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Reflect on the assigned readings for the week. Identify what you thought was the most important concept(s), method(s), term(s), and/or any other thing that you felt was worthy of your understanding.

Also, provide a graduate-level response to each of the following questions:

Discuss how core factors, cues to quality, and interpersonal factors of a product influence your buying decisions. Discuss with supporting examples.

Choose a company, research the company’s Customer Relationship Marketing (CRM), and discuss it with the rest of the class.

[Your initial post should be at least

600+ words

and in APA format (including Times New Roman with font size 12 and double spaced). Post the actual body of your paper in the discussion thread then attach a Word version of the paper for APA review]

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Marketing Management, Fifth Edition
Dawn Iacobucci
Senior Vice President, General Manager,
Social Sciences, Humanities & Business:
Erin Joyner
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Preface x
About the author xii
Part 1
Part 2
Part 3
Marketing Strategy
Why is Marketing Management Important? 1
Customer Behavior
Segmentation 32
Targeting 51
Positioning 63
Product Positioning
Products: Goods and Services 79
Brands 91
New Products and Innovation 109
Positioning via Price, Place,
and Promotion
Pricing 131
10 Channels of Distribution 161
11 Advertising Messages and Marketing Communications 185
12 Integrated Marketing Communications and Media Choices 205
13 Social Media 224
Part 4
Positioning: Assessment Through
the Customer Lens
14 Customer Satisfaction and Customer Relationships 239
15 Marketing Research Tools 256
Part 5
16 Marketing Strategy 275
17 Marketing Plans 293
Endnotes 312
Index 316
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About the author
Part 1 Marketing Strategy
Why Is Marketing Management
Important? 1
1-1 Defining Marketing 1
1-2 Marketing Is an Exchange Relationship 1
1-2a Marketing is Everywhere 2
1-3 Why Is Marketing Management Important? 2
1-3a Marketing and Customer Satisfaction is
Everyone’s Responsibility 4
1-4 The “Marketing Framework”: 5Cs, STP, and the 4Ps 5
1-4a Book Layout 7
1-4b Learning from the Marketing Framework 8
1-4c The Flow in Each Chapter: What? Why? How? 9
Customer Behavior
2-1 Three Phases of the Purchase Process 13
2-2 Different Kinds of Purchases 15
2-3 The Marketing Science of Customer Behavior 18
2-3a Sensation and Perception 18
2-3b Learning, Memory, and Emotions 20
2-3c Motivation 22
2-3d Attitudes and Decision Making 25
2-3e How Do Cultural Differences Affect
Consumers’ Behavior? 27
3-1 Why Segment? 32
3-2 What Are Market Segments? 33
3-3 What Information Serves as Bases for Segmentation? 35
3-3a Demographic 35
3-3b Geographic 36
3-3c Psychological 37
3-3d Behavioral 39
3-3e B2B 40
3-3f Concept in Action: Segmentation Variables 41
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3-4 How Do Marketers Segment
the Market? 42
3-4a How to Evaluate the
Segmentation Scheme 42
4-1 What Is Targeting and Why
Do Marketers Do It? 51
4-2 How Do We Choose a Segment
to Target? 52
4-2a Profitability and Strategic Fit 52
4-2b Competitive Comparisons 54
4-3 Sizing Markets 56
4-3a Concept in Action: How Much of
My Consultative Advice Can I Sell? 58
5-1 What Is Positioning and Why Is It Probably the Most Important
Aspect of Marketing? 63
5-1a Positioning via Perceptual Maps 64
5-1b The Positioning Matrix 66
5-2 Writing a Positioning Statement 74
Part 2 Product Positioning
Products: Goods and Services
6-1 What Do We mean by Product? 79
6-1a The Product in the Marketing Exchange 80
6-2 How Are Goods Different from Services? 81
6-2a Intangibility 81
6-2b Search, Experience, Credence 82
6-2c Perishability 83
6-2d Variability 83
6-2e To Infinity and Beyond Goods and Services 84
6-3 What Is the Firm’s Core Market Offering? 84
6-3a Dynamic Strategies 86
6-3b Product Lines: Breadth and Depth 87
7-1 What Is a Brand? 91
7-1a Brand Name 92
7-1b Logos and Color 92
7-2 Why Brand? 93
7-3 What Are Brand Associations? 95
7-3a Brand Personalities 97
7-3b Brand Communities 98
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7-4 What Are Branding Strategies? 98
7-4a Umbrella Brands vs. House of Brands 99
7-4b Brand-Extensions and Co-Branding 100
7-4c How are Brands Best Rolled Out Globally? 103
7-4d Store Brands 103
7-5 How Is Brand Equity Determined? 104
New Products and Innovation
8-1 Why Are New Products Important? 109
8-2 How Does Marketing Develop New Products for
Their Customers? 110
8-2a Philosophies of Product Development 110
8-2b Marketing 111
8-2c Idea Creation and Market Potential 112
8-2d Concept Testing and Design & Development 113
8-2e Beta-Testing 115
8-2f Launch 116
8-3 What Is the Product Life Cycle? 118
8-3a Diffusion of Innovation 120
8-4 How Do New Products and Brand Extensions Fit in
Marketing Strategy? 124
8-4a Strategic Thinking about Growth 125
8-5 What Trends Should I Watch? 126
Part 3 Positioning via Price, Place,
and Promotion
9-1 Why Is Pricing so Important? 131
9-2 Background: Supply and Demand 131
9-3 Low Prices 136
9-3a Concept in Action: Break-Even for a Good 137
9-3b Concept in Action: Break-Even for a Service 139
9-4 High Prices 142
9-4a Using Scanner Data 142
9-4b Using Survey Data 144
9-4c Conjoint Analysis 144
9-5 Units or Revenue; Volume or Profits 145
9-6 Customers and the Psychology of Pricing 147
9-6a Price Discrimination, a.k.a. Segmentation Pricing 150
9-6b Quantity Discounts 151
9-6c Yield or Demand Management 152
9-7 Non-Linear Pricing 152
9-8 Changes in Cha-Ching 154
9-8a Pricing and the Product Life Cycle 154
9-8b Price Fluctuations 155
9-8c Coupons 155
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9-8d Competitive Strategy and Game Theory 155
9-8e Auctions 156
Channels of Distribution
10-1 What Are Distribution Channels, Supply Chain Logistics, and
Why Do We Use Them? 162
10-2 How to Design Smart Distribution Systems: Intensive or
Selective? 165
10-2a Push and Pull 167
10-3 Power and Conflict in Channel Relationships 168
10-3a Revenue Sharing 170
10-3b Integration 173
10-3c Retailing 175
10-3d Franchising 178
10-3e E-Commerce 179
10-3f Catalog Sales 180
10-3g Sales Force 181
10-3h Integrated Marketing Channels 182
Advertising Messages and Marketing
Communications 185
11-1 What Is Advertising? 187
11-2 Why Is Advertising Important? 187
11-3 What Marketing Goals Are sought from Advertising
Campaigns? 188
11-4 Designing Advertising Messages to Meet
Marketing and Corporate Goals 190
11-4a Cognitive Ads 191
11-4b Emotional Ads 193
11-4c Image Ads 195
11-4d Endorsements 196
11-5 How Is Advertising Evaluated? 198
11-5a Aad and Abrand 201
Integrated Marketing Communications
and Media Choices 205
12-1 What Media Decisions Are Made in Advertising Promotional
Campaigns? 205
12-1a Reach and Frequency and GRPs 207
12-1b Media Planning and Scheduling 209
12-2 Integrated Marketing Communications Across Media 210
12-2a Media Comparisons 212
12-2b Beyond Advertising 214
12-2c Choice Between Advertising and a Sales Force 215
12-2d The IMC Choices Depend on
the Marketing Goals 218
12-3 How Is the Effectiveness of Advertising
Media Measured? 220
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Social Media
13-1 What Are Social Media? 224
13-1a Types of Social Media 225
13-1b Word-of-mouth 226
13-2 What Are Social Networks? 227
13-2a Identifying Influentials 227
13-2b Recommendation Systems 228
13-2c Social Media ROI, KPIs, and Web Analytics 230
13-2d Pre-purchase: Awareness 230
13-2e Pre-purchase: Brand Consideration 231
13-2f Purchase or Behavioral Engagement 232
13-2g Post-purchase 233
13-2h How to Proceed? 234
Part 4 Positioning: Assessment Through
the Customer Lens
Customer Satisfaction
and Customer Relationships
14-1 What Are Customer Evaluations, and Why Do We Care? 239
14-2 How Do Consumers Evaluate Products? 240
14-2a Sources of Expectations 241
14-2b Expectation and Experience 243
14-3 How Do Marketers Measure Quality and Customer
Satisfaction? 245
14-4 Loyalty and Customer Relationship Management (CRM) 248
