CH-1-5 Marketing Fundamentals – Marketing: The Core : Chapter Notes

This Document Contains Chapters 1 to 5 Chapter 1 Marketing Fundamentals MARKETING TIPS For this particular chapter we look to Mike Welling. Partner dougserge+partners for his MARKETING TIP on what he considers is important for students to understand. 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. Depending on the quote, this MARKETING TIP can also prompt interesting class discussions. The quote for this chapter is as follows: “Building a brand that has a distinctive, but authentic, image is important for success in the short-term and the long-term.” LECTURE NOTES CHAPTER 1 OPENING VIGNETTE – MUCHO BURRITO Mucho Burrito is a successful franchise of fast-casual restaurants that sells good quality Mexican-type food that is freshly made before the consumer’s eyes. It is reasonably priced and made with many fresh and healthy ingredients. The vignette focuses on how Mucho Burrito manages the marketing mix to appeal to its target market of 18 - 34 year olds. Its marketing mix is as follows: Product: Mucho Burrito is a fast-casual Mexican restaurant with higher quality foods than your regular Mexican fast-food outlet. Items are made-to-order with fresh, healthy ingredients. It sells hand rolled burritos, hard and soft tacos, quesadillas, salad bowls, and soups with carefully seasoned beef, pork, chicken, fish, or shrimp. Mexican salsa and guacamole are freshly made each day. It also sells promotional products periodically during the year to tie into Mexican celebrations. Price: A meal at Mucho Burrito is priced at $8 -$13 per meal, a few dollars higher than the $7 - $8 price point at quick service restaurants such as McDonalds, and slightly lower than the Mexican food sold at Chipotle.. Place: Mucho Burrito franchises can be found as stand-alone restaurants in downtown locations, in neighbourhood malls, or in the food courts of universities, and airports Promotion: Mucho Burrito uses radio ads, billboards, online display ads, and posters as a form of advertising its restaurants. It also uses social media to update followers with newsy updates and turns to mobile marketing to provide email blasts on its promotions, and uses bloggers to help spread the word. It uses event marketing with its annual all you can eat Ghost Pepper Burrito contest. Reality Check As you read chapter 1, refer back to the opening vignette to answer the following questions: • Is Mucho Burrito a good, a service, or an idea? Answer: The actual food is a good. The restaurant that makes the food and provides a place to eat is a service. • Who is the target market for Mucho Burrito? Answer: 19 - 34 year old men and women. • What marketing tools does Mucho Burrito use to create relationships with its consumers? Answer: It creates events and uses social media, mobile apps, email blasts, and uses its website to create relationships with consumers. I. THE ESSENCE OF MARKETING Chapter 1 introduces marketing as a concept that focuses on the consumer. It looks at the marketing process, explains how marketing evolved, and discusses the latest developments. Marketing programs focus on consumers, providing them with value through products that meet their needs. Marketers attempt to create distinct images for their products, setting them apart from their competition, while also appealing to consumer needs. a. Focusing on Customer Needs Successful marketing programs focus on consumer needs and try to develop customer value through programs that delight the consumer and encourage customer loyalty. Consumer needs are often vague and marketers turn to market research for clarification. Customer value is the unique combination of benefits received by targeted buyers that includes quality, price, convenience, on-time delivery, and both before-sale and after-sale service. b. Creating Customer Value Customer value is created by providing customers with products that have added value through a combination of (1) pricing strategies, (2) product design, and (3) service elements. Customer value is the unique combination of benefits received by targeted buyers that includes quality, price, convenience, on-time delivery, and both before-sale and after-sale service. Marketers deliver this value by managing each element of the marketing mix (product, price, place, and promotion) so that this value is evident to consumers. c. Appealing to Target Markets Since companies to do not have infinite funds, and cannot satisfy everyone’s needs, they design products to appeal to specific groups of customers that we call target markets. A target market is the specific group of existing and potential consumers to which a marketer targets its marketing efforts. Marketing efforts are created to appeal to a product’s specific target market. The marketing mix is designed to appeal to this specific target market. d. Coordinating the Marketing Mix The elements of the marketing mix consist of product, price, place, and promotion. Each element is well coordinated and managed by marketers to appeal to the target market. • Product - a good, service, or idea designed to satisfy a consumer’s needs • Price - what is exchanged for the product • Promotion - a means of communication between the seller and buyer • Place - a means of getting the product to the consumer Ask Yourself 1. What is the essence of marketing? Answer: The essence of marketing is focusing on customer needs and designing programs to meet these needs so that a company can generate revenue or profits. 2. What is a target market? Answer: A target market is the group of consumers to whom you direct your marketing. 3. What is the marketing mix? Answer: The marketing mix consists of product, price, place, and promotion. II. THE MARKETING PROCESS The marketing process is a continuous process that requires marketers to pay attention to detail and apply their strategic, analytical, and creative-thinking skills. a. The Marketing Process The marketing process is a three step continuous process that involves (1) identifying consumer needs, (2) managing the marketing mix to meet these needs, and (3) realizing profits. Marketers constantly evaluate the success of their programs, implementing and recommending future changes to improve the programs. Marketing is the process of developing, pricing, promoting, and distributing goods, services, and ideas to satisfy the needs of consumers. To serve both buyers and sellers, marketing seeks to discover the needs and wants of prospective customers, and to satisfy these needs. The key to achieving these two objectives is the idea of exchange, which the trade of things of value between a buyer and seller so that each benefits. b. What can be Marketed? Goods services and ideas can all be marketed – in marketing we refer to these as products which are explained below: • Goods - products you can touch and own such as running shoes or a can of cola • Services - intangible products you cannot touch such as a holiday or a haircut • Ideas - concepts which typically looks for your support such as a political party or cause c. What is a Market? Potential consumers make up a market, which consists of people with both the desire and the ability to buy a specific product. Ask Yourself 1. What steps are involved in the marketing process? Answer: The marketing process involves (1) identifying consumer needs, (2) managing the marketing mix to meet these needs, and (3) realizing profits. 2. What are the differences between goods, services, and ideas? Answer: A good is tangible while services and ideas are not. 3. Are credit cards goods, services, or ideas? Answer: A credit card is a combination of a good and a service; you actually own the credit card, (thus making it a good), while it provides the owner with deferred credit terms on purchases which is intangible, (thus making it a service). III. THE EVOLUTION OF BUSINESS PHILOSOPHIES Business approaches have changed over time, steered by improved technology, increased competition, and the evolution of different philosophical approaches. The stages overlap but in general terms they are as follows: a. The Production Orientation Stage (until the 1930s) This approach focused on manufacturing goods which tended to sell regardless of their quality since they were in short supply. Consumer needs were not a priority. b. The Sales Orientation Stage (1930s to the 1960s) This approach focused on selling as many products as possible in a more competitive market where products were in abundance. Companies were hard-selling to make profits. Consumer needs were still not a major consideration. c. The Marketing Orientation Stage (1960s to the 1990s) This approach focused on consumer needs. The market was very competitive and meeting consumer needs was the path to success and profits. If a company did not meet consumer needs, another company would be able to do so. d. The Relationship Marketing Orientation Stage (1990s onward) This approach considers the life-time value of its customers and developing long-term relationships with them. It emphasizes customer retention and on-going satisfaction rather than short-term sales. The philosophy behind this approach is that improved customer relationships can result in increased customer loyalty, improved customer retention levels, and greater profits for the organization. • Relationship Marketing - when organizations create long-term links with their customers, employees, suppliers, and partners to increase loyalty and customer retention. An important outgrowth of this market orientation is customer relationship management, (CRM). • Customer Relationship Management (CRM) – an approach grounded in the fact that it is less expensive to service and maintain current customers rather than obtain new ones. It focuses on identifying a firm’s most valued customers and building long-term customer relationships to build loyalty. The process involves building and maintaining profitable customer relationships through superior customer value. Examples can be simple courtesy phone calls from car dealerships or more complex loyalty programs such as AIRMILES, or OPTIMUM cards from Shoppers Drug Mart. In it most complex form, CRM involves sophisticated database management companies and software programs that allow marketers to precisely target individuals with offers and programs that meet their individual needs. • Social Media - the use of social networks to interact with consumers in two-way conversations. Common platforms include Facebook, Twitter and YouTube. Consumers use social media to create networks of friends and contacts with whom they share comments, videos, and images as a form of self-expression. Marketers use social media to engage and connect with consumers through special offers and contests. It is also used to monitor engagement and brand buzz and to evaluate promotional programs. Marketers also use social media to identify informal brand advocates that can spread positive messages about a brand. • Corporate Social Responsibility (CSR) - when organizations voluntarily take responsibility for how their businesses impact consumers, customers, suppliers, employees, shareholders, communities, and society in general. Many companies have CSR initiatives which focus organizations on achieving goals they have set for themselves in these areas. Companies which have these types of initiatives include BMO, BCE, and Tim Hortons. Business sustainability that links the long term performance of a business to its financial results, its social performance, and its impact on the environment is part of CSR The Societal Marketing concept involves marketing programs that address the well-being of society and the environment. The Cadbury Bicycle Factory with their program that sends bicycles to Ghana is an example of the societal marketing concept. Greenwashing is when companies or brands give the impressions that they are good for society and/or the environment when in fact this is not the case. IV. THE PROGRESSION OF MARKETING AND EVOLVING AREAS Recent marketing approaches include customer relationship management programs and corporate social responsibility with newly evolving areas including (1) real-time marketing, (2) content marketing, (3) mobile marketing, (4) social media marketing, (5) partnership marketing, (6) metrics and analytics, and (7) new marketing regulations and ethical considerations. Background - Digital Marketing The