your customer lifetime value to this company. After recording your customer lifetime value, describe how you calculated it. A simple formula for any product would be anticipated annual expenditures (price × number of times purchased) multiplied by life expectancy. 3. Developing Critical-Thinking Skills Answers will vary depending on the company and product or service chosen. Drug and grocery items are the most common types of consumer products. Students might be directed to consult American Demographics, a monthly magazine containing articles on demographic trends. Also, the government is an excellent source for demographic information. Most federal government publications can be ordered from the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402. Other sources include: U.S. Small Business Administration, Washington, DC 20416 Bureau of the Census, Commerce Department, Suitland, MD 20233 Census of Business: Retail Area Statistics is a U.S. summary. Final figures from the Census of Retail Trade include statistical totals for each region, state, city, and metro area. County and City Data Book contains data for 50 states, over 3,000 counties or county areas, 243 SMSAs, and 840 cities of 25,000 inhabitants or more. Directory of Federal Statistics for State and Local Areas, A Guide to Sources provides individual guides for state and local area socioeconomic data. Department of Commerce. Direct requests for information to the Department’s Domestic and International Business Administration, Washington, DC. Measuring Markets: A Guide to the Use of Federal and State Statistical Data presents features and measurements of markets, various types of useful data by federal and state governments, and case examples of market measurement. Auber Bibliography of Publications of University Bureaus of Business and Economic Research can be ordered from the Bureau of Business Research, College of Business and Economics, West Virginia University, Morgantown, WV 26506. 4. Building Team Skills Answers will vary depending on the company and product or service identified. For example, students might describe a customer of Walmart as price sensitive, looking for the highest quality, at a convenient location. Additionally, students might be directed to find ads for the product or service. Usually, people shown in the ad depict the target market. 5. Researching Different Careers Answers will vary depending on the local companies chosen and information available from the Chamber of Commerce and the Better Business Bureau. 12.8 QUIZZES I AND II QUIZ 1 True-False Questions Select the correct answer. 1. T F Influences in a society and its culture that result in changes in attitudes, beliefs, norms, customers, and lifestyles are known as economic forces. 2. T F The business philosophy that involves the entire organization in the process of satisfying customers’ needs while achieving the organization’s goals is called the marketing concept. 3. T F Different products may not result in different marketing mixes. 4. T F The marketing plan doesn’t include the exact allocation of resources to achieve the marketing objectives. 5. T F Marketing research is the process of gathering, recording, and analyzing data concerning a particular marketing problem. Multiple-Choice Questions Circle the letter before the most accurate answer. 6. Which of the following is not one of the steps in implementing the marketing concept? a. Obtaining information about existing and potential customers b. Pinpointing needs and potential customers for further marketing activities c. Mobilizing marketing resources to provide, promote, and distribute products d. Obtaining new information about effectiveness of efforts e. All are steps in implementing the marketing concept. 7. A marketing plan includes all of the following except a. schedules of marketing tasks. b. product production schedule. c. assignment of responsibilities. d. resource allocation. e. marketing objectives. 8. Which of the following is least likely to be a factor in developing a sales forecast? a. Geographic area in which the product is sold b. Last year’s sales c. Entire product line d. Number of salespeople employed by the firm’s major competitors e. Expected level of marketing effort 9. _________ markets consist of churches, not-for-profit private schools and hospitals, civic clubs, fraternities and sororities, charitable organizations and foundations. a. Reseller b. Governmental c. Consumer d. Producer e. Institutional 10. Income less taxes, savings, food, clothing, and housing is __________ income. a. gross b. personal c. disposable d. net e. discretionary Quiz II True-False Questions Select the correct answer. 1. T F Business-to-business markets, which include churches, schools, and civic clubs, are a type of industrial market. 2. T F Sales forecasts usually are generated by complex software and should not be biased by managerial input. 3. T F A marketing information system is well suited to testing new products, determining various characteristics of consumer markets, and evaluating promotional activities. 