14-4a Recency, Frequency, and
Monetary Value (RFM) 249
14-4b Customer Lifetime Value (CLV) 251
Marketing Research Tools 256
15-1 Why Is Marketing Research
so Important? 256
15-2 Cluster Analysis for Segmentation 258
15-3 Perceptual Mapping for Positioning 260
15-3a Attribute-Based 260
15-4 Focus Groups for Concept Testing 264
15-5 Conjoint for Testing Attributes 265
15-6 Scanner Data for Pricing and Coupon Experiments and Brand
Switching 268
15-7 Surveys for Assessing Customer Satisfaction 270
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Part 4 Capstone
16-1 Types of Business and Marketing Goals 275
16-2 Marketing Strategy 278
16-2a Ansoff’s Product-Market Growth Matrix 278
16-2b The BCG Matrix 279
16-2c The General Electric Model 280
16-2d Porter and Strategies 281
16-2e Treacy and Wiersema Strategies 282
16-3 How to “Do” Strategy 283
16-3a SWOT’s S&W 284
16-3b SWOT’s O&T 285
16-4 Key Marketing Metrics to Facilitate Marketing Strategy
Marketing Plans
How Do We Put it All Together? 293
Situation Analysis: The 5Cs 294
STP 298
The 4Ps 300
Spending Time and Money 304
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There are several really good marketing management texts, yet this text was created because
the Cengage sales force recognized an opportunity. Existing texts present numerous lists of
factors to consider in a marketing decision but offer little guidance on how the factors, lists
and multiple decisions all fit together.
In this book, an overarching Marketing Framework, used in every chapter, shows how
all the pieces fit together. So, for example, when facing a decision about pricing, readers
must consider how pricing will impact a strategic element like positioning or a customer
reaction like loyalty and word of mouth. This book is practical, no-nonsense, and relatively
short, to further heighten its utility. Everyone is busy these days, so it’s refreshing when a
writer gets to the point. After this relatively quick read, MBAs and EMBAs should be able
to speak sensibly about marketing issues and contribute to their organizations.
Chapter Organization
The form of each chapter is very straightforward: The chapter’s concept is introduced by
describing what it is and why marketers do it, and the rest of the chapter shows how to do
it well. This what-why-and-how structure is intended to be extremely useful to MBA and
EMBA students, who will quickly understand the basic concepts, e.g., what is segmentation and why is it useful in marketing and business? The details are in the execution, so the
how is the focus of the body of the chapter.
Key Features
Each chapter opens with a managerial checklist of questions that MBA and EMBA students will be able to answer after reading the chapter. Throughout each chapter, boxes
present brief illustrations of concepts in action in the real world or elaborations on concepts
raised in the text, also drawing examples from the real business world. Chapters close with
a Managerial Recap that highlights the main points of the chapter and reviews the opening
checklist of questions. Chapters are also summarized in outline form, including the key
terms introduced throughout the chapter. There are discussion questions to ponder, as well
as video resources to serve as points for still further discussion. Each chapter contains a
Mini-Case that succinctly illustrates key concepts.
The 5th edition of Marketing Management offers two exciting alternative teaching formats. Instructors can choose between either a hybrid print and digital offering or a version
that provides completely integrated online delivery through a platform called MindTap.
MindTap is a fully online, highly personalized learning experience built upon authoritative
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content. By combining readings, multimedia, activities, and assessments into a singular
Learning Path, MindTap guides students through their course with ease while promoting
engagement. Instructors personalize the Learning Path by customizing Cengage Learning
resources and adding their own content via apps that integrate into the MindTap framework seamlessly. Instructors are also able to incorporate the online component of Consumer
Behavior into a traditional Learning Management System (e.g. Blackboard, Canvas, D2L,
etc.) providing a way to manage assignments, quizzes and tests throughout the semester
Instructor Resources
Web resources for the book at www.cengagebrain.com provide the latest information in
marketing management. The Instructor’s Manual, Test Bank authored in Cognero, and
PowerPoint slides can be found there.
Cengage Learning’s people are the best! Special thanks to John Sarantakis (Content
Developer), Mike Roche (Senior Product Manager), Heather Mooney (Product Manager)
Jenny Ziegler (Senior Content Project Manager), Diane Garrity (Intellectual Property Analyst), Sarah Shainwald (Intellectual Property Project Manager) Laura Cheu (Copyeditor),
Ezhilsolai Periasamy (Project Manager), Manjula Devi Subramanian (Text Researcher),
Abdul Khader (Image Reasearcher), and Pushpa V. Giri (Proofreader).
As always, special thanks to the Cengage sales force. I will forever be grateful for your
notes of encouragement as we began this project. I hope you like Marketing Management 5.
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
is the Ingram Professor of Marketing at the Owen
Graduate School of Management, Vanderbilt University (since 2007). She has
been Senior Associate Dean at Vanderbilt (2008-2010), and a professor of marketing
at Kellogg (Northwestern University, 1987-2004), Arizona (2001-2002), and Wharton
(Pennsylvania, 2004 to 2007). She received her M.S. in Statistics, and M.A. and Ph.D.
in Quantitative Psychology from the University of Illinois at Urbana-Champaign. Her
research focuses on modeling social networks and geeky high-dimensional analyses. She
has published in Journal of Marketing, Journal of Marketing Research, Harvard Business
Review, Journal of Consumer Psychology, International Journal of Research in Marketing,
Marketing Science, Journal of Service Research, Psychometrika, Psychological Bulletin, and Social
Networks. Iacobucci teaches Marketing Management and Marketing Models to Executives,
MBA and undergraduate students and multivariate statistics and methodological topics to
Ph.D. students. She has been editor of both Journal of Consumer Research and Journal of
Consumer Psychology. She edited Kellogg on Marketing, she is author of Mediation Analysis,
and co-author on Gilbert Churchill’s leading text, Marketing Research.
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Managerial Checklist
What are the three phases of the buying process?
What kinds of purchases are there?
How do consumers make purchase decisions—and how can marketers use this information?
Ask the average person, “What is marketing?” and they might say:
• “Marketing is sales and advertising.”
• “Marketers make people buy stuff they don’t need and can’t afford.”
• “Marketers are the people who call you while you’re trying to eat dinner.”
Unfortunately those comments are probably all deserved. The marketing profession, like
any other, has its issues. But in this book we’ll take a more enlightened view.
This chapter begins with an overview of marketing concepts and terms. We’ll see the
importance of marketing in today’s corporation. We’ll then present the Marketing Framework that structures the book and gives you a systematic way to think about marketing, and
we’ll define all the terms in the framework: 5Cs, STP, and 4Ps.
Marketing is defined as an exchange between a firm and its customers.1 Figure 1.1 shows
the customer wants something from the firm, and the firm wants something from the
customer. Marketers try to figure out what customers want and how to provide it profitably.
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Part 1 Marketing Strategy
Ideally, this can be a nice, symbiotic relationship. Customers don’t mind paying for their
purchases—and sometimes they pay a lot—if they really want what they’re about to buy.