widespread use of digital technology is impacting consumer behaviour and marketing practices and changing the path-to-purchase. Consumers spend copious amounts of time on the Internet, particularly the younger generations where18 to 34 year olds spend an average 30 hours per week on the Internet. Digital marketing uses electronic means to reach consumers through computers, gaming devices, out-of-home electronic screens, or mobile device such as smartphones, tablets, MP3 player, and e-readers. Digital marketing includes online tools such as display advertising, affiliate marketing, search engine marketing, search engine optimization, pay-per-click advertising, mobile marketing, e-mail marketing, and social media marketing. a. Real-time Marketing This is when brands make themselves relevant online during events or newsworthy occurrences by creating or joining conversations as they occur to create buzz that is shared by others on social media. This is a planned approach that uses teams of real-time marketing experts (brand marketers, advertising agencies, and legal experts) during large scale media events such as the Super Bowl, the Olympic Games, or the academy awards to creatively engage in online conversations by using Twitter to take advantage of the buzz and reach a wide audience. On a smaller scale, real-time marketing can be used by companies on a daily basis by front line social media managers that continuously monitor and respond to social media conversations. b. Content Marketing This is when brands or companies reach out by creating and sharing expertise, information, or branded content 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. c. Mobile marketing This is when marketers communicate with audiences through a mobile device or network using cellphones, tablets, e-readers, handheld gaming devices, or portable MP3 players. Mobile marketing uses specific marketing tools: the mobile web, apps, mobile advertising, and various mobile sales promotional tools such as text messaging, mobile games, QR codes, and proximity marketing that allows people to opt-in to receiving marketing messages in a restricted geo-location. d. Social media marketing This is when brands reach out to consumers online through the social networks that people use to connect with friends and contacts to share messages, comments, videos, and images as a form of self-expression. Brands advertise on these websites and create their own social media pages to connect with users. Social media community managers are used to manage these social media programs. Experiential marketing approaches are often used in conjunction with social media programs to create a focal point and topic of conversation. This is when marketers create opportunities for consumers to directly interact with a brand to generate word-of-mouth awareness and free publicity. Experiential marketing often uses a combination of public relations, event marketing, and promotions to break through the clutter of competing marketing messages e. Partnership Marketing Partnership marketing involves the use of added-value offers by companies with a common interest. These partnerships use formal associations between brands to drive incremental business and a strong return on investment (ROI). Brands with a similar customers but different distribution channels may use each other’s strengths to build brand awareness and incremental revenue streams. Shoppers Drug Mart and Esso have teamed-up to drive increased distribution to their retail outlets and provide exceptional customer value. $20 Esso gift cards were provided to Shoppers Drug Mart customers on certain dates after a dollar purchase level was achieved. Promotional partnerships and involve short-term offers between brands while strategic alliances involves long-term arrangement between companies with similar values and objectives that extend beyond short-term promotional offers into long-terms business agreements. f. Metrics and Analytics Marketing is a performance-based discipline that uses metrics and analytics to improve programs and results, often turning to companies that can help by providing easy-to-use platforms for gathering and analyzing the data. Metrics refers to numeric data that is collected and grouped to track performance. Analytics refers to the process of taking metrics and applying smart thinking and technology to gain actionable insights that can help make better business decisions. An analytics platform helps answer questions and provides customer insights, and predicts patterns that can improve marketing performance. Online metrics can track website interactions such as unique visitors, time-on-site, page views, returning visitors, newsletter signups, and digital downloads and the effectiveness of e-mail campaigns, online advertising campaigns, and social media programs. Offline metrics can include return on investment (ROI), brand awareness levels, ad recall, sales conversions, coupon redemption rates, contest entries, or media mentions. Analytics can provide insights to help segment the market and provide financial information such as costs-per-click, costs-per-conversion, costs-per-interaction, and the ROI of specific programs. g. Marketing regulations and ethical considerations Companies and marketers are increasingly focusing on society, understanding that they can play a major role and have a strong impact on its well-being. Nonetheless, not all organizations or marketers are focused on CSR or the societal market¬ing concept. To protect society and the envi¬ronment from the adverse effect of businesses, regulations are imposed (see Chapter 2) as a basic safeguard for our communities. These regulations can be imposed by governments, companies, and industry associations. Changes in business practices due to digital technology has prompted new legislation and guideline for marketers This includes new privacy legislation, new anti-spam laws, and the institution of behavioural advertising practices to regulate online marketing practices. New industry associations and regulatory bodies have also surfaced to control the wireless industry so that its marketing practices are ethical, legal, and transparent. The Canadian Marketing Association (CMA) is the professional body for the marketing industry. It consists of more than 800 corporate members and deals with legislation and sets guidelines for responsible business practices. The CMA has a code of ethics with which all members must comply. Its purpose is to encourage ethical and legal marketing practices. It covers topics such as accuracy, truthfulness, pricing, redemption, and privacy. Visit http://www.the-cma.org/. Ask Yourself 1. What are the stages involved in the evolution of business philosophies? Answer: The stages are; the product orientation stage, the sales orientation stage, the marketing orientation stage, and the relationship marketing orientation stage. 2. What is involved in a relationship marketing orientation? Answer: This is when organizations create long-term links with their customers, employees, suppliers, and other partners to increase loyalty and customer retention. 3. In your own words explain mobile marketing? Answer: Mobile marketing uses mobile devices and mobile networks to communicate with consumers through devices such as cellphones, tablets, laptops, e-readers, gaming devices, and MP3 players. 4. What is CSR? Answer: This is corporate social responsibility and involves companies considering the well-being of society in their business practices. V. MARKETING CAREERS Many students wonder whether there are jobs in the marketing field. This is dependent on the strength of the economy, education, work experience, and contacts in the industry. a. Getting a Job in Marketing The key to finding a job in the industry is to obtain an education, network with industry professionals, volunteer at organizations to gain experience, and review job postings. Job postings can be found at www.marketingmag.ca, www.strategymag.ca, www.the-cma.org, and www.mediajobsearchcanada.com. b. Marketing Jobs Entry level positions exist in sales, marketing, and promotions. Typical jobs are for marketing coordinators, marketing analysts, marketing assistants, sales representatives, and account coordinators. Most entry level jobs usually include on the job training, the creation of analytical reports, liaison with other departments within the company, exposure to marketing program development, and the potential to move up within the company. Growth areas exist in promotions and digital marketing services. Foreign languages can be an asset. c. Skills Required Students need to be analytical, capable of working in teams, and have strong communication skills. They need to be aware of recent events, be intellectually curious, and be up-to-date on cultural events and trends. Reading blogs, newspapers, magazines, surfing the Internet, watching TV, and listening to the radio will help students stay current. Marketers also need to attend conferences and webinars and use Twitter to stay current on the evolving trends. d. Recommended Reading Publications such as Marketing magazine, Strategy magazine, Canadian Business, and Maclean's magazine are highly recommended as well as subscribing to the Mashable blog and eMarketer newsletter. Chapter 2 The Marketing Environment MARKETING TIP For this particular chapter we look to Mohammed Asaduallah, co-founder and CEO GrapeTrail 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: “It's important to have a clear vision and understand what's important to the user. Including a cool feature is meaningless unless it adds value to the user's experience.” LECTURE NOTES CHAPTER 2 OPENING VIGNETTE – GRAPETRAIL The chapter uses the mobile app GrapeTrail as an example of how marketers respond to changes in the marketing environment to design products. The marketing environment refers to demographics, socio-cultural factors, the economic environment, technology, the competition, and regulatory forces. This vignette is summarized as follows: GrapeTrail is a new iPhone app, created for touring Ontario wine country. It allows users to discover local wineries, create itineraries, and have GrapeTrail guide them through the local wine country. Before creating this app, the following marketing environment factors were noted: • Demographic factors: Aging baby boomers have the financial means and interest in travel and new experiences. Young couples enjoy local and international tourist destinations. • Socio-cultural factors: Wine consumption is growing in Canada (4.5 percent per year). A foodie trend is making wine and culinary tours popular. Social media is commonly used. • Economic factors: The Canadian economy is robust but the Euro crisis and US economic uncertainty makes Canadians cautious in their spending. • Technological factors: Smartphone and tablet usage is strong with apps widely used. Three mobile platforms are widely used in Canada, iOS (Apple), Android, and BlackBerry, • Competitive factors: There are no well-designed, highly functional apps for wine country tours. Local wine country associations lack the means to develop and maintain apps. Competitive wine tour apps are either free or priced at $2.99 with no search or navigation within the app. • Regulatory factors: People must be over 19 years to drink alcohol legally in most of Canada and so the app requires age restrictions. iPhone apps must pass Apple’s approval process, which includes an annual $99 fee with 30 percent of revenues generated through the app payable to Apple (paid downloads, in-app purchases and iAds). This marketing environment prompted Asaduallah to launch GrapeTrail as a technically robust, intuitive free iPhone app with built-in navigation, social media integration, and the ability to easily explore all aspects of Ontario wine country. Reality Check As you read chapter 2, refer back to this opening vignette to answer the following questions: • Which generations are targeted by GrapeTrail? Answer: GrapeTrail targets baby boomers, generation X, generation Y, and the millennials. All these generations are interested in new experiences. • What new features do you think GrapeTrail should incorporate into its app to appeal to its target market and meet upcoming trends? Answer: The responses to this question will vary. I. The MARKETING ENVIRONMENT Chapter 2 focuses on understanding the environment which affects marketing