4. T F Business buyers are solely interested in the product’s price. 5. T F The way a consumer perceives a store is probably the most important factor that influences his or her decision about where to buy. Multiple-Choice Questions Circle the letter before the most accurate answer. 6. Which of the following is not one of the four commonly recognized forms of utility? a. Form b. Time c. Production d. Place e. Possession 7. When goods and services are purchased to maintain highways, education, water, and energy, the purchasers are members of what type of market? a. Business-to-business b. Producer c. Governmental d. Institutional e. Consumer 8. The ingredient of the marketing mix concerned with providing product information to target markets is a. quality. b. promotion. c. pricing. d. distribution. e. product. 9. The effects of consumers’ social and cultural values, the consumer movement, and the environmental concerns would best be called __________ forces. a. technological b. legal and regulatory c. economic d. sociocultural e. competitive 10. An approach to collecting marketing information for specific marketing projects is called a. contracted marketing specialists. b. government information. c. marketing research. d. computer specialists. e. marketing consultants. 12.9 ANSWER KEY FOR QUIZZES I AND II Quiz I True-False Multiple-Choice 1. F 6. e 2. T 7. b 3. F 8. d 4. F 9. e 5. T 10. e Quiz II True-False Multiple-Choice 1. T 6. c 2. F 7. c 3. F 8. b 4. F 9. d 5. T 10. C 12.10 CLASSROOM EXERCISES 12.10a Homework Activities • Have students bring in an article or advertisement that shows an example of market segmentation. • Researching and Following a Company Throughout the Course (continuing assignment). Have students describe what market segmentation approach the company has taken for its major products or services. 12.10b Classroom Activities • Market Research Fun Exercise. This is an exercise that can be done at the beginning of the chapter discussion or when discussing research. See handout and instructor notes for specific directions. • Building Relationships Exercise. Make enough copies of the handout provided and put students into groups of three or four. They are to consider the type of information that would be desirable for a database maintained by a local steakhouse. After they develop the list, follow up with a discussion of how each item on the list might prove useful to the owner. Instructor notes provided. • Who’s Your Segment? Exercise. Make enough copies of the handout for each group of three to four students. Ask students to open their books to Table 12.3 (segmentation bases). They should have approximately 15 minutes to identify as many different segments as they can for the new product described in the handout. Instructor notes are provided. • Describe the Market! Exercise. Using the handout provided, ask groups of three to four students to define the potential market for the five products listed. They should have approximately 10 to 15 minutes to complete the exercise. Instructor notes are provided. • Walmart Exercise. Have small groups discuss the following scenario so that students can explore the elements of the marketing environment. Although Walmart supercenters have generated great customer satisfaction, they have also prompted questions about their impact on communities. These issues relate to urban sprawl, the viability of local “mom and pop” stores, the destruction of historic sites, the ability of local tax dollars to support infrastructure to handle increased traffic, and the impact on local culture. Some communities have successfully fought to keep their hometowns Walmart free. On the other hand, one new Walmart supercenter can create 450 jobs and generate millions of dollars in local taxes. What impact are these supercenters likely to have on competitive forces, economic forces, political forces, legal and regulatory forces, and sociocultural forces? • Decision Stage Exercise. Ask students to determine in which stage of the consumer buying decision process each of the following people are. a. A recent college graduate who reads Consumer Reports to compare automobile ratings. b. On the first day of class, a student finds out that a programmable calculator is needed for the course, but she doesn’t own one. c. After purchasing an evening gown, a woman decides that it is not quite appropriate for her special occasion. d. A car buyer gets a loan to purchase a new car. e. A teenager compares numerous laptop computers and narrows the choice down to two. f. While on the way to work, a person’s automobile stalls and will not start again. g. At an open-house party, a guest realizes that the host already owns the gift he plans to give. h. A person receives a sample package of laundry detergent in the mail and uses it to wash a load of clothes. • Family Decision-Making Exercise. Use the handout “An Exercise in Family Decision Making” to explore