Companies like taking in profits, of course, but great companies really do care about their
customers. If we’re lucky, the exchange depicted in Figure 1.1 is an ongoing exchange between the customer and the company, strengthening the tie
between them.
As a lifelong customer, you are already somewhat familiar with marketing from the consumer side. But on the job,
you’ll need to understand marketing from the firm’s point
of view. Throughout this book, you’ll see both perspectives.
In particular, you’ll see all the issues that marketers deal
with as they try to deliver something of value to their customers, while trying to derive value from them.
Marketing oversees the
customer-brand exchange.
Figure 1.1
Marketing is
an Exchange
seeks benefits
seeks profits
expects to pay
offers benefits
1-2a Marketing is Everywhere
Figure 1.2 illustrates that you can market just about anything. Marketing managers sell
simple, tangible goods such as soap or shampoo, as well as high-end luxury goods such as
Chanel handbags. Other marketing managers work in services, such as haircuts, airlines,
hotels, or department stores. Marketers oversee experiences like theme parks or events like
theater and concerts. Marketers help entertainers, athletes, politicians, and other celebrities
with their images in their respective “marketplaces” (fans, agents, intelligentsia, opinion).
Tourist bureaus have marketers who advertise the selling points of their city’s or country’s
unique features. Information providers use marketing because they want customers to think
they’re the best (and thereby maximize their ad revenue). Marketers at nonprofits and government agencies work on “causes” (e.g., encouraging organ donation or drinking responsibly). Industries market themselves (think of the beef or milk ads). Naturally, companies
use marketing for their brands and themselves. And you can market yourself, e.g., to a job
interviewer or potential amour. These goals may look different, but marketing can be used
beneficially in all these situations.
Marketers have evolved beyond being merely product or production focused, where the
company mind-set is, “Let’s build a better mouse trap.” We know that approach doesn’t
work. There’s no point in just cranking out better gadgets unless the customers want them
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Jason Lee/Alamy Stock Photo
Justin Sullivan/Getty Images
Craig Melville/Shutterstock.
Shots Studio/Shutterstock.com
Credit: Source:
National Pork Board
iStockPhoto.com/Günay Mutlu
Kohlhuber Media Art/
ventdusud /Shutterstock.com
Chapter 1 Why is Marketing Management Important?
What Can We
Figure 1.2
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Part 1 Marketing Strategy
because the gadgets won’t sell. However, there are still pockets of marketing
naïveté in a number of industries. For example, some museums believe they
don’t need marketing. They think people should appreciate their exhibits, and, if
they don’t, it’s because the public is ignorant. Perhaps the general public is inMarketing can seem intuitive
deed relatively unsophisticated culturally, but marketing can be used to educate
because we’re all consumers.
the public.
But we’re not always the target
We’re also more advanced than the old sales-oriented days when the action
customer for the brands we’re
in the marketplace was, “Let’s make a deal.” This mentality still exists in placbuilding. As a Brand Manager or
es like drug companies, which push their sales forces to impress physicians. But
CEO, don’t forget to put yourself
in the shoes of your customers
usually sales dynamics occur where the product is perceived to be a commodity.
every once in a while, to see
In contrast, marketers should be good at communicating product distinctions.
your brand from their
As much as direct-to-consumer pharma ads annoy physicians, they attest to the
perspective. When you do, you’ll
power of marketing. The ads result in patients asking their doctors for particular
understand their wants and
brand names.
needs better. That alone will
These days we live in a truly customer-oriented and customer-empowered
give you an advantage over your
marketing world. Marketing is even said to be evidence of evolved markets—that
an industry or country has moved beyond production and sales and seeks true relationships with its customers. Marketers seek to identify their customers’ needs
and wants, and they try to formulate attractive solutions. Marketing can make customers
happier, thereby making companies more profitable. Throughout the book, you’ll see how.
1-3a Marketing and Customer Satisfaction is
Everyone’s Responsibility
Many management gurus believe that marketing has succeeded so well that it isn’t just a
“function” in an organization anymore. Marketing is more of a philosophy—a way to think
about business. The marketing orientation should permeate the organization.
• Accounting and finance need to acknowledge the importance of marketing. Why?
Because their CEOs do. Thinking about customers is unimportant only if you’re a
monopoly, and even then, you won’t be one for long.
• Salespeople understand marketing immediately. They’re the front line, interfacing
with the customer. They want to push their firm’s stuff, but they’re thrilled when
their company actually makes stuff that customers want. Then their jobs are so
much easier.
• R&D people tend to understand the marketing spirit, too. They’re hired because
they’re technically sophisticated, but they get jazzed when their inventions become
popular. It doesn’t take much marketing research to test concepts or prototypes and
to veer an R&D path one way or another.
One of the factors stressing marketers these days is the pressure to show results. It’s fair
to hold any part of the corporation accountable, and results may be measured for a number
of marketing activities. The Chief Financial Officer (CFO) who wants to see that a recent
coupon promotion lifted sales can get reasonably good estimates from the Chief Marketing
Officer (CMO) about effectiveness, e.g., the percentage sales increase attributable to the
coupon introduction. The Chief Operating Officer (COO) can also get good estimates of
whether a recent direct mail campaign to target customers has been effective in encouraging frequent buyers to go directly to the Web for purchasing.
However, it’s important not to go overboard in the effort to quantify. For example, how
does one assess the value of a good segmentation study? If segments are poorly defined, any
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Chapter 1 Why is Marketing Management Important?
TENGKU BAHAR/Staff/AFP/Getty Images
speaks to
wherever they
subsequent marketing efforts would be completely off, so a good segmentation scheme is
invaluable. Advertising is also a little tricky. Non-marketers have the misconception that
advertising is supposed to bump up sales. It can, and that bump is easily measured. But
really great advertising isn’t intended for a short-term effect on sales. Great advertising
is intended to enhance brand image, a goal that is relatively longer term and thus more
difficult to measure.
In addition to quantifying the effectiveness of marketing programs, marketers are
motivated to translate their efforts into dollars for another reason: to have a “seat at the
table.” Marketers want to make sure that the CMO carries as much weight in the firm
as the CEO or CFO or COO. They all speak finance, so the marketer is frequently motivated to translate progress into financial terms. Fortunately, technology and data are
increasingly enabling more opportunities for the marketer to make such assessments.
For example, a good customer relationship management (CRM) program allows marketers to run a field study to assess the impact of a new promotion, and tracking Web
data allows marketers to determine the product combinations that are most attractive
to customers.
Figure 1.3 provides the marketing management framework. Marketing is captured by
the 5Cs, STP, and the 4Ps. The 5Cs are customer, company, context, collaborators, and
competitors. The 5Cs force a businessperson to systematically frame the general analysis
of the entire business situation. Figure 1.1 shows that the customer and company are the
central players in the marketing exchange. The context includes the backdrop of macroenvironmental factors: How is our economy and that of our suppliers doing? What legal
constraints do we face, and are these changing? What cultural differences do our global
segments manifest? The collaborators and competitors are the companies and people we work
with vs. those we compete against (though drawing the line is sometimes difficult in today’s interconnected world).
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Part 1 Marketing Strategy
Figure 1.3
5Cs, STP, 4Ps
STP stands for segmentation, targeting, and positioning. A company or a brand may
want to be all things to all people, but most are not. It’s best to identify groups, or segments,
of customers who share similar needs and wants. Once we understand the different segments’ preferences, we’re in a position to identify the segment we should target with our
marketing efforts. We then begin to develop a relationship with that target segment by
positioning our product to them in the marketplace, via the 4Ps.
The 4Ps are product, price, promotion, and place. A marketer is responsible for creating
a product (goods or services) that customers need or want, for setting the appropriate price
for the product, for promoting the product via advertising and sales promotions to help
customers understand the product’s benefits and value, and finally for making the product
available for purchase in easily accessed places.2
Marketing management oversees the 5Cs, STP, and 4Ps with the goal of enhancing
the marketing exchange (of goods, services, payment, ideas and information, etc.) between
a customer base and a firm. It all sounds easy! Group your customers, and figure out which
group to target. Then create a position in the marketplace by means of the features of the
product, its price, communications and promotions, and distribution choices. Ah, but
don’t dismiss marketing as only common sense; after all, consider how few companies do
it well!