decisions. It explains how marketers channel their ideas and programs to meet changes in the consumer and the environment in which they function. Marketers continually acquire information on trends, opportunities and threats to their businesses to mold their products and programs to meet evolving consumer needs. II. MARKETING ENVIRONMENTAL SCAN A marketing environmental scan is the pro¬cess of continually acquiring information on events occurring outside an organization to identify trends, opportunities, and threats to a business. Marketers use this knowledge to ensure that their prod¬ucts, services, and ideas are relevant, meaningful, and com¬petitive. A marketing environmental scan looks at demographic forces, socio-cultural forces, economic forces, technological forces, competitive forces, and regulatory forces. A. Demographic Forces The statistical study of populations is referred to as demographics. It looks at age, gender, ethnicity, income, and occupation. Marketers need to clearly understand changes that occur in this area to ensure marketing efforts are well placed. The following changes are evident today: • Aging Population - the fastest growing age group is 60-64 years with a large portion of seniors over 65 years. Centenarians are posting large increases with over 17, 000 expected by 2031. The aging population is due to Canada’s political stability, good living conditions, and strong health care services. • Diverse Generations - there are four main generational groups of consumers - baby boomers, generation X, generation Y, and generation Z. Baby boomers are the main reason for the “greying” of North America. This group accounts for approximately 70 percent of the wealth in Canada. • Big City Dwelling - 70 percent of Canadians live in one of Canada’s 33 cities with 35 percent of the population living in either Toronto, Montreal, or Vancouver. • Ethnic Diversity - Canada is a multicultural society with two thirds of its growth in 2006- 2011 coming from immigration – mainly from Asia and Pacific regions (47%). • World Markets - The world population is showing growth in underdeveloped areas such as Africa, Asia, and India. China and India alone are home to 2.7 billion people, 37 percent of the world’s population and stand as future business opportunities. • Non-Traditional Families - over the years the traditional nuclear family of two parents and two children has changed with more single parent families, blended families, same sex marriages, and common law unions. Family size has also decreased to 1-2 children per family. B. Socio-Cultural Forces Socio-cultural forces include society’s morals and beliefs, and covers cultural values, ideas, and attitudes. Marketers are currently responding to socio-cultural changes related to communications and media, food, health and fitness, shopping, entertainment, the environment, and the modification of gender roles in society as identified below: • Media - The wide spread use of the Internet and people’s reliance on mobile devices to communicate and search for information is changing how consumers interact and how marketers communicate with consumers. Consumers are spread across multiple communication channels and devices, (tablets, smartphones, laptops, and TV’s) and use websites, blogs, mobile apps, and social media through YouTube, Facebook, Twitter, Pinterest, and Instagram to search for information and communicate. • Food Consumption - Consumers in Canada are interested in nutritious, fresh, and easy to prepare foods. They are enjoying a wide variety of international foods and in response marketers are providing a wide range of ethnic foods as well as foods that are fresh and nutritious. Meatless meals, gluten free products, organic offerings, local produce, and small indulgent gourmet brands and increasingly popular. Consumers are increasingly snacking versus eating sit-down meals. • Health and Fitness - Canadians are concerned about health, nutrition, and obesity with an increased focus on making healthier life-style choices. • Environmental Awareness - The issue of global warming is influencing Canadians to reduce pollution, be less wasteful, and make choices that do not negatively impact the environment. • Evolving Gender Roles - Increasingly, women are working full time and men are becoming more involved in household duties. This has resulted in dual income families who are time-starved. Ask Yourself 1. What do we mean by time-starved? Answer: Time-starved is when people do not have enough time in the day to compete all the necessary tasks. 2. What are the marketing implications of ethnic diversity in Canada? Answer: Products may have to be redesigned to reflect this societal change since each diverse group has unique purchasing patterns. 3. How are important values such as health and fitness reflected in the marketplace today? Answer: Concern for health and fitness is reflected in the market through an increased number of healthy food products, the growth of the gym/fitness industry, and the heightened media interest in this topic. C. Economic Forces Marketers are interested in consumers’ ability to purchase products and how the economy impacts purchase behaviour. There are macroeconomic forces and microeconomic forces as explained below: • Macroeconomic Forces - macroeconomic forces refer to the state of the country’s economy as a whole. Key economic indicators are inflation, unemployment, economic growth, and consumer confidence. • Microeconomic Forces - microeconomic forces refer to the supply and demand of goods and services and how this impacts on the buying power of individuals, households, and companies. Key indicators are gross income, disposable income, and discretionary income. D. Technological Forces Technological forces refer to innovations that stem from scientific or engineering research. Changes in how consumers use technology and integrate it into their lives must be understood by marketers and incorporated into their products and communications programs. Canadians are increasingly comfortable with digital communications and view computers and the Internet as essential tools. Marketers need to know not only what new inventions are coming on the scene but also how consumers are integrating technology into their lives. E. Competitive Forces There are various types of competition which a marketer must consider. There are direct competitors who offer very similar products in the same category, and there are indirect competitors who compete for the same buying dollar in a slightly different market. 1. Types of Economic Competition • Monopoly - only one company selling in the market • Oligopoly - only a few companies control the market • Monopolistic Competition - a large number of sellers offering similar or substitute products. • Perfect Competition - many sellers with similar products and little differentiation. Ask Yourself 1. What is the difference between a consumer’s disposable and discretionary income? Answer: Disposable income is the money left after paying taxes to use for food, clothing, and shelter. Discretionary income remains after paying for taxes and necessities. 2. What is the most common form of competition? Answer: Monopolistic competition. 3. What are the indirect competitors to a bag of Doritos chips? Answer: Other snack items such as nuts, pretzels, grapes, or cookies are indirect competitors. F. Regulatory Forces A marketer needs to be aware of any restrictions placed on its marketing practices by government and industry associations. These regulations protect consumers from unscrupulous business practices, and set acceptable standards of practice. The key regulatory groups that affect marketing practices in Canada are the Competition Bureau, the Canadian Radio-Television and Telecommunications Commission (CRTC), Advertising Standards Canada, (ASC), the Canadian Marketing Association (CMA), and the Better Business Bureau (BBB). New regulatory areas have surfaced due to mobile communications with the Canadian Wireless Telecommunications Association (CWTA) and the Mobile Marketing Association (MMA) • The Competition Bureau is responsible for the administration and enforcement of the Competition Act, the Consumer Packaging and Labelling Act, the Textile Labelling Act, and the Precious Metals Marking Act. It is also part of the Canadian Anti-Fraud Centre. The role of the Competition Bureau is to promote and maintain fair competition Failure to abide by these acts can result in fines and jail time if appropriate. Visit http://www.cb-bc.gc.ca. • Advertising Standards Canada (ASC) is a self-regulatory non-government association run by advertising, media, and marketing professionals. It sets regulations and standards of professional practice for the advertising industry that has agreed to abide by its policies. A single complaint will trigger a review of and ad with its eventual withdrawal if it does not meet the guidelines. The ASC also provides advice and pre-clearance services for advertisers. • The Canadian Radio-Television and Telecommunications Commissions (CRTC) administers the Broadcast and Telecommunications Act, setting guidelines for broadcast standards, monitoring the ownership of media outlets, and approving broadcast licences for TV and radio stations. It sets guidelines for the broadcast of Canadian content and sets the number of minutes of advertising permitted hourly on TV. It also manages Canada’s Do-Not-Call telemarketing list and administers the Wireless Code that regulates wireless telecommunications sector. Visit http://www.crtc.gc.ca. • The Canadian Marketing Assocition (CMA) represents the marketing industry in Canada. Its members need to abide by its code of ethics. It provides the industry with guidelines related to topics such as mobile marketing, telemarketing, email marketing, social media marketing, privacy compliance, promotional contests, fundraising, database marketing, marketing to children and teenagers, Canada’s anti-spam legislation, and online behavioural advertising. Visit http://www.the-cma.org. • The Better Business Bureau (BBB) is a voluntary alliance of businesses which provides information to help businesses and consumers follow fair and honest business practices. Visit http://www.bbb.org. • The Canadian Wireless Telecommunications Association (CWTA) provides resources on the wireless industry in Canada. It deals with the government on issues related to cellular, personal communication devices, messaging, wireless and mobile satellite carriers, and represents companies working in that space. Its website provides useful statistics on the industry as well as regulations which control the sector. Visit www.cwta.ca and www.txt.ca. • The Mobile Marketing Association (MMA) is a global association driven to create growth and efficiency within the industry. It sets standards and guidelines that regulate mobile messaging, mobile advertising, and to mobile marketing promotions. It has a resource centre for marketers and publishes a code of conduct, a best practices guide, privacy policy templates, and the International Journal of Mobile Marketing which periodically includes a section on Mobile Marketing in Canada. Privacy, spam and online behavioural advertising have undergone considerable scrutiny over the past few years with new anti-spam legislation and online behavioural guidelines put in place to guide the industry and protect consumers. Privacy legislation has been update to reflect these areas. ^^^ Ask Yourself 1. What role does the Canadian Radio-television and Telecommunications Commission (CRTC) play in Canadian marketing regulations? Answer: The CRTC helps set standards of acceptable broadcast standards and regulates the telecommunications industry. 2. What government body oversees privacy issues in Canada? Answer: The Office of the Privacy Commissioner of Canada oversees privacy in Canada. 