specific types of consumer decision making and marketing research. This exercise requires significant time outside of class. • Consumer Buying Decision Process. When students decide to enroll in a college, they go through the consumer buying decision process. Lead students through a discussion that asks them to relate the steps of the decision-making process with their decision. For example: a. The buying decision process starts when the buyer acknowledges that a problem exists, that there is a difference between his/her actual state and his/her desired state. Ask: What triggered your interest in going to college? b. The next step in the buying decision process is to look for information. Ask: What sources of information did you use to find out about colleges? Did you visit the Web sites of different colleges? Did you talk with friends or family? Did you visit campuses? c. The third step of the buying decision process is to weigh the various alternatives and make a choice. Ask: How many colleges or universities did you consider in your selection process? Why did you choose this school? What factors influenced your decision? d. In the final step of the buying decision process, the buyer evaluates the suitability of the product. Ask: Tell me about your post-purchase evaluation in enrolling in this college or university. Are you satisfied with your decision? If you had to make the decision all over again, would you enroll here? Why or why not? • Neuromarketing. According to Roger Dooley, author of a neuromarketing blog, neuromarketing is “any use of brain science in marketing.” Show the brief video available at http://videos.webpronews.com/ 2011/01/neuromarketing-marketing-through-science/. Then lead the class in a discussion about the pros and cons of neuromarketing. Questions may include: a. An MRI is considered a medical procedure, and all medical procedures carry an element of risk. Does the use of MRIs to quantify consumer behavior expose people to risks unnecessarily? b. One argument against the use of neuromarketing is that the information obtained can then be used to spread more effective political propaganda and manipulate consumers into purchasing items that may be harmful. How do you feel about this? c. Marketers such as Roger Dooley believe that understanding and predicting how and why a consumer chooses to buy a product will enable companies to provide consumers with what they want. Some consumer groups believe that this information can lead to invasions of privacy and consumer manipulation. What’s your take? 12.10c Exercise Handouts Follow on Next Pages Market Research Fun Market Survey Example Handout Topic: Use of cell phones by college students 1. Do you have a cell phone? ( screener question) If answer is no, discontinue interview. 2. What brand of cell phone do you have? 3. How often do you use it each day? 4. Rank your primary activities on the phone: Activity Rank Making calls Clock Texting Calendar Music Internet Other 5. How old are you? Market Research Fun Instructor Notes This is an exercise that can be done in two class periods or shortened to just one class. It can be done while discussing market research or at the beginning of the chapter. If used at the beginning of the chapter, it can be used to illustrate possible segments (e.g., were you able to determine any differing groups of needs for cell phone usage, etc.) or other marketing concepts. It is particularly effective in classes that last two or more hours. It gets students up and moving and involved in the material. They will also find out how difficult it is to get people to take surveys seriously or even to answer them at all. You may find it useful to raise issues of privacy at this time as well. If time doesn’t allow for the full exercise, the creation of a survey can still be a meaningful introduction to a discussion of the types of things marketers need to learn. The first day of the exercise, place your students into groups of four or five. Using the survey on the previous page as an example, ask each group to write a short questionnaire about product usage and attitudes among students at their college. Ask each group to e-mail a copy of their survey to you by the end of the day. (You may wish to use the last 20 minutes of the class for this activity.) Make 20 to 25 copies of each survey. Do not make any changes to the surveys. At the beginning of the next class, have the students gather in their groups again. Hand out copies of another team’s survey to each group, making sure that each student has five copies. No team should have copies of their own survey. Send the students out of the classroom to areas where students congregate. They should politely approach five students each and ask them to fill out the surveys. This should take no more than 15 to 20 minutes. When they return to class, ask each group to summarize what they learned both about the topic of the survey and the issues involved in surveying. They should also make note of any way in which they