If marketing is an exchange, then, just like an interaction between two people, a company has its best chance at keeping its customers happy if it is in close communication with
them. The company that does its marketing research and really listens to its customers will
be able to deliver goods and services that delight those customers. The best marketers put
themselves in the place of their customers: What are they like? What do they want? How
can we play a role in their lives? In this book, we’ll elaborate on these themes. If you get
overloaded while reading this book, you can step back and remember this: You’ll always be
a step ahead of your competition if you simply think about your customers! All marketing
strategy derives from that.
To elaborate on marketing strategy and develop a particular marketing plan, start with a
situation analysis, and sketch answers to the following questions:
• Customers: Who are they? What are they like? Do we want to draw different
• Company: What are our strengths and weaknesses? What customer benefits can we
• Context: What is happening in our industry that might reshape our future business?
• Collaborators: Can we address our customers’ needs while strengthening our
business-to-business (B2B) partnerships?
• Competitors: Who are the competitors we must consider? What are their likely
actions and reactions?
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Chapter 1 Why is Marketing Management Important?
With that background analysis, proceed to strategic marketing planning via STP:
• Segmentation: Customers aren’t all the same; find out their various preferences,
needs, and resources.
• Targeting: Pursue the group of customers that makes the most sense for our company.
• Positioning: Communicate our product’s benefits clearly to the intended target
Similarly, marketing tactics to execute the intended positioning derive from a customer
• Product: Will customers want what our company is prepared to produce?
• Price: Will customers pay what we’d like to charge?
• Place: Where and how will customers purchase our market offering?
• Promotion: What can we tell our customers or do for them to entice them to
That doesn’t sound too difficult, right? But customers’
preferences change. And the competition is also dynamic;
who they are changes as well as what they offer your customers. Factors that are out of your control change as well.
For example, as marketing manager or CMO, you won’t
have control over whether your company is merged with
another whose image seems inconsistent with your brand,
but you’ll have to deal with it. Further, the legal environment in this country is different from that in another’s, and
each is always in flux. Many such contingencies call for modifying marketing plans. So the
inputs keep changing. (But if marketing weren’t challenging, it wouldn’t be as fun!)
As Figure 1.3 indicates, if we keep an ongoing read on the 5Cs, it will make us better
informed as we approach the STP task. These background indicators will apprise us of which
qualities of a customer base are likely to be relevant as we identify segments. The P of positioning in STP is done via all 4Ps. Thus the 5Cs, STP, and 4Ps operate interdependently.
Optimal business solutions (in real life or in class case discussions) should reflect a working
knowledge of all of these elements, and their connections; as a contextual factor changes,
what is the predicted impact on distribution channels? As a collaborator shifts its demands,
what will that do to our pricing structure? As our company sells off a nonperforming function, what impact might that have on our positioning and customer satisfaction? The plot
Good marketing makes any
company better!
1-4a Book Layout
Marketing is involved in designing products that customers will enjoy, pricing them appropriately, making them available for purchase at easy points of access in the marketplace,
and advertising the products’ benefits to customers. Throughout this book, we’ll assume
that we’re talking about customers all over the world. This internationalism is already true
for most big firms, and it will be true even for small entrepreneurs via the Internet or once
they succeed and grow. We’ll also assume the omnipresence of the Internet and always
consider it a factor in data intake or in customer channels of interactions with the company.
In addition to aiming for global citizenship and recognizing the Internet as essential as air,
we will offer fresh, fun examples throughout the book, such as Vegas and Ferrari, instead
of laundry detergent.
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Part 1 Marketing Strategy
Ethics: Have a Heart
It is a good thought exercise to consider any dilemma from 2 perspectives:
1) Outcomes
a) An outcome orientation is called consequentialism or teleological ethics (fancy words to impress an interviewer).
b) This perspective believes that “the end justifies the means.”
c) As a manager, you’d ask, “What should I do to produce the most good (or the least harm)?”
2) Processes
a) An orientation toward fair process is called deontological ethics.
b) The idea is that the process must be fair, regardless of the outcome that might results.
c) Managers suggest an action as the right one to take according to a principle, such as human rights (e.g.,
fair pay) or environmental sustenance (e.g., green packaging).
Throughout the book, we’ll encounter several classes of ethical issues: don’t price discriminate, don’t target
uninformed groups, don’t advertise deceptively, etc.
If you want an additional challenge, assess a scenario from multiple viewpoints. For example, deontologically, we might say, “We never price discriminate!”Teleologically, we might say, “To maximize value to our
shareholders, we should charge different prices to different customer segments.” See? The plot thickens!
This book will train you to think like a marketer. You’ll see that great marketing is not a
soft discipline, it’s not an art, nor is it simply intuitive. Great marketing is based on sound,
logical—economic and psychological—laws of human and organizational behavior. You will
learn the scientific and rigorous way to think about marketing issues, so that, in the future,
when your situation looks nothing like the ones you’ve talked about in school, you’ll know
how to proceed in finding your optimal solution. (Hint: Keep the framework close at hand!)
1-4b Learning from the Marketing Framework
There are two key features to how the material is organized in this book. First, MBA
and executive students learning marketing management typically want to see a framework
depicting how all the marketing pieces come together to form the whole picture. To give
you the big picture as well as to provide you with the in-depth details, Figure 1.3 kicks
off every chapter with a Managerial Checklist of questions and issues that the reader can
expect to understand better at the close of the chapter. Those questions are revisited at the
end of the chapter in a list format called Managerial Recap. The chapters are mapped onto
the framework as depicted in Figure 1.4.
You’ll become very familiar with this marketing management framework. You will see
the 5Cs, STP, and 4Ps over and over again, so you’ll pick them up nearly by osmosis.
We want to make great marketing part of your DNA. You’ll know that any marketing
strategy and planning must begin with the 5Cs assessment and then a strategic look at STP,
before turning to the strategies and tactics of the 4Ps.
When you’re . . .
• Working on a case for class,
• Or trying to answer an interviewer intelligently,
• Or trying to impress your boss at work,
• Or trying to launch your own business.
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Chapter 1 Why is Marketing Management Important?
Ch. 3
Chs.1, 2,14
Ch. 9
Chs.15, 16
Chs. 6,7,8
Ch. 4
Ch. 5
You’ll see the framework in your head. It will remind you of everything that needs to be
addressed and how all the pieces fit together. The framework will make you process these
marketing questions very thoughtfully and systematically.
Figure 1.4
Mapped to
1-4c The Flow in Each Chapter: What? Why? How?
The presentation scheme we’ve adopted in this book is that each chapter covers the What,
Why, and How. Specifically,
• What is the topic in this chapter?
• Why does it matter?
• How do I do this? Show me what to do so that I can be successful!
Between the marketing framework and the practical flow of the chapters, you’ll gain
a strong, clear knowledge of marketing both at the strategic, conceptual level and at the
tactical, hands-on level. Both levels of insight will help ensure your success throughout
your career, whether you’re a marketer, a brand manager, an advertising exec, a CMO, or a
well-informed financial analyst, CEO, or world guru.
Marketing can make customers happier and therefore companies more profitable. Marketing will enhance your career, and marketing can
make the world a better place. Honest!
• Marketing is about trying to find out what customers would like, providing it to them, and doing so profitably.
• Ideally, marketing facilitates a relationship between customers and a company.
• Just about anything can be marketed.
• The overarching marketing management framework—5Cs, STP, 4Ps—will structure the book and help you to think methodically
about the big picture of marketing.
• Don’t forget! Stay focused on your customer! If you can remain customer-centric, you’ll be five steps ahead of the competition.