3. Does self-regulation work? Why or why not? Answer: Self-regulation works when the industry is committed to supporting and enforcing these regulations. The threat of government intervention and negative publicity helps support self-regulation. G. Steps in a Marketing Environment Scan Marketing environment scans are conducted by marketers to ensure products and marketing approaches are relevant. A marketing environment scan is often conducted annually as part of the marketing planning process, and also periodically when new ideas and approaches are needed. Steps in the process are: (1) Collect the facts and identify trends (2) Brainstorm on marketing ideas to build the business (3) Assess, evaluate, and implement ideas Mohammed Asaduallah shared the marketing environment scan that was conducted prior to designing and launching GrapeTrail. It highlighted the importance of creating an app that is: • Technically robust and easy to use • Free to download • Contains in-app navigation and social media integration • Uses beautiful images Chapter 3 Consumer Behaviour MARKETING TIP For this particular chapter we look to Nick Gaudreau, Chief Marketing Officer of Yellow Pages Group for his MARKETING TIP. His tip alludes to how consumer behavior is impacted by local advertising. 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: “There is a huge opportunity in local advertising. It is a $10 billion market.” LECTURE NOTES CHAPTER 3 OPENING VIGNETTE – YELLOW PAGES GROUP Yellow Media, a leading digital media and marketing solutions company owns and operates a network of properties including Yellow Pages Group, its flagship company, as well as RedFlagDeals.com, Canada411.ca, Wall2Wall Media, and Canpages. This corporate behemoth has had to adapt to the changing needs of consumers over the past 100 years. Understanding how the company’s strategy changed helps understand how consumer behaviour has changed. • Nick Gaudreau is the Chief Marketing Officer of Yellow Pages Group. When asked about how he has seen consumer behavior change over the years, Nick had this to say: ““Once upon a time, it was easier for consumers to find local business information. It was the Yellow Pages directory – a physical publication delivered to each household.” • Although the digital revolution seems to have begun suddenly, Nick remembers the change to be more gradual. “The digital revolution began in the late-1990s and in 2008, the print business at Yellow Pages Group was still relatively stable. Our company was delving into online media, but the paper business was still going strong.” The management at Yellow Pages Group observed that consumers were behaving differently and adjusted their solutions and businesses accordingly. • “All of sudden, consumer behaviour changed,” recounts Nick. “And the smartphone meant you always had the opportunity to be connected.” With his background in traditional and digital marketing as well as product development, Nick was able to witness the change in consumer behaviour first hand. “Who would have thought 10 years ago that one-third of all local searches was going to be done on smartphones?” Nick asks. • “Traditionally, consumers made decisions through awareness, consideration, evaluation and purchase,” Nick continues. “Today, consumers are still subject to awareness, but by the time they reach the evaluation and purchase stage, they may have been in contact with 14 touch points of research. There is a lot more information to access and process for a decision than ever before. And, it is easier to get.” The fact that the consumer decision-making process evolved required Yellow Pages Group to embark on one of the largest corporate transformations ever attempted. With 100 per cent of its revenues coming from print in 2008, Yellow Pages Group has embraced the digital revolution and now generates close to 50 per cent of its revenue from digital sources. Reality Check As you read Chapter 3, refer back to the Yellow Media vignette to answer the following questions: • When have you used online or mobile technology to find the information you were searching for to help you make your purchase decision? Answer: Most students will be familiar with online or mobile technology. They may have used smartphones to find products or services or compare prices from different distribution channels. Some may purchase products directly online or browse online stores before visiting retail outlets. I often use online reviews and comparison websites to research product quality and prices before making a purchase decision. Mobile apps also help me track deals and read real-time feedback from other consumers. • How have advances in technology affected the consumer purchase decision process? Answer: Problem recognition, information search, evaluation of alternatives, purchase decision and post-purchase behavior make up the consumer purchase decision process. Today, consumers receive multiple touchpoints of awareness before reaching the evaluation and purchase process. Essentially, when it is time to conduct the information search, technology has allowed consumers to receive more information in a shorter period of time facilitating the evaluation of alternatives step and helping consumers make informed purchase decisions. I. CONSUMER PURCHASE DECISION PROCESS Consumer behaviour can be defined as the actions a person takes in purchasing and using products and services, including the mental and social processes that precede and follow these actions. The behavioural sciences help answer questions, such as why people choose one product or brand over another, how they make these choices, and how companies use this knowledge to provide value to consumers. The purchase decision process is the stages a buyer passes through in making choices about which products and services to buy. The process consists of 5 stages: (1) problem recognition, (2) information search (3) alternative evaluation, (4) purchase decision, and (5) post-purchase behaviour. The Internet is changing how consumers are obtaining information and how they are making a purchase decision. A. Problem Recognition: Perceiving a Need 1. Problem recognition occurs when a person realizes a difference between what he or she has and what he or she would like to have is big enough to actually do something about it. 2. In marketing, advertisements or salespeople can activate a consumer’s decision process by showing the shortcomings of competing or currently owned products. B. Information Search: Seeking Value After recognizing a problem, a consumer begins to search for information about what product or service might satisfy the need. 1. An internal search involves scanning one’s memory for previous experiences with products or brands. Internal search is often sufficient for frequently purchased products. 2. An external search may be necessary when past experience or knowledge is insufficient, the risk of making a bad decision is high, and the cost of gathering information is low. The primary sources of external information are: • Personal sources, such as friends and family whom the consumer trusts. • Public sources, including various product-rating organizations such as Consumer Reports or the government. • Marketer-dominated sources, such as information from sellers that include advertising, company websites, salespeople, and point-of-purchase displays in stores. C. Evaluation of Alternatives: Assessing Values 1. The information stage clarifies the problem for consumers by: • Suggesting criteria, or points to consider, for the purchase. • Providing brand names that might meet the criteria. • Developing consumer value perceptions. 2. A consumer’s evaluative criteria represent both the objective attributes of a brand and the subjective ones used to compare different products and brands. These criteria are often mentioned in advertisements. 3. These criteria establish the consumer’s evoked set—the group of brands that a consumer would consider acceptable from among all the brands in the product class of which he or she is aware. D. Purchase Decision: Buying Value Having examined the alternatives, two choices remain: 1. From who to buy, which is determined by the seller’s location, past purchase experience, return policy, etc. 2. When to buy, which is determined by whether the product is on sale or the manufacturer offers a coupon/rebate and/or the seller’s store atmosphere, shopping experience, salesperson persuasiveness, financial terms, etc. 3. The Internet adds a technological dimension to the consumer decision process by allowing consumers to gather information, evaluate alternatives, and make buying decisions. E. Post-Purchase Behaviour: Value in Consumption or Use After buying a product, the consumer compares it with expectations and is either satisfied or dissatisfied. 1. Satisfaction or dissatisfaction affects consumer value perceptions, consumer communications, and repeat-purchase behaviour. 2. Satisfied buyers tell three other people about their experience, while dissatisfied buyers complain to nine people. 3. Satisfied buyers tend to buy from the same seller each time a purchase decision arises. 4. Often, a consumer is faced with two or more highly attractive alternatives before purchase. The feeling of post- purchase anxiety that results from picking one and rejecting the other is called cognitive dissonance. F. Effects of Technology on Purchase Behaviour Advances in technology are changing behaviour in everyday living. For example, many consumers are viewing movies on their cable channels instead of running to the video store to rent movies. This has led to the demise or decrease in the numbers of corner video stores. With the advent of e-readers such as the Kindle, Kobo and iPad, some consumers are switching to e-reading as opposed to purchasing physical books. Although e-reading is still a niche market, it may become more mainstream in time. G. Involvement and Problem-Solving Variations 1. Consumers may skip or minimize one or more steps in the purchase decision process depending on the level of involvement, which depends on the personal, social, and economic significance a particular purchase has to the consumer. 2. High-involvement purchase occasions typically have at least one of three characteristics: the item to be purchased: • is expensive; • can have serious personal consequences; or • could reflect on one’s image. 3. There are three general problem-solving variations in the consumer purchase decision process based on consumer involvement and product knowledge: • Routine problem solving – virtually a habit and involves little effort seeking external information and evaluating alternatives. Routine problem solving is typically used for low-priced, frequently purchased products. • Limited problem solving – involves the use of moderate information seeking efforts. It is often used when the buyer has little time or effort to spend. • Extended problem solving – means that each stage of the consumer purchase decision process is used, including considerable time and effort on external information search and in identifying and evaluating alternatives. It is used in high-involvement purchase situations. Ask Yourself 1. What is the first stage in the consumer purchase decision process? Answer: problem recognition 2. The grouping of brands a consumer considers buying out of the set of brands in a product class is called the . Answer: evoked set 3. What is the term for post-purchase anxiety? Answer: cognitive dissonance II. SITUATIONAL INFLUENCES Five situational influences impact the purchase decision process: 1. The purchase task, the reason for engaging in the decision. Information search and evaluation alternatives may differ if the purchase is a gift or for the buyer’s own use. 2. Social surroundings, including other people present when a purchase decision is made. 3. Physical surroundings, such as decor, music, and crowding in retail stores. 4. Temporal effects, such as time of day or the amount of time available. 5. Antecedent states, which include the consumer’s mood or amount of cash on hand. III. PSYCHOLOGICAL INFLUENCES ON CONSUMER BEHAVIOUR Psychology helps marketers understand why and how consumers behave as they do. Concepts such as motivation and personality; perception; learning; values, beliefs and attitudes are useful for interpreting buying processes and directing marketing efforts. A. Motivation and Personality are used to describe why people do some things and not others. Motivation is the energizing force that stimulates behaviour to satisfy a need. Because consumer needs are the focus of the marketing concept, marketers try to arouse these needs, which are hierarchical, ranging from basic to learned needs: • Physiological needs, such as water, food, and shelter, are basic to survival and must be satisfied. • Safety needs involve self-preservation and physical well-being. • Social needs are concerned with love and friendship. • Personal needs are represented by the need for achievement, status, prestige, and self-respect. • Self-actualization needs involve personal fulfillment. Personality refers to a person’s consistent behaviours or responses to recurring situations. • Key traits include assertiveness, extroversion, compliance, dominance, and aggressiveness. • Personality characteristics are often revealed in a person’s self-concept, which is the way people see themselves and the way they believe others see them. • Marketers recognize that people have an actual (how they see themselves) and ideal self-concept (how they want to see themselves). These two images are reflected in the products and brands a person buys. B. Perception is the process by which an individual selects, organizes, and interprets information to create a meaningful picture of the world. 