would change the survey they were given or the manner in which they would approach potential respondents. Building Relationships CRM is all about maintaining relationships with profitable customers by providing superior value. Value can be provided in a number of ways—a well-performing product, a stylish product, or a product that helps the consumer express his or her personality. Value can also be provided by time, effort, or money savings, or by a product that makes the customer feel good in some way. Marketers build databases containing all kinds of information about these valuable customers. In your groups, develop a list of requirements for a database for a new steakhouse just opened near campus. The steakhouse serves not only steaks but excellent burgers, ribs, salads, and fish. Its specialty is unique and tasty appetizers. The steakhouse anticipates catering not only to students for special occasions but also to parents, faculty, and staff as well as local town residents. The purpose of the list is to determine what information should be held in the database about each current and potential customer of the steakhouse. Hint: Consider what is important to you in a restaurant. You have 10 minutes to generate a list. Use the following categories as a guideline. 1. Demographic Data 2. Lifestyle Data (activities, interests, opinions) 3. Behavioral Data (shopping, cooking, eating habits, preferences) 4. Other? Building Relationships Instructor Notes After students build their lists, which should include a number of the items below, ask them how each of their lists could be used to generate value for customers. 1. Demographic Data. Desirable data would include age, gender, income, marital status, family size, occupation, ethnicity, and religion. Ages of children might be useful as well. 2. Lifestyle Data (activities, interests, opinions). It might be helpful to know if potential patrons enjoy reading (newspapers and magazines could be provided to waiting customers), the Internet, athletics, or similar activities. It would also be useful to know how concerned they might be about health and/or weight maintenance. 3. Behavioral Data (shopping, cooking, eating habits, preferences). The most important information would relate to restaurant patronage and out-of-home eating in general—how often they eat out, where they eat, and what types of restaurants they frequent. Preferred foods and cuisines are also important pieces of information. It would be useful to know if takeout is an important part of their lives as well as how long they like to spend in a restaurant. WHO’S YOUR SEGMENT? Congratulations! Your team has just been hired by a leading coffee manufacturer to help determine which market segments it should pursue for its new coffee line. The beans used to make this coffee are different from other coffee beans in that the caffeine in the coffee does not cause insomnia hours later. A coffee drinker can enjoy the coffee at 10 P.M. and be sound asleep at midnight. Yet, it has all the short-term characteristics of a regular cup of coffee, unlike decaf. Using the bases of segmentation in Table 12.3, list as many different segments for the new coffee as you can in 15 minutes. Who’s Your Segment? Instructor Notes Some of the segments students will generate might include the following: Demographic: Age—older people Occupation—truckers on short hauls, salespeople who make presentations, teachers who teach night classes but need to get up early, students with night classes, nurses, etc. Family Life Cycle—families with young children who need their sleep Psychographic: Lifestyles—anyone who enjoys eating or going out in the evening but has to work in the morning Motives—anyone who is motivated to finish an activity in the evening or get up early to accomplish some task Geographic: Climate—anyone in a cold climate who enjoys warm coffee as a pick-me-up Behavioristic: Volume—heavy drinkers of coffee or other caffeinated beverages Benefit Expectations—anyone who enjoys the pick-me-up provided by coffee and other beverages Describe the Market! In your groups, describe the market for the following products. Be as specific as you can in terms of demographics such as age, gender, occupation, geography, lifestyle, and personality. 1. Self-cleaning ovens 2. Sandwich bags 3. Perfumed dryer sheets 4. Gourmet canned cat food in small cans 5. Snow blowers Describe the Market! Instructor Notes 1. Self-cleaning ovens One potential market would be suburban and urban married couples with or without children who enjoy cooking. 2. Sandwich bags The market for sandwich bags would primarily be composed of anyone who takes a sandwich to work or to school. This includes students of all ages, construction and travel workers, teachers, and other occupation groups. 3. Perfumed dryer sheets It is likely that the market for these products would be female, higher income as this is a discretionary purchase, and also women who purchase other perfumed products. 