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Part 1 Marketing Strategy
Chapter Outline in Key Terms and Concepts
1. Defining marketing
2. Marketing is an exchange relationship
a. Marketing is everywhere
3. Why is marketing management important?
a. Marketing and customer satisfaction is everyone’s
4. The marketing framework: 5Cs, STP, and the 4Ps
a. Book layout
b. Learning from the marketing framework
c. The flow in each chapter: What? Why? How?
5. Managerial recap
Chapter Discussion Questions
1. Before reading this chapter or beginning class,
what did you expect marketing to be? Ask a family
member, classmate, or coworker what they think
marketing is. See whether you can persuade them
that marketing enhances a mutually beneficial
exchange between a customer and a company.
2. What are examples of brands and companies you
like? Why do you think you like them? What is a
brand you can’t stand? Why not?
3. Think about a recent time when you bought something or tried to do so and you were treated poorly
as a customer. What was the essential problem?
If you ran the company, what would you do to
ensure happier and more loyal customers?
4. List three brands you’re loyal to. List three things
you tend to buy on sale. How are the product
categories represented on these two lists different
for you?
5. What social problem do you think is the world’s
biggest? Wars? Global warming? Resource imbalances? How could you start to solve a big social
problem through marketing?
Video Exercise: Southwest Airlines (13:55)
The Southwest Airlines brand is that of a low-fare carrier with the highest level of customer
service—and with fun added into the flying experience. Southwest Airlines strives to provide
its customers with a total product experience that includes check-in, boarding, flying, and baggage claim experiences. In providing this total product experience, the airline strives to fully meet
the needs, wants, and desires of its customers. Southwest regularly surveys its customers regarding all components of the product experience in order to foster continuous improvement. Southwest also conducts extensive quantitative and qualitative research to better understand customers’ needs, as well as to explore possible
product experiences that the company might offer in the future. Southwest operates on the premise that having
new products is what makes a company successful over time. Thus, while maintaining its commitment to low
fares, excellent customer service, and fun, Southwest seeks to identify product experiences that different market
segments would like to have. The company then builds those experiences into the ticket price structure rather
than charging customers with numerous add-ons. Taking this approach enables Southwest Airlines to better
tailor its total product experience to the wants, needs, and desires of its different market segments.
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Chapter 1 Why is Marketing Management Important?
Video Discussion Questions
1. Describe the marketing exchange relationship between Southwest Airlines and its customers.
2. Describe the 5Cs of the marketing framework as they pertain to Southwest Airlines.
3. How does Southwest Airlines’ approach to providing a total product experience capture the marketing framework
elements of STP (segmentation, targeting, and positioning) and the 4Ps (product, price, place, and promotion)?
How to Design an Attractive Wearable
A large electronics manufacturer wishes to issue a new “wearable.” The company wants to design it such that it
will make money with the purchase of the unit, of course, but that it will also make money as its customers use
it. In addition, the company would like to capture data about the customers’ profiles, in terms of their activities,
spending patterns, etc.
Wearables vary in many ways, and initially, the brand management team proposed to issue a design that looked
like a small smartphone, to be worn on the user’s wrist. Given the still relative novelty of such units, they thought
they’d charge on the high end, about $100, maybe even instituting a small annual fee. To get supplementary data,
they thought they’d issue periodic surveys, about once a quarter, via the unit or via e-mail.
The youngest marketer, newest to the team asked, “Well, that’s good for us, but how is it attractive to our customers? Why would they want this unit—when there are plenty of others out there?” One old manager shot out
a withering look. Well, that’ll teach the young person to speak up in the meeting. But the senior-most manager
spoke up and said, “Well, you’re right, we’re only looking at it from our point of view. What would this wearable look
like that our customers would want—and that can be profitable to us?”
What would help these marketers? What steps could they take to design a wearable that would be both optimally appealing to its customers (and perhaps attract new customers), as well as optimally profitable?
A wearable could vary on many parameters, such as whether it would be worn on the wrist like a watch, or
as an earbud like music headphones or smartphone speakers, or as an add-on unit to glasses. Early prototypes
suggested that while earbuds or eyeglass designs were good at capturing GPS, they weren’t as versatile in supporting multiple apps, and they weren’t as precise as exercise (step) counters (for example, the head didn’t move
as distinctly as the user’s wrist while walking). That is what led the brand managers to ask the designers to create
a wrist-wearable.
Even so, there were many possibilities: Should the unit look like a small smartphone or like a nice classic wristwatch in design? Should the apps be accessed by touch only or should the apps also be voice-activated? Should
there be an annual licensing fee? Should they allow co-branding with affiliations (e.g., a professional sports team
or one’s college alma mater)? Which features should be recommended as the unit is designed?
This electronics firm has little experience in marketing research as well, so the older managers were uncertain
as to how to proceed. One mentioned a focus group, another suggested an ethnography, and a third mentioned
surveys. The information that is sought, as well as the method by which the information would be obtained, are
both to be determined. Naturally, the company wants to roll out the new wearable as soon as possible, so while
the research project could be well-funded, they would face time pressure and would have to be judicious in their
choice of research avenues.
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Part 1 Marketing Strategy
Case Discussion Questions
1. Are the old managers right? A lot of other wearables focus on counting steps or enabling apps. Is that what
this group should design, so as to be seen as a legitimate competitor and not confuse customers, or should
they design something different to be seen as innovative?
2. Are the people in the room a good proxy for their customers? Are the young managers a better proxy than
the older managers?
3. What additional information would be helpful to strengthen a recommendation?
4. How would that information best be obtained?
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Managerial Checklist
What are the three phases of the buying process?
What kinds of purchases are there?
How do consumers make purchase decisions—and how can marketers use this information?
There is some subjectivity in marketing (and in business generally), but there are also many
known, reliable patterns that comprise the science of consumer behavior. Most of this
chapter talks about these effects and how managers can use this knowledge wisely. To prepare, we first consider the three major phases that consumers go through when making any
purchase. Next, we’ll see the different kinds of purchases that consumers make. Then we’ll
drill down and see what makes consumers tick.
Customers go through predictable stages in making a purchase. In the pre-purchase phase, the
customer identifies that something is lacking—there is a need or a desire to be satisfied. Critics sometimes say that marketers create desires in people that they didn’t already have. There
is some truth in that (e.g., “Is your breath fresh?” “Do you own the coolest running shoes?”),
but even without marketers, people really do need and want all kinds of things. Then the hunt
begins. Buyers search for information about products and brands that may be suitable.
For example, a newly minted MBA student has multiple wants: new clothes, a car, a
condo and furnishings, a list of restaurants in a new city to take clients or visiting friends,
a new dentist, a drycleaner, etc. Such consumers might search for alternative solutions
by going online or asking friends. They might evaluate alternatives by reading Consumer
Reports or going to BizRate.com. By comparison, a newly promoted business executive
might want a corporate jet. Possible vendors would need to be investigated, and alternatives
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Part 1 Marketing Strategy
could be evaluated by soliciting and entertaining bids. While the objects and details of
these two purchases may look different, they both entail a variety of pre-purchase activities.
During the purchase phase itself, the consumer is creating a consideration set that includes
all the brands that are deemed potential candidates for purchase and that excludes the brands
that have been rejected.1 The MBA student may limit the car search to include only hybrids.
The condos considered would be only those within a certain price range. The restaurants selected might be only those with menus that can be previewed online. Analogous considerations
factor into the executive’s jet quandary: What attributes are important? What attributes must I
have or not have? What attributes don’t I care about and therefore will not pay high prices for?
The final stage is the customer evaluation post-purchase. Buyers assess their purchase
and the purchase process, posing such questions as: Am I satisfied as a customer? Will I buy
this brand again? Will I tell my friends what a great brand I’ve found? Figure 2.1 shows
the complete process, from seeing that there is a need, to choosing and buying something
expected to be a solution to the need, and finally, to assessing one’s satisfaction with that
purchase. For example, imagine running to an interview and the strap on your messenger
bag breaks. You’re able to grasp the bag before it hits the ground and possibly shakes up
your tablet. However, obviously you realize you need a new messenger bag. You go online
and order a new bag. When it arrives, you like the looks, the protective inner sleeve for your
tablet, it has a few new features you like, and you had thought the price was pretty reasonable. You’re pleased that the bag achieved its mission.