1. Selective perception is a process which filters the information so that only some of it is understood or remembered or even available to the conscious mind. • Selective exposure occurs when people pay attention to messages that are consistent with their own attitudes and beliefs and ignore messages that are inconsistent. • Selective comprehension involves interpreting information so that it is consistent with a person’s attitudes and beliefs. • Selective retention means that consumers do not remember all the information they see, read, or hear, even minutes after exposure to it. 2. Perceived risk represents the anxieties felt because the consumer cannot anticipate the outcomes of a purchase but believes that there may be negative consequences. • Perceived risk affects the information stage of the consumer purchase decision process. The greater the perceived risk, the more extensive the external search is likely to be. • Marketers try to reduce a consumer’s perceived risk and encourage purchases by using one or more strategies. C. Learning refers to those behaviours that result from (1) repeated experience and (2) reasoning. Much consumer behaviour is learned, such as information sources about products, the evaluative criteria used to assess alternatives, and how to make purchase decisions. 1. Behavioural learning is the process of developing automatic responses to a type of situation built up through repeated exposure to it. – A drive is a need that moves an individual to action. – A cue is a stimulus or symbol that one perceives. – A response is the action taken to satisfy the drive. – A reinforcement is the reward. – A negative reinforcement is a “reward” that is unpleasant. Marketers use two concepts from behavioural learning theory: – Stimulus generalization occurs when a response elicited by one stimulus (cue) is generalized to another stimulus. – Stimulus discrimination refers to one’s ability to perceive differences among similar products. 2. Cognitive learning involves making connections between two or more ideas or simply observing the outcomes of others’ behaviours and adjusting one’s own behaviour accordingly. An example is the use of repetitive advertising. 3. Brand loyalty is a favourable attitude toward and consistent purchase of a single brand over time. It results from positive reinforcement. • Developing habits means that a consumer is solving problems routinely and consistently without much thought. D. Values, Beliefs, and Attitudes play a central role in consumer decision making. 1. Attitude Formation • An attitude is a learned predisposition to respond to an object or class of objects in a consistently favorable or unfavorable way. • Beliefs are one’s perception of how a product or brand performs on different attributes. 2. Attitude Change Marketers use three approaches to try to change consumer attitudes toward products and brands: • Changing beliefs about the extent to which a brand has certain attributes. • Changing the perceived importance of attributes. • Adding new attributes to the product. E. Lifestyle Lifestyle is a way of living that is identified by how people: • Spend their time and resources (activities); • Consider what is important in their environment (interests); and • Think of themselves and the world (opinions). Psychographics, which is the analysis of consumer lifestyles, and is useful in segmenting and targeting consumers for new and existing products. VALS™ Program was developed by SRI International and is based on a person’s: • Self-orientation, or the patterns of attitudes and activities that help a person reinforce his/her self-image; and • Resources, which range from minimal to abundant, and include income, education, self-confidence, health, etc. • Consists of eight lifestyle types, each of which exhibit different buying behaviour and media preferences. • When marketers have attempted to apply American psychographics to Canadian markets they have not been successful. Environics Analytics provides exceptional insight into 66 clusters of the Canadian population. For example, it describes a specific segment of the population as Grads & Pads – number 31 on the 66-rung socioeconomic ladder. Ask Yourself 1. The problem with the Toro Snow Pup was an example of selective . Answer: comprehension 2. What three attitude-change approaches are most common? Answer: Changing beliefs about the extent to which a brand has certain attributes, changing the perceived importance of attributes, adding new attributes to the product 3. What does the concept of lifestyle mean? Answer: Lifestyle is a way of living that is identified by how people spend their time and resources (activities), what they consider important in their environment (interests), and what they think of themselves and the world around them (opinions). IV. SOCIO-CULTURAL INFLUENCES ON CONSUMER BEHAVIOUR Socio-cultural influences evolve from a consumer’s formal and informal relationships with other people. These influences include: A. Personal Influence Aspects of personal influence important to marketing are: 1. Opinion leaders are individuals who have social influence over others. 2. Word of mouth is people influencing each other during conversations. Word of mouth agencies such as Matchstick specialize in product seeding programs. B. Reference Groups Reference groups are a group of people who influence a person’s attitudes, values and behaviour. They have an important influence on the purchase of luxury products but not of necessities. Three groups have marketing implications: 1. Membership group is one to which a person actually belongs, such a fraternities and sororities, social clubs, etc. 2. Aspiration group is one that a person wishes to be a member of or identified with, such as a professional society. 3. Dissociative group is one from which a person wishes to maintain a distance because of differences in values or behaviours. C. Family Influence Family influences on consumer behaviour result from three sources: 1. Consumer socialization, which is the process by which people acquire the skills, knowledge, and attitudes necessary to function as consumers. Children learn how to purchase by: • interacting with adults in purchase situations. • engaging in their own purchasing and usage experiences. 2. Family life cycle, which is the concept that describes the distinct phases that a family progresses through from formation to retirement, each phase bringing with it identifiable purchasing behaviours. • Young singles purchases are for nondurable goods including prepared foods, clothes and entertainment • Young marrieds without children purchase furniture and housewares. • Young marrieds with children represent a sizable market for children’s products and home furnishings. • The older married and older unmarried stages are a market for vacation trips and medical services. 3. Family Decision Making • Two decision-making styles exist: spouse-dominant and joint decision making. • Five roles of individual family members in the purchase process exist: (1) information gatherer, (2) influencer, (3) decision maker, (4) purchaser, and (5) user. D. Culture and Subculture Culture refers to the set of values, ideas and attitudes that are learned and shared among the members of a group. Subcultures are subgroups within the larger, or national, culture with unique values, ideas, and attitudes. The three largest racial/ethnic subcultures in Canada are French, German, Italian, Chinese and Ukrainian. Each of these groups exhibits sophisticated social and cultural behaviours that affect their buying patterns. 1. French Canadian Subculture. This subculture represents about 30% of the population of Canada. • French Quebecers are less likely to buy grocery items on impulse, and are increasingly calculating in their food purchases. • They are cautious about new products, exhibit brand loyalty but will switch brands if a discount is offered. • They consume a higher percentage of beer and wine and there tends to be more smokers. 2. Chinese-Canadian Subculture. Chinese Canadians comprise the largest visible minority in Canada with more than a million people or 3.5% of the population. • They like to do business within their own communities and prefer media in their own languages. • They have strong allegiance to brands and are very family-oriented. • They have a preference for luxury vehicles and tend to eat out in restaurants more than the average Canadian. E. Global Cultural Diversity Marketers must be sensitive to the cultural underpinnings of different societies if they are to develop successful exchange relationships with global consumers. As a result, they must conduct a cross-cultural analysis, which involves the study of similarities and differences among consumers in two or more nations or societies. A thorough cross-cultural analysis involves an understanding of and an appreciation for the values, customs, symbols, and language of other societies. 1. A society’s values represent socially preferable modes of conduct or states of existence that tend to persist over time. 2. Customs are what is considered normal and expected about the way people do things in a specific country. • The custom of giving token business gifts is popular in many countries where they are expected and accepted. • However, bribes, kickbacks, and payoffs to entice someone to commit an illegal or improper act on behalf of the giver for economic gain are considered corrupt in most cultures. • The widespread use of bribery in global marketing has led to an agreement among the world’s major exporting nations to make bribery of foreign government officials a crime. The Organization for Economic Cooperation and Development (OECD) is an international body whose goal is to foster democratic government and market-driven economy. The OECD has taken action to set guidelines for preventing international corruption and bribery. Canada has adopted the OECD’s anti-corruption conventions. 3. Cultural symbols are objects, ideas or processes that represent a particular group of people or society. Symbols play an important role in cross-cultural analysis because different cultures attach different meanings to things. • Positive symbols can enhance the attractiveness of products and services to consumers. • Improper use of symbols can spell disaster and can stir up deep feelings of resentment. 4. Language. Global marketers should know not only the native tongues of countries in which they market, but also the idioms and nuances of a language. • Unintended meanings of brand names and messages range from the absurd to the obscene. • Experienced global marketers use back translation, where a translated word or phrase is retranslated into the original language by a different interpreter to catch errors. Ask Yourself 1. What are the two primary forms of personal influence? Answer: Opinion leadership and word of mouth. 2. What challenges do marketers face when marketing to ethnic sub cultural groups? Answer: Understanding their unique buying patterns and social/cultural behaviours. Chapter 4. Market Research, Metrics, and Analytics MARKETING TIP For this chapter we look to Luke Sklar, Partner, SW+A for his MARKETING TIP on what he considers it is important for students to understand. 