4. Gourmet canned cat food in small cans The market for this product would be cat owners who either have only one cat and/or are extremely fastidious about smells in the refrigerator from leftover cat food or about the freshness of their pet’s food. 5. Snow blowers Obviously, geography and climate contribute to the market designation for snow blowers. Homeowners are more likely to be in the market than renters as well. AN EXERCISE IN FAMILY DECISION MAKING* Introduction Research into family decision making has identified four possible power structures that can exist: patriarchal, matriarchal, autonomic, and syncratic. This exercise calls for students to acquire data on decision making within a number of families and then assess each family’s power structure using the aforementioned categories. The Project Students are given the assignment of choosing at least three married couples to survey (by phone, in person, electronically, or by mail). The length of time which two of the couples have been married is dictated by the instructor: one must have been married less than two years and one must have been married more than 10 years. Students can choose the length of time for the third couple (or all of the additional couples surveyed). The purpose of the mandate in marital length is to provide the student with a possible influencing factor on which to assess the possible differences in couples’ decision making. Students are instructed to survey each spouse separately, without letting the other spouse hear, see, or know of the respondent spouse’s answers. This will, hopefully, allow for each respondent spouse to be honest in answering. Students may share with each spouse the other spouse’s answers after the completion of the survey. The instructor suggests the products around which the questions are asked (purchase of a car, vacations, restaurants, home electronics, financial institution, etc.), but students gather demographic information (in addition to number of years married) such as gender, age, number of previous marriages, general occupation, education level, and anything else they may want to investigate (some have asked about religious affiliation and ethnic background, thinking that these factors might affect who holds the power). Students analyze each couple’s responses and categorize each couple into one of the four power structures. Sometimes students find that the couple (or at least one spouse) may have included someone else, like a child or a relative, as either having made or been involved in the purchase decision. Results are written up as a description of the methodology, the results, as well as the analyses. Students are asked to give thought as to why each couple (or the individual in the couple) answered in that way. In class, students share their results, looking for any factors of commonality that may contribute to a particular response. Students are graded on their ability to follow the assignment’s instructions, thoroughness of research description and analyses, tie-ins with the concepts of power structures, and presentation of report. Learning Outcomes The learning outcomes of this exercise are numerous. First of all, having studied the concept of power structures in families, students see that the differences actually exist, especially in people they often think they know very well. The answers have been quite unpredictable and surprising. Second, students gain experience (albeit limited) in conducting field surveys. Third, students begin to question their own power structure (if they are married) or what power structure they would desire in a marriage. Fourth, students analyze why the power structures are what they are in these people. They look for affecting factors (great for critical thinking). Chapter 12 Video Case: Raleigh Wheels Out Steel Bicycle Marketing RUNNING TIME: 5:19 Chapter 12 introduces the concept of marketing. Marketing is a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships. Marketing adds value in the form of utility, the ability of a product or service to satisfy a need. Implementation of the marketing concept begins and ends with customers. A market consists of people with needs, the ability to buy, and the desire and authority to purchase. A marketing strategy is a plan for the best use of an organization’s resources to meet its objectives. Marketing mix strategies must begin with an assessment of the marketing environment, which will influence decisions about marketing-mix ingredients. A marketing plan is a written document that specifies an organization’s resources, objectives, strategy, and implementation and control efforts to be used in marketing a product or service. Market measurement and sales forecasting estimate sales potential and predict product sales in specific segments. Strategies are monitored and evaluated through marketing research and the marketing information system. Buying behavior consists of the decisions and actions of people involved in buying and using products. Concepts Illustrated in the Video • Relationship Marketing • Marketing Concept • Target Market • Market Segment VIDEO CASE SUMMARY Raleigh Bicycle has been around since 1887 when it started in Nottingham, England. Raleigh became known as being the “all steel” bicycle manufacturer, and Raleigh bikes used to be considered a status symbol. However, over the past 10 to 15 years, there has been a push for technological advancements in the industry called the “Lance effect”—lighter, faster, better, more. Raleigh realized that, instead of competing in that market, it needed to get back to who it was and what consumers expected from the company. It looked at bicycling trends in Europe and also saw a huge surge in the bike messenger market in the United States. This market was not high-tech and Spandex; it was all steel, jeans, and t-shirts. With that in mind, Raleigh brought back the old bikes because it recognized that its target market was lifestyle riders. Raleigh takes great strides to keep in touch with its target market. Raleigh makes use of social networking in order to chat with customers and get immediate feedback. It also monitors blogs as part of its market research and notes that the opinions expressed on these blogs help drive the direction in which the company goes. As part of its marketing effort, Raleigh has a demo fleet of bicycles because “you can read about it, you can hear about it, you can see pictures of it on the Internet, but when you actually ride a bike, that’s when you get the bike.” Many of Raleigh’s marketers and employees are riders themselves, and they spend time talking with riders at coffee shops, bars, and races so that they get feedback from “people that are really in the scene.” Raleigh has gone back to its roots in terms of all steel bikes, and everything old is new again. Brian from Raleigh notes, “They [customer] have been praising us for that, especially for pushing the steel bikes, because no one else is doing that. … It validates everything that we’re doing so it helps us push forward with it.” Critical-Thinking Questions Using information from the case and the video, answer the following questions: 1. Marketers use a wide variety of segmentation bases, as shown in Table 12.3. Which of these bases appears to be most important to Raleigh’s segmentation strategy? Explain. According to the case, psychographic variables such as lifestyles are most important to Raleigh’s segmentation strategy. The company is focusing on consumers who ride for fun, not as serious racers, and who wear jeans and t-shirts instead of spandex. Applying psychographic variables allows Raleigh to identify and focus its marketing on this specific group of consumers. 2. How has Raleigh used social media in terms of its relationship marketing? Understanding what the customer wants is the first step to achieving a long-term, satisfying relationship with the customer. Raleigh indicates that blogs do much of the market research for the company, because the opinions expressed on the blogs help the company focus on what is important to customers. Raleigh also uses social networking to chat with customers and get their feedback so that the company can continue to refine its product line to meet its customers’ needs. 3. What are some of the factors Raleigh used in determining its target market? One factor in selecting a target market is the strength and number of competitors already marketing to customers in the target market. A number of firms in the industry were jumping on the lighter-faster-better-more wagon, so it is likely that this factor played a role in Raleigh’s decision to pursue lifestyle riders rather than serious cyclists. Another factor in selecting a target market is determining if satisfying the needs of the target market is consistent with the firm’s overall objectives. This certainly was the case with Raleigh. Pursuing lifestyle riders as a market segment allowed the company to go back to its roots—all steel bicycles. Chapter 12 Lecture Launcher: We Can’t Make Stuff Grow! VIDEO SUMMARY Value Mart has dropped Urban Farmz as one of its suppliers because it couldn’t meet the company’s minimum order. Instead, Value Mart is contracting with a national supplier that gives it a yearly price and quantity guarantee. Caleb is furious. Sue, the supplier Urban Farmz has hired, tries to put things into perspective for Caleb. “Value Mart was never meant to be our customer,” she tells him. “If you try to please too many people, you fail everyone.” “So I’m just supposed to aim low?” asks Caleb. “Not go for the big accounts? Not try to build new relationships?” Sue says that is not what she means—that Urban Farmz just needs to be more selective about to whom it markets. In other words, she and Caleb need to think strategically to find the right market targets. Solution Manual for Business William M. Pride, Robert J. Hughes, Jack R. Kapoor 9781133595854, 9780538478083, 9781285095158, 9781285555485, 9781133936671, 9781305037083

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