Figure 2.1
The Purchase
Identify need or want
Search possible solutions
Build consideration set
Narrow “consideration set”
Decide on retail channel
Customer satisfaction
Likelihood to repeat
Generate word of mouth
B2B Buying Center Roles
In B2B, big, expensive, purchases can be complicated because it’s not just one person making the
decision. Each purchase involves a half dozen or so roles in a buying center:
The Initiator: An administrative assistant who notices that one of the printers in the office is
frequently breaking down.
The User: Every staff member who tries to use that printer.
The Influencer: The IT guy who says, “Well, Brand X is cheaper, but Brand Y is cooler.”
The Buyer: The head administrative person whose responsibilities are to facilitate supplies but
also to answer to . . .
The Gatekeeper: A conservative accountant type whose job it is to tighten purse strings.
A decision to buy a new printer is complicated by the fact that each of these roles seeks slightly different
attributes. Some care only about price, others want great features, and still others may appreciate
wiggle room in negotiating delivery dates or follow-up customer service.
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Chapter 2 Customer Behavior
The buying process is consistent whether the buyer is a consumer or a business. Consumer buying is easy to relate to. It involves people buying something for themselves or
their households, and we are those people. A business customer is an agent buying something on behalf of an organization. The agent can be an administrative assistant deciding
to use UPS or FedEx, or the agent can be a group of people, representing different aspects
of the organization (accounting, operations, etc.), comprising a collective buying center.
All purchases, business-to-consumer (B2C) or business-to-business (B2B), go through the
three stages, but the amount of time spent in any stage depends in part on what is being
bought. For example, sometimes the pre-purchase phase is extensive, and sometimes it is
very quick. So let’s consider some classes of purchases.2
Marketers distinguish between types of purchases. For consumers, a convenience item is a
fairly mindless purchase of “staples” (standard, frequently-consumed goods, such as bread
or gas) or an impulse purchase (such as candy or magazines that are available near grocery
checkouts). There are also shopping purchases, which require some thought or planning, as
when using OpenTable to find a restaurant before heading out of town. Finally, there are
specialty purchases such as a car or new laptop. These purchases are occasional, they are often more expensive than other types of purchases, and as a result they require more thought.
For B2B customers, the terms are different from consumer buying, but the ideas are
analogous. A purchase can be a straight rebuy, such as when the office copier needs toner
and the office manager buys the usual brand. Another purchase may be a modified rebuy,
such as when the copier lease comes up and there is a desire to consider a different vendor.
Last, there is the new buy. For example, perhaps the company is considering buying teleconferencing equipment for the first time, and it is not yet well-understood what attributes
to consider.
As Figure 2.2 indicates, what differentiates these purchases is not the product itself. The
distinction is more in the minds of the customers and in their involvement with the brand
and product category. For example, the purchase of the same product—an energy drink—
can be convenience when shoppers mindlessly put their usual brand in their grocery cart; it
can be a shopping purchase when customers see a new offering that they consider trying;
and it can be a specialty purchase when customers see an expensive brand that promises
antioxidants, which they choose to read up on before making a purchase.
Customer Involvement
Figure 2.2
Straight rebuy
Modified rebuy
New buy
Needs some
Needs research
and serious thought
“Add to Cart”
or “Click to buy”
Types of
Purchases in
B2C & B2B Is a
Matter of
Consumers purchase convenience items—or business customers a straight rebuy—in
a fairly mindless manner. It’s the proverbial no-brainer. Buyers won’t spend much time
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Part 1 Marketing Strategy
thinking about brands or attributes because they just don’t care enough to do so. The challenge for marketers is to break that thought pattern (not that it’s very thoughtful!)—to
shake up the consumer with news of their brand and break through that white noise clutter.
For items that customers care more about, they’ll expend some time and effort prior to
the purchase, seeking out more information to be a smart shopper and to obtain good value.
For even higher customer involvement, as in specialty purchases or new buys, the customers
are more engaged. A great deal of effort is put into researching the best brands, quality, and
price. The marketer’s challenge is to convince the buyer that their brand is the best choice.
Types of B2B Customers
B2B customers are often classified according to what they sell:
Installations (e.g., equipment for new factories)
Accessories (e.g., computers to help run the office)
Raw materials (e.g., lumber, plastics)
Components (processed items that are components in a later finished product)
Business services (e.g., insurance, legal, consulting)
Ultimately, the most important classification is how much the buying business cares about the
purchase. Then we’ll know whether they care primarily about quality or price.
The category that a brand and target segment is in will suggest the appropriate
marketing activities that we’ll select from in the chapters that follow. For example, for
lower-involvement purchases, we can expect customers to be somewhat more price sensitive.
They’ll pay more when they buy things they really like or want (e.g., a cool laptop) or that
they expect to be of high quality (e.g., a great restaurant) or that is important to them (e.g.,
health care for their parents).
Consider the implications for loyalty programs. The marketer can create such programs
regardless of the level of customer engagement, but they’d take different forms, e.g., price
discounts for low-involvement purchases vs. brand communities and events for high-involvement products and brands. Customer satisfaction can be fine for low-involvement
purchases, but customers won’t generate word of mouth; they don’t care enough. In contrast,
for high-involvement purchases, strong followers and satisfied customers can be zealots and
brand ambassadors.
Consider the implications for channels of distribution. Low-involvement products need
to be widely available so that the customer can pick them up without thinking. Highinvolvement products will be sought out by more customer
Finally, consider the implications for promotions. For
low-involvement products, the marketer just hopes to cut
through the noise and clutter—getting customers’ attention
only long enough to register the brand name in the mind of
the customer for sheer familiarity. With high-involvement
purchases, customers are hungry for information, and marketers can provide much more.
Marketing satisfies (and creates)
consumers’ needs and wants.
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C t litter/Pet pprod
Pet ffood//Ca
Fabric softener
Air fresheners
© Richard B. Levine/Newscom
Cold beverages
Cold wine
Kids’ toys
Laundryy soapp
p ucts
g s Cleaningg
p nge
p ucts Spo
Plastic baggs
Baby prod
p Aluminum foil
/ ups
p es/C
Papper plat
g tbulbs School
per towels Ligh
Toilet ppapper Pap mpo
Bathroom pproducts
p o
Hand soapp Sha
p ste
g paper
C s & Wrappin
Soup & Salad bar
Soft drinks
In grocery stores,
consumers form
sets (and then
choose brands)
as a function of
brand recognition
(brand recall
helps when searching online). Retailers also
place specific brands where they can be seen
by specific customers, such as brands aimed at
children shelved at eye level to toddlers seated
in shopping carts.
Boxed meals
g tables
Canned vege
Canned fruit
Ethnic foods
Instant ppotatoes
Frozen juice
Checkout stands
Rock salt
Extra large dog food
items are close
(chips and dip).
g 2013
© Cengage Learnin
Layout is designed to
facilitate the shopper.
Upon entering, the shopper
has a choice of selecting
a traditional shopping
cart, a smaller basket, or
shopping carts designed
for shoppers with children.
For physically challenged
shoppers, motorized
shopping carts are often
© Karlheinz Schindler/dpa/
Landov Media
© David R. Frazier/DanitaDelimont.
com ”Danita Delimont Photography”/
Packaged salads
Powered drinks
Frozen food
g nuts
Snacks & Chipps
Canned nuts
O eal
p es
Frozen food
g ake mixes
Pie fillings/C
y upp
Pancake mix//Syr
Fruit snacks
PB & J
Frozen food
Canned fish
Canned meats
Choc chipps/Nuts
Cut flowers
Frozen fish
Cold beer
Baked goods
Ice cream
Frozen meat
Bottled water
g d meat & fish
The dairy section contains milk, which
is the most commonly purchased item.