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: “The marketing world is suffocating in data and thirsty for clarity and insight. Companies need to step back, focus, and have clarity on the task at hand as well as a vision on how to grow the business.” LECTURE NOTES CHAPTER 4 OPENING VIGNETTE - SW+A AND MOLSON CANADIAN Chapter 4 opens with insights from one of Canada’s leading market research companies, Sklar, Wilton and Associates (SW+A) and uses Molson Canadian as an example of how market research is used to help guide marketing programs. It provides students with a realistic view of market research and explains how it can be used to market products with insights into the lives of consumers. The vignette is summarized as follows: Overwhelming amounts of digitally driven data now flood marketers’ desks. This makes the task of market researchers more complex and it is changing the way research projects are approached. Researchers now start earlier in the process and spend more time gathering and culling data that already exists. However the principles of market research are still sound and are used to ensure results are insightful and provide clarity on how to solve a problem. SW+A is integrated into the research group at Molson and as part of this team they sifted through Molson Canadian’s data and conducted preliminary research to reveal that while consumers viewed Molson Canadian as a strong Canadian icon some viewed it as an old fashioned beer and did not connect with the brand. SW+A used private online bulletin boards to dig deeper and asked lapsed Molson Canadian beer drinkers how they viewed Molson Canadian beer. They were tasked to write a break-up letter to the brand, followed by a second letter, this time rekindling the relationship because of what they missed. This revealed the deep emotional connections that existed. These insights were passed along to Molson Canadian and its ad agency to create new strategies and communication approaches to reignite the brand. Concepts were linked back to respondents for feedback which resulted in a high energy campaign, The Canadians, where hip, young characters in Berlin, Dublin, South Africa, Tokyo, and Australia shared stories on crazy and free spirited Canadians that let loose at concerts, drank beer, and had fun doing unusual things such as mud-sliding and kissing under water. In three days, the YouTube rendition of the ad received over one million views, prior to airing on TV. Reality Check As you read chapter 4, refer back to the opening vignette and answer the following questions: • What metrics could Molson Canadian use to measure the success of its new advertising campaign? Answer: Relevant metrics would include clarity of communication, brand awareness levels, advertising recall, share of voice, and elements within the ad that were liked, disliked, and found memorable. Sales lift could also be reviewed, although a short-term lift that is directly attributable to an advertising campaign such as this (designed to build brand imagery), is highly unusual. Since this ad was also posted on YouTube, other relevant metrics would include views, shares, comments, new channel subscribers, and sentiment. • What insights about Molson Canadian beer drinkers were captured in the ad campaign The Canadians? Answer: The vignette notes that the ad showed high spirited Canadians that are hip, adventurous, uninhibited, and like to do fun crazy things - these are the insights. Students should be encouraged to view this ad on YouTube by navigating to YouTube and searching for "Molson Canadian - The Canadians," as this may prompt other insights. I. METRICS AND ANALYTICS An organization constantly requires data to evaluate its performance and to analyze its customers, competitors, products, and services. It collects this information in the form of metrics and analyzes and interprets the metrics using analytics. Marketers also field market research projects to solicit insights on particular topics that require attention. Marketers today are bombarded by big data, the massive amounts of data that is high in volume, velocity, and variety. Companies such as Salesforce and IBM provide marketers with services that help manage metrics, analytics, and big data and provide insightful recommendations. Metrics Metrics refers to numeric data that is collected and grouped to track performance. It is often presented in spreadsheets and dashboards and tracks marketing program success. Metrics can points to areas that need improving as well as elements such as ROI, customer life-time value, brand advocates, and sales conversion rates. Key metrics are shown below: Analytics Analytics refers to the process of taking metrics data and applying smart thinking and technology to gain actionable insights that can help make better business decisions. Analytics help answer questions, provide customer insights, and predict patterns that can improve marketing performance. Best practices use analytics platforms that are customer focused, uncomplicated, easy to access, and in real-time. Three types of analytics are mentioned in the chapter: web analytics that analyze website traffic and website interactions; social media analytics that track social media activity and performance; and predictive analytics that combine data from varied sources to reveal consumer behaviour patterns that are modeled to customize offers and predict outcomes. Data analytics can be used to rate and score customers based on the value that they contribute to a business. They can use RFM analyzes (recency, frequency, and monetary value) that rates customers on the basis of how recently products were purchased (recency), how often products are purchased (frequency), and the dollar value of the transactions (monetary value). Companies then group customers based on ratings and use different approaches to interact with them. Ask Yourself 1. What is the difference between metrics and analytics? Answer: Metrics measure and gather data. Analytics turn the data into actionable insights. 2. What tools would you use to measure a Twitter campaign? Answer: A Twitter campaign can be measured by looking at Tweets, Retweets, engagement levels, sentiment, follows, unfollows, website referrals, and website visits etc. II. BIG DATA Big data Big data refers to the massive amounts of data that is high in volume, velocity, and variety. It comes from sources such as promotions, social media interactions, e-mail programs, customer service communications, mobile downloads, e-commerce purchases, and website metrics. This huge volume of data is constantly changing, often in real-time, making it difficult for marketers to manage, gain insights, and use. Companies such as IBM provided marketing information systems to help manage the data and use sophisticated software to find insights, correlations, and patterns that lead to better business decisions. There are four types of data: structured data that is easily tagged and stored in a uniform database; unstructured data that cannot be easily categorized as is comes from images, audio, video, and text files; semi-structured data that is a hybrid of structured and unstructured data; and legacy data that is generally old and in a format that is not compatible with current computerized platforms. Ask Yourself 1. What are the challenges of big data? Answer: The challenges with big data are having employees who know how to use the data so that it can be sorted, cleaning and stored. Issues lie with how to use legacy data and unstructured data as well as finding insights from any type of data. 2. What is an RFM analysis and how can it improve ROI? Answer: An RFM analysis measures and rates customers on recency, frequency and monetary value to an organization. Organizations can use RFM analyses to pinpoint its most profitable customers and to reach out to them to increase engagement, interactions, and purchases. This will in turn help improve ROI. III. MARKET RESEARCH Market Research Market research is the process of planning, collecting, and analysing information in order to recommend actions to improve marketing activities. It can be classified into three basic areas: (1) exploratory research, (2) descriptive research, and (3) causal research. Each area serves a different function and uses different techniques. Research Classifications • Exploratory Research is preliminary research used to clarify the nature of the marketing problem and provide researchers with a better understanding of the issues. It is often conducted with the expectation that subsequent research will follow. • Descriptive Research is designed to describe basic characteristics of a population and/or to clarify their usage and attitudes. With descriptive research, the researcher has an understanding of the marketing problem and is seeking answers to particular questions. • Causal Research is designed to identify cause-and-effect relationships among variables. In general, exploratory and descriptive research normally precedes causal research. With causal research a relationship needs to be explained, such as the influence of price on demand, the effect of advertising on sales, or the impact of a new package on sales. Ask Yourself 1. What are the three research classifications? Answer: Exploratory, descriptive, and causal are the three research classifications. 2. What steps are included in the six-step market research process? Answer: The six steps are: (1) Define the problem/issue/opportunity, (2) Design the research plan, (3) Conduct exploratory research, (4) Collect quantitative research information (5) Compile, analyze, and interpret data, and (6) Generate report and recommendations. II. THE SIX-STEP MARKET RESEARCH APPROACH The market research process follows 6 basic steps as follows: 1. Define the problem/issue/opportunity 2. Design the research plan 3. Conduct exploratory and qualitative research 4. Collect quantitative research information 5. Compile, analyze, and interpret data 6. Generate report and recommendations A. Step 1 – Define the Problem/Issue/Opportunity This includes setting research objectives which should be specific and measurable. B. Step 2 – Design the Research Plan The research plan should involve outlining how the research will be collected and the sampling plan. Researchers can purchase research information from a pre-existing study, or conduct their own research using in-depth personal interviews, focus groups, telephone surveys, mall intercepts, online questionnaires, or direct mail surveys. Samples are used in research to avoid surveying the entire population which is expensive and time consuming. Sampling takes information from a subset of the total population, rather than from everyone. A sampling plan indentifies who will be sampled, how large the sample will be, and how the sample will be selected. A probability sample is when precise rules are used to select the sample so the probability of being selected is known. A non-probability sample uses judgment to select the sample with the chance of being selected unknown or zero. Ask Yourself 1. How do research objectives relate to marketing actions? Answer: Research objectives are specific, measurable goals the decision maker seeks to achieve in solving a problem. Marketing research is then conducted to identify possible marketing actions. Those implemented can be compared to the objectives to assess success. 2. What different methods can be used to conduct market research? Answer: Researchers can conduct exploratory research, descriptive research, and causal research. 