Because of this, it is located in an area
of the store that requires the customer
to travel through the store, increasing
the likelihood of impulse purchases.
© Jeff Greenberg / Alamy Limited
© Ron Buskirk/Alamy Limited
In the produce
section similar items
are close together
(for example, fruits
and vegetables).
Bulk cheese
Prepared meat
© Richard B. Levine/Newscom
Anatomy of a Grocery Store
Checkout counters provide the store
the opportunity to capture customer
information through the use of loyalty cards,
and bar codes can provide a wealth of data
that can be mined to provide insights into
customer purchasing decisions.
The end of each aisle and the area at the checkout lanes are likely
to hold high-profit items or grouped items (such as marshmallows,
chocolate bars, and graham crackers for s’mores) designed to inspire
impulse buys. Sometimes those aisle-ends are used to promote sale
items. “People are 30% more likely to buy items on the end of the aisle
versus in the middle of the aisle—often because we think what’s at
the end is a better deal,” says Brian Wansink of Cornell University and
author of Mindless Eating.
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Part 1 Marketing Strategy
So how do customers learn about brands and make choices? In the rest of the chapter,
we’ll look at how customers think and how marketing can have an impact on their decisions and choices.
Consumers are human beings and, as such, are sometimes simple and predictable, but often
rather complex. In this section, we’ll delve into consumer psychology, examining sensation
and perception, learning and memory, motivation, attitudes, and decision making.
2-3a Sensation and Perception
When marketers formulate positioning statements or produce perceptual maps, they
presuppose a complicated system through which consumers sense and perceive their
environment. An enormous wave of sensory stimulation washes over and through us every
day. We are selective in our attention, choosing to consider certain stimuli and effectively
screening out others. For example, if we are in the market for a car, we’ll watch TV ads for
cars. If we’re not in the market for a car, we barely “see” the TV ads for cars. We know that
consumer involvement creates a state of heightened motivation to learn more about a purchase or to pay attention to advertisement. The human organism is very efficient at adapting
to the multitude of stimuli, helping us focus and block out what we deem to be irrelevant.
Let’s consider how marketers can use information through each of the senses. Visual
stimuli are obviously important to marketers. Ads show products, product design, print
information, imagery visualization to facilitate desirable lifestyles, etc. Even simple colors
imbue brand associations and can be integral to some brand identities:
• Toothpaste packaging is dominated by whites and blues, implying freshness, cleanliness, water, etc.
• Tiffany’s aqua blue boxes have saved many a marriage.
• Dell’s blue is deeper and darker than Tiffany’s, and also trademarked.
Marketers frequently use color to convey information. There are color wheels to guide
the brand manager considering a new logo or packaging. For example, blue seems to connote dependability and is used widely (American Express, Ford, Intel). Red tends to imply
passion, as in the excitement of breaking news (CNN) or sporting events (ESPN). Green
often implies environmental sustainability (although judge for yourself whether that applies to the green in BP, or whether it’s relevant to H&R Block).
The symbolism of colors also varies across cultures, so it is important for a brand manager
responsible for a global multinational brand to test the color’s meaning in its major markets. In the U.S., brides wear white because it symbolizes purity (like newly fallen snow).
In India, red conveys purity. In the U.S., red conveys danger and passion; a bride in red
would be . . . unusual. In Western civilizations, purple has traditionally denoted royalty; but
in Thailand, it’s the color of mourning. Mourners in Egypt wear yellow, yet yellow implies
courage in Japan and the opposite, cowardice, in the U.S. There are a zillion colors and many
cultures. Imagine the challenge for a brand manager in selecting packaging or logo designs
for global multinational brands.
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Chapter 2 Customer Behavior
Brand Colors
Apple, Wikipedia, Honda
Hertz, Shell, National Geographic
Crush, Fanta, Harley-Davidson
Coca-Cola, CNN, Kellogg’s, Target
Hallmark, Yahoo
AT&T, Dell, HP, IBM, Tiffany’s
BP, John Deere, Starbucks
M&M’s, UPS
Channel, Gucci, Prada
Hearing is also important to marketers. Research shows that when retailers play background music that is energetic, with a quick tempo, customers spend more. There are other
aural brand associations:
• iPhone vs. Samsung vs. T-Mobile vs. AT&T ringtones
• United Airlines’ frequent use of Gershwin’s Rhapsody in Blue in their ads
• Fancy Feast television commercials feature a high-pitched “ding, ding” (a fork
clinking against fine crystal) implying that the food is special, and therefore worth
its higher price.
Car and motorcycle enthusiasts know that manufacturers are meticulous in delivering distinctive sounds, and, as a result, consumers have come to learn the sounds, expect
them, and pay for them. A high-end Honda motorcycle runs about mid-$20k, whereas a
Harley-Davidson runs in the high $30k. Obviously, the sound is not the only difference
between the two bikes, but if the Harley didn’t sound like a Harley, a biker won’t fork over
the extra $15k. Similarly, a Porsche 911 turbo at $150k is no clunker, but Ferrari’s engineers create a symphony of car sounds and charge $250k. Again, even acknowledging other
differences, sound is nevertheless a part of the purchase decision.
A third sense is smell. Think of how many times you’ve walked through a shopping mall
and felt carried away on the wafting scent of a Cinnabon store or an Auntie Anne’s pretzel
store in the food court. Strong perfume scents are a large part of the Bath & Body Works
or The Body Shop stores’ ambience. Scent can also be alluded to, drawing on the consumer’s
memory, as when Folger’s coffee commercials depict a person being awakened by the aroma
of brewing coffee.
A fourth sense is taste. A classic marketing exercise is to run blind taste tests in order to
declare that one’s own product is superior to the market leader, or that a “me-too” brand is
liked as well as a market leader. These tests can be dramatic and compelling. They are also
interesting to marketers because they clearly distinguish the power of the brand from the
product itself. For example, most people swear they can identify a Pepsi vs. a Coke, and yet
many people actually cannot. Try it on your friends.
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Part 1 Marketing Strategy
Figure 2.3
Subliminal Ad
A fifth sense is touch. The predominant means of conveying brand imagery through
touch is when marketers create well designed products, compared to products intended to
be positioned for value. For example, design can mean good ergonomics, as in good kitchen
knives, wrist-friendly mice or keyboards, good office chairs, etc. Design can also mean clean
lines, simplicity, and beauty, such as the products that Apple creates. Finally, design can also
certainly mean a sensual experience, like leather interior options in cars, compared to their
less expensive, less touchable alternatives.
Finally, a discussion about sensation and perception wouldn’t be complete without mention of so-called subliminal advertising. The idea is that an ad can be shown very quickly,
on TV, online, or in the movies, so that it doesn’t quite meet the threshold of liminal
recognition and consciousness, and therefore it is said to be subliminal. Yet somehow the
vision is captured subconsciously, and marketers hope the message will compel action (e.g.,
buy more popcorn). Print ads depend not on brief time exposure but on ambiguity. If you
think companies don’t do this anymore, take a look at the logo for the Chicago White Sox
baseball team (at whitesox.com) in Figure 2.3. What does it spell?
While marketers have debunked the notion that subliminal advertising works, they
nevertheless conduct a great deal of research in areas called “mere exposure” and “perceptual fluency.” Neither of these effects is subliminal, per se, but they share a certain
subtlety. For example, mere exposure, as its
name suggests, says that, though you might
not think the billboard you drive past every
day is having a persuasive effect on you, it is.
Marketers know that repeated exposures to
a brand name brings familiarity, and with familiarity comes a comfortable, positive feeling. Thus, brands advertised on billboards or
that keep appearing in sidebar ads online
are familiar and would probably rate fairly
Perceptual fluency is also a subtle phenomenon. When consumers thumb through
a magazine or click through websites, they
are probably paying most of their attention
to the content of the message. However, other information is being expressed. Colors and
fonts can make a message seem more professional, more emotional, more contemporary,
more gothic. Those cues make an impression
as well. The cues are liminal but subtle, and
they are part of the brand.