3. What are the differences between probability and non-probability samples? Answer: A probability sample uses statistical methods to clearly identify the odds that a particular group will be selected to participate in the research. A non-probability sample uses judgment to select the participants and the odds of participating are unknown or zero. C. Step 3 – Conduct Exploratory and Qualitative Research Exploratory research is preliminary research conducted during the early stages of the research process to clarify the scope of the research project. It is often conducted knowing that more research will follow and ensures key insights are not overlooked. Two basic tools can be used in exploratory research: (1) secondary data analysis, (2) primary data analysis: • Secondary Data Analysis - Secondary data is low cost and readily available. It exists either within a company in the form of internal data, (sales reports and market share data) or as external data from published sources outside the organization, (newspapers, Statistics Canada, Ipsos Reid Polls, media measurement services etc.). A general rule is to obtain secondary data first, and then collect primary data, newly collected data specifically for the project. The following are examples of secondary sources of market research information many marketers find useful. Selection of Market Research Sources – Online Secondary Data • Alliance for Audited Media: www.auditedmedia.com • Numeris: www.bbm.ca • Bensimon Byrne Consumerology Report: http://consumerology.ca • Canadian Marketing Association: www.the-cma.org • Communispace: www.communispace.com • comScore: www.comscore.com • Forrester Research: www.forrester.com • GFK Group: www.gfk.com • Government of Canada: www.canada.gc.ca • Industry Canada: www.ic.gc.ca • Interactive Advertising Bureau of Canada: www.iabcanada.com • Ipsos Canada: www.ipsos.ca • Leger, The Research Intelligence Group: www.legermarketing.com • Media Digest: www.cmdc.ca • Newspaper Audience Databank: www.nadbank.com • Nielsen Canada: www.ca.nielsen.com • Print Measurement Bureau: www.pmb.ca • SEDAR: www.sedar.com • Solutions Research Group: www.srgnet.com • Statistics Canada: www.statcan.gc.ca • Television Bureau of Canada: www.tvb.ca • Primary Data – Primary data is data that is original and specifically collected for the project at hand. It can include focus groups, in-depth interviews, online research bulletin boards, online research communities, social listening. • Focus Group Research - a primary form of exploratory research whereby six to ten people are informally interviewed and video-taped on a topic by a research moderator. Generally a number of focus groups are conducted with the researcher writing a report on the responses. • In-Depth Interviews - these are detailed, video-taped, individual interviews used to discover information that may provide insight into a marketing issue or opportunity. The researcher may conduct a number of these interviews and then writes a report on the responses. • Online Research Communities – this is a new qualitative research tool that uses consumer groups, brought together privately in an online environment, to answer questions, respond to ideas, and collaborate with researchers in real time. • Online Research Bulletin Boards – this new research tool involves private online forums where respondents post responses to questions. Unlike online communities, online bulletin boards do not engage respondents through dialogue. • Social Listening – this new research approach uses monitors online consumer conversations on social media sites such as social networks, blogs, and forums looking for positive and negative sentiments, popularity scores, message reach, as well as the levels of conversation and buzz. Ask Yourself 1. Why do researchers use exploratory research? Answer: Exploratory research is used to reduce the risk of overlooking an important aspect of the research study. It is generally an inexpensive first step. 2. What are some of the online tools available to market researchers? Answer: Online communities, online bulletin boards, and social listening are new approaches that are used today. 3. What are the advantages and disadvantages of secondary data? Answer: Advantages of secondary data are; (1) it is quick to access, and (2) it is generally cheaper than collecting the information yourself. Disadvantages include; (1) the data may be out-of-date, (2) the categories used may not be applicable, and (3) the information may be too vague. D. Step 4 – Collect Quantitative Research Information The three principal ways of collecting primary data are by using (1) observational research, (2) surveys, and (3) experiments. • Observational research - research obtained by watching how people behave either in person, or by using a machine to record the event. • Surveys – surveys can be standardized in the form of questionnaires and asked to a large representative sample to obtain accurate data. Surveys can be conducted in person, through the mail, on the telephone, or through the Internet, with each method having limitations. A market researcher has to balance the cost of the methodology against the expected quality of information. Personal interviews tend to be the most expensive but the most accurate. Mail surveys tend to be low cost but have low response rates and biased respondents. Telephone interviews are often biased and difficult to obtain respondents. Internet surveys are becoming more popular as they are quick and cost effective but limited to those who use the technology. • Experiments –involve measuring changes in consumer behaviour over time to determine reactions to new-product introductions or new promotional offers. A marketing experiment involves changing a variable involved in a purchase to find out what happens. Ask Yourself 1. Which survey approach provides the greatest flexibility for asking probing questions: mail, telephone, Internet, or personal interview? Answer: A personal interview provides the greatest flexibility. 2. In the field of research what is the difference between an online bulletin board and an online community? Answer: An online research bulletin board does not engage respondent through dialogue. E. Step 5 – Compile, Analyze, and Interpret Data Once marketing research has been conducted, the data has to be compiled, analyzed, and summarized with relevant observations and conclusions that can be used by marketers. F. Step 6 – Generate Report and Recommendations Once the data has been analyzed, the researcher will discuss the results with the marketing manager and prepare a report to communicate the research findings. The report will include recommendations that address the marketing challenge. III. THE FUTURE OF MARKET RESEARCH In today’s world of big data marketers have extensive information on consumers, the competition, and the market. This situation will continue with companies investing in analytics platforms, training programs, and hiring employees that are data-savvy. Market researchers will need to ensure their research practices stay in line with privacy legislation and anti-spam laws in Canada by being compliant with the Personal Information Protection and Electronic Documents Act (PIPEDA) as well as Canada’s anti-spam legislation (CASL). Chapter 5 B2B Marketing MARKETING TIP For this chapter we look to Sharon Metz, vice president of vertical marketing at Rovi Corporation 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: “In B2B marketing, there may be numerous departments and people involved. When you are working with so many people, and trying to ensure all needs (especially, the consumers’ needs) are met, it can take years to get the solution just right.” LECTURE NOTES CHAPTER 5 OPENING VIGNETTE – ROVI CORPORATION Rovi Corporation is the focus of the opening vignette. It created a recent partnership with Canadian company, Cogeco Cable Inc. to offer a unique entertainment solutions for its subscribers. The vignette is summarized as follows: Rovi Corporation and Its Partnerships: As consumers, we sometimes take for granted the work that needs to be done in the background to offer end-user services. We are familiar with companies such as Apple and Best Buy and amazed by their offerings. What we may not realize is that these companies turn to others for the ability to enhance their products and services for consumers. Rovi Music provides the back-end support to online stores and social networking sites. This service, which adds artist biographies and reviews to sites, is offered by Rovi Corporation to companies such as Apple and Best Buy, enhancing the end-user experience. Business-to-business marketing is conducted with multi-billion dollar companies, but also with small to medium-size companies. B2B Partnership: Technology has enabled businesses to develop efficiencies. These efficiencies make items available for purchase by consumers that would have been unimaginable in the past. As end users, consumers usually do not realize the extent of the marketing that businesses do with one another to ensure the best products available to them. The businesses in Canada’s industrial markets, reseller markets, governments, and non-profit organizations have a number of companies they can choose from to partner with. Organizational Buying: Although the purchase decision process is similar to that of consumers, the scope and size of purchase decisions are magnified. This in turn magnifies the number of people involved in the process as well as the time it takes to complete the purchase. Sharon Metz, vice president of vertical marketing for Rovi Corporation offers insight into this process. The Cogeco Cable Inc. Launch: In 2013, Cogeco Cable Inc. and Rovi Corporation launched two new interactive applications. Cogeco Remote Cable powered Rovi TV Listings, and TotalGuide xD allowed Canadian subscribers to find television shows and schedule recordings from their tablets. The partnership was a win for consumers and the two businesses. Upon the announcement, executives from both companies shared the excitement of the purchase decision and what it meant for customers. Similar to strategies that draw in consumers to make purchases, marketing to businesses requires a strong digital footprint and social media presence. Companies look to partner with companies that are innovative and have growing markets. This is extremely important as technology has enabled more marketing opportunities on a global scale. Reality Check As you read Chapter 5, refer back to the opening vignette to answer the following questions: • Senior executives were quoted in the product launch news release. These executives led teams that were instrumental in the final partnership. What other employees or departments do you think would be involved in a partnership decision? Answer: This question requires students to make assumptions regarding the roles that individuals played in the buying centre at Cogeco Cable. Ron Perotta, vice president of strategic planning at Cogeco Cable would either be a decider or influencer. Encourage students to review the buying centre and determine who would play the roles of user, gatekeeper, and buyer. • Considering the makeup of the buying centre, what roles would the executives in the vignette play in the purchase decision? Answer: The individuals in the vignette would represent either influencers and potentially deciders of their respective companies. Since the magnitude of this decision is large, there would most likely be a collaborative team approach to make the final decision. I. THE NATURE AND SIZE OF ORGANIZATIONAL MARKETS Business marketing is the marketing of products to companies, governments, or not-for-profit organizations for use in the creation of goods and services that they then produce and market to others. Organizational buyers are those manufacturers, wholesalers, retailers, and government agencies that buy goods and services for their own use or for resale. Organizational buyers are divided into three different markets: industrial, reseller, and government markets. A. Industrial Markets: Industrial firms in some way reprocess a product or service they buy before selling it again to the next buyer. B. Reseller Markets: Resellers are wholesalers and retailers who buy physical products and resell them again without any reprocessing. C. Government Markets: Government units are the federal, provincial, regional, and municipal agencies that buy goods and services for the constituents they serve. D. Non-Profit Organizations: Non-profit organizations do not have any financial profit as a goal and seek to provide goods and services for the good of society. II. MEASURING INDUSTRIAL, RESELLER, GOVERNMENT AND NON-PROFIT MARKETS • The North American Industry Classification System (NAICS) provides common industry definitions for Canada, Mexico, and the United States, which make easier the measurement of economic activity in the three member countries of the North American Free Trade Agreement (NAFTA). • The NAICS is consistent with the International Standard Industrial Classification of All Economic Activity, published by the United Nations, to help measure global economic activity. • The NAICS groups economic activity to permit studies of market share, demand for goods and services, competition from imports in domestic markets, and similar studies. • The NAICS designates industries with a six-digit numerical code. Ask Yourself 1. Organizational buyers are divided into three different markets. What are they? Answer: Industrial firms, resellers, and government units. 2. What is the North American Industry Classification System (NAICS)? Answer: The NAICS provides common industry definitions for Canada, Mexico, and the United States, which facilitate the measurement of economic activity in the three member countries of NAFTA. III. CONTENT MARKETING Content marketing keeps potential customers engaged by ensuring that relevant and valuable content is available at various touchpoints. B2B marketers can track usage and views of content and adjust information accordingly. IV. CHARACTERISTICS OF ORGANIZATIONAL BUYING Unique objectives and policies of an organization put special constraints on how it makes buying decisions. Key characteristics include: A. Derived Demand: Derived demand means that the demand for industrial products and services is driven by, or derived from, demand for consumer products and services. B. Inelastic Demand: Inelastic demand means that regardless of whether there is an increase or decrease in the price of a B2B product, customers will buy the same quantity. C. Fluctuating Demand: Fluctuating demand means that demand for business products and services fluctuate more than demand for consumer products and services. D. Size of the Order or Purchase: The size of the purchase in organizational buying is much larger than that in consumer buying. As a result, most organizations place purchasing policies or procedures constraints on their buyers, who must often get competitive bids from at least three prospective suppliers when the order is above a certain amount. The size of the order also is important in determining who participates in the purchase decision and the length of time required to reach a purchase agreement. E. Number of Potential Buyers: Firms selling consumer products and services try to reach thousands or millions of individuals or households. Firms selling to organizations are often restricted to far fewer buyers. F. Organizational Buying Objectives: For business firms, the buying objective is usually to increase profits through reducing costs or increasing sales. For not-got-profit firms and government agencies, the objective is usually to meet the needs of the groups they serve. G. Organizational Buying Criteria: Organizational buying criteria are the detailed specifications for the products and services they want to buy and the characteristics of the suppliers that will supply them. Seven commonly used buying criteria are: a. Price. b. Ability to meet the quality specifications required for the item. c. Ability to meet required delivery schedules. d. Technical capability. e. Warranties and claim policies in the event of poor performance. f. Past performance on previous contracts. g. Production facilities and capacity. Reverse marketing involves the deliberate effort by organizational buyers to build relationships that shape suppliers’ products, services, and capabilities to fit a buyer’s needs and those of its customers. H. The Role of Fear in B2B Buyer Behaviour: B2B buying decisions are usually driven by one emotion—fear. Specifically, B2B buying is all about minimizing fear by eliminating risk. There are two distinct types of risk. Organizational risk is typically formalized and dealt with in the buying process and then there is personal risk, which is unstated but remains a huge influencing factor in organizational buying. For example, a buyer who chooses to deal with the same trusted supplier for many years is minimizing fear by eliminating organizational risk. Personal risk is explained by the buyer who chooses not to work with a new supplier even if that potential supplier’s products offer better value. I. Buyer-Seller Relationships and Supply Partnerships: Organizational buying is more likely to involve complex and lengthy negotiations concerning delivery schedules, price, technical specifications, warranties, and claim policies. Reciprocity is an industrial buying practice in which two organizations agree to purchase each other’s products and services. A supply partnership exists when a buyer and its supplier adopt mutually beneficial objectives, policies, and procedures for the purpose of lowering the cost and/or increasing the value of products and services delivered to the ultimate consumer. Ask Yourself 1. What is derived demand? Answer: Derived demand is demand for industrial products and services that is driven by, or derived from, demand for consumer products and services. 2. A supply partnership exists when . Answer: a buyer and its supplier adopt mutually beneficial objectives, policies, and procedures for the purpose of lowering the cost and/or increasing the value of products and services delivered to the ultimate consumer V. THE ORGANIZATIONAL BUYING PROCESS AND BUYING CENTRE Organizational buying behaviour is the decision-making process that organizations use to establish the need for products and services and identify, evaluate, and choose among alternative brands and suppliers: A. Stages in the Organizational Buying Process The same five stages consumers use in the buying decision process applies to organizational purchases: (1) problem recognition, (2) information search, (3) evaluation of alternatives, (4) purchase decision, (5) post-purchase behaviour. B. The Buying Centre: A Cross-Functional Group • A buying centre consists of people in an organization that participates in the buying process and share common goals, risks, and knowledge important to purchase decisions. • In large multi-store chain resellers, the buying centre is very formal and is called a buying committee. • A firm marketing to industrial firms and governmental units must understand the structure, technical, and business functions represented, and the behaviour of the buying centre. Need to ask the following questions: a. Which individuals are in the buying centre for the product or service? b. What is the relative influence of each member of the group? c. What are the buying criteria of each member? d. How does each member of the group perceive the potential supplier, its products, its services and its salespeople? 1. People in the Buying Centre: The composition of the buying centre depends on the item being bought. A buyer or purchasing manager is almost always a member and individuals from other functional areas are included depending on the purchase. 2. Roles in the Buying Centre: Researchers have identified five specific roles that one or more individuals can play in a buying centre: a. Users are people in the organization who actually use the product or service. b. Influencers affect the buying decision, usually by helping define the specifications for what is bought. c. Buyers have formal authority and responsibility to select the supplier and negotiate the terms of the contract. d. Deciders have the formal or informal power to select or approve the supplier that receives the contract. e. Gatekeepers control the flow of information in the buying centre. 3. Buying Situations and the Buying Centre: The number of people in the buying centre largely depends on the specific buying situation. There are three types of buying situations, called buy classes, that vary from the routine reorder to the completely new purchase: a. Straight rebuy, where the buyer reorders an existing product or service from the list of acceptable suppliers. b. Modified rebuy, where users, influencers, or deciders in the buying centre want to change the product specifications, price, delivery schedule, or supplier, although the item purchased is largely the same. c. New buy, where the firm is a first-time buyer of the product or service. This involves greater risks, so the buying centre is enlarged to include all who have a stake in the new buy. Ask Yourself 1. What one department is almost always represented by a person in the buying centre? Answer: Purchasing department. 2. What are the three types of buying situations, or buy classes? Answer: Straight rebuy, modified rebuy, and new buy. VI. B2B MARKET SEGMENTATION Consumer market segmentation places consumers into groups that have common needs and respond similarly to marketing programs. The process of segmenting business markets divides markets based on type of customer, size, buying situation, customer location, and benefits sought. A. Type of Customer: The NAICS codes discussed earlier provide a useful tool for identifying business target markets. B. Size of Customer: Many B2B marketers divide their potential market into large and small accounts, using separate distribution channels to reach each segment. C. Type of Buying Situation: B2B marketers can divide their potential market by the three types of buy classes – new buy, modified rebuy, and straight rebuy. D. Customer Location: The product manager might segment on the basis of region or actual location of the potential customer. Firms located in a metropolitan area might receive a personal sales call, whereas those outside this area might be contacted by telephone. E. Benefits Sought: The market may also be segmented on the basis of benefits sought. Xerox may decide to focus on firms looking for quality products and good customer service as opposed to those looking simply for lower prices. VII. ONLINE BUYING IN ORGANIZATIONAL MARKETS Organizational buyers account for 80% of the total worldwide value of all online transactions. Online organizational buyers around the world purchased $8 to $10 trillion worth of products and services in 2010. Organizational buyers in North America will account for about 60% of these purchases. A. Prominence of Online Buying in Organizational Markets Online buying in organizational markets is prominent for three major reasons: • Organizational buyers depend heavily on timely supplier information that describes product availability, technical specifications, application uses, price, and delivery schedules. • Internet/Web technology has been shown to substantially reduce buyer order processing costs. • Business marketers have found that Internet/Web technology can reduce marketing costs, particularly sales and advertising expense, and broaden their potential customer base for many types of products and services. B. E-Marketplaces: Virtual Organizational Markets E-marketplaces are online trading communities that bring together buyers and supplier organizations. • These online communities go by a variety of names, including portals, exchanges and e-hubs, and make possible the real-time exchange of information, money, products, and services. • E-marketplaces can (1) be independent trading communities or private exchanges and charge a fee for their service, (2) offer small business an economical way to expand their customer base, and (3) exist in settings that have one or more of the following features: a. Thousands of geographically dispersed buyers and sellers. b. Frequently changing prices caused by demand and supply fluctuations. c. Time sensitivity due to perishable offerings and changing technologies. d. Easily comparable offerings between a variety of suppliers. • Large companies favour private exchanges that link them with their network of qualified suppliers and customers. They are not a neutral third party, but represent the interests of their owners. C. Online Auctions in Organizational Markets Many e-marketplaces offer online auctions. Two types are: • In a traditional auction a seller puts an item up for sale and would-be buyers are invited to bid in competition with each other. As more would-be buyers become involved, there is an upward pressure on bid prices. The auction ends when a single bidder remains and wins the item with its highest price. • In a reverse auction, a buyer communicates a need for a product or service and would-be suppliers are invited to bid in competition with each other. As more would-be suppliers become involved, there is a downward pressure on bid prices for the buyer’s business. The auction ends when a single bidder remains and wins the business with its lowest price. Ask Yourself 1. What are e-marketplaces? Answer: E-marketplaces are online trading communities that bring together buyers and supplier organizations. 2. How do traditional auctions and reverse auctions affect bid prices? Answer: Traditional auction – upward pressure on bid prices; reverse auction – downward pressure on bid prices. Instructor Manual for Marketing: The Core Roger A. Kerin, Steven W. Hartley, William Rudelius, Christina Clements, Harvey Skolnick, Arsenio Bonifacio 9781259030703, 9781259269264, 9781259107108