2-3b Learning, Memory, and Emotions
All those sensory and perceptual impressions can become brand associations. To say that
consumers have brand associations means that, in their memory, they have stored certain
attributes attached to the brand. When the brand is mentioned, those associations are
brought to mind. Learning is the process by which associations get past the sensory and
perception stages into short-term memory and then, with repetition and elaboration, into
long-term memory. There are several theories about learning, but two are so fundamental
and pervasive that every marketer should know them.
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Chapter 2 Customer Behavior
The first way that people learn is through classical conditioning. This type of learning is
so well known and integrated into our culture that most people have heard of the demonstrations by Ivan Pavlov of his salivating dogs. The learning goes through stages:
• Stage 1: A food bowl placed in front of a dog naturally elicits its drool.
• Stage 2: A bell rung in front of the dog initially elicits no response.
• Stage 3: A bell rung while a food bowl is simultaneously placed in front of the dog
elicits drool.
• Stage 4: With time, bell rung in front of the dog elicits drool. The dog has come to
learn that the bell is associated with food.
Perhaps you’re thinking, “But that’s just a dog.” Indeed. However, consider Figure 2.4.
It’s common to hear that “sex sells,” but why or how does it work? The process is this:
• Stage 1: A babe (male or female) elicits drool.
• Stage 2: Some brand or product initially elicits no response.
• Stage 3: That brand or product in a picture with aforementioned babe elicits drool.
• Stage 4: With time, the brand itself elicits drool.
That might sound a little far-fetched,
but that’s the learning process. Consider
more neutral stimuli, such as the logos in
Figure 2.5. At their introduction, these
abstract symbols convey no information
and function much like the bell in Pavlov’s lab. With time, while logos might
not elicit drool, consumers come to learn
and associate these fairly similar looking
symbols with their unique brands.
It’s also worth noting, in this ever
changing world, that sometimes companies want to shed negative associations, and
they change their names and logos to do
so. For example, in recent years, Blackwater
became Xe, Philip Morris became Altria,
ValuJet became AirTran, and Andersen
Consulting became Accenture. The hope is
that the slate has been wiped clean, so that
fresh associations might become attached
to the new company names and logos.
Figure 2.4
©Leonard Zhukovsky/
Michael Dechev/
Source: SKYY Vodka
Sex Sells Due
to Classical
Figure 2.5
Logos Gain
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Part 1 Marketing Strategy
A fun use of classical conditioning is jingles. It takes only a few exposures before people
learn the catchy lyrics. Consider these jingles; it’s hard to resist finishing them, and it’s hard
to stop thinking about them:
• M’mm m’mm good . . .
• Gimme a break, gimme a break, break me off a piece of that . . .
• Plop, plop, fizz, fizz . . .
• Oh, I wish I were an Oscar . . .
• I’d like to buy the world a . . .
• Sometimes you feel like a nut; . . .
And the master of all jingles:
• Two all-beef patties . . .
The second way that people learn is through operant conditioning. This type of learning
is also so well known that most people have heard of Skinner boxes. B. F. Skinner studied
pigeons pecking at a target, or rats pressing a bar, to receive food pellets. The pigeon learns
the desired behavior by being rewarded. The behavior is said to be positively reinforced.
Skinner boxes are programmed to reward the pigeon every time it pecks, or only after
every fourth peck, or only at 20 after the hour, etc. When the bird is rewarded every time
or every fourth time, the reinforcement schedule is said to be on a fixed ratio reinforcement
schedule. When the bird is rewarded on average every fourth time (so perhaps after two
pecks, then after six pecks, then after four, etc.), the reinforcement schedule is said to be on
a variable ratio. This difference matters because the unpredictability of the variability drives
the birds (and humans) a little nuts. In the same amount of time, say 30 minutes, the bird
will peck a lot more on the variable, rather than on the fixed, ratio schedule.
So what? Well, consider loyalty programs. Marketers reward consumers who carry their
loyalty cards by giving them every 10th coffee free, for example. If marketers want their
consumers to purchase even more frequently and ring up more sales, they would design a
variable ratio reinforcement program. Each coffee card could have a scratch-off number
indicating that the customer would receive a free coffee after, say, seven coffees. The next
card might say five or 15, etc.
With current programs, the customer’s behavior is very predictable. With a variable program, the customer would be excited about the seven because it means a free coffee is coming much faster than after 10. Even when they scratch off and get a higher number, like 15,
they’ll still recall that they have had smaller numbers in the past. So the sooner they get to
15 and redeem this card, the sooner they’ll get another card, perhaps with a smaller number.
There are also reinforcement schedules based on duration lapses, but these are not
implemented in marketing as frequently. One famous exception, however, is the policy
by Southwest Airlines that allows passengers to obtain their boarding pass classification
24 hours prior to the flight, but no sooner. Passengers who wait too long get less desirable
status, so many fliers find themselves poised over their keyboard to press the right letters at
just the right time. Keyboard pressing is not that different from pigeons pecking.
As any student knows, a big factor in learning and memory is motivation. Thus, we
consider it next.
2-3c Motivation
Figure 2.6 depicts psychologist Abraham Maslow’s hierarchy of needs. We have to meet
basic needs—have food on the table and a roof overhead—before we think about buying
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Chapter 2 Customer Behavior
Figure 2.6
Hierarchy of
Self-Esteem, Respect
Friendship, Love, Belonging
Safety, Security
Food, Water, Sleep, Sex
nice clothes. Once we have met our basic needs, we are driven by more abstract motivations, such as love and esteem, qualities that begin to define humanity. At the peak of this
pyramid is the phrase, self-actualization, an achievement of our ideal self, with no needs, no
excessive wants, no jealousies, etc.
One way that marketers use this hierarchy is by identifying their product with a certain
level of needs. They use imagery to appeal to those motivations. For example, the VW crash
ads appeal to our need for safety. Similarly, the entire Volvo brand is positioned for safety.
Beyond cars, other examples involve different kinds of security. For example, in B2B, they
used to say, “You won’t get fired for buying IBM.” Even though IBM was often the most
expensive choice, buyers knew that the quality would be good, so any risk-averse buyer
would feel security in having chosen a good brand.
Many of us are fortunate enough that our simpler needs are met, so a great number
of brands are positioned to heighten a consumer’s sense of belonging or, at the next level,
social acceptance and respect. Belonging can be signaled by explicitly affiliative products,
such as team logos, or by conspicuously branded products, as in certain men’s athletic shoes
or women’s handbags. Belonging can also be more subtle; many ads appeal to a person’s
concern with fitting in with the norm. For example, when you start a new job, are you
wearing the right clothing? If all your friends drive a hybrid, will they accept you and your
SUV? And so on.
At the higher level, the acceptance, by self (esteem) and others (respect) is often signaled
by marketers by pointing a consumer to an aspiration group. You might be a business school
student right now, but ads will show you the clothes, restaurants, and cars that the most
successful CEOs wear, dine in, and drive. The implication is that you should begin to shape
your preferences accordingly so that, when you achieve that CEO status, your purchases
will exhibit good taste.
Another way that marketers have used this hierarchy is to offer an extended brand line
that encourages a customer to reach ever higher in the pyramid. For example, Mercedes
makes their entry-level C-Class for the driver who wants the brand but cannot afford
much. Mercedes hopes that drivers will like the C-Class and, when they’re ready, trade it in
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Part 1 Marketing Strategy
for an E-, then S-, then CL-Class. This product range is a simple manifestation of customer
relationship management.
Yet another way that the hierarchy is used is when brand managers think about positioning their brands as high in the pyramid as possible. Walmart makes basic sneakers that
satisfy simple needs at the bottom of the hierarchy. However, stronger brands like New Balance can charge more, not just because the product may be somewhat better but because the
consumer wants to believe that the shoes will make them better—better athletes, more fit,
more attractive, better people. The basic Walmart sneaker probably can’t be positioned too
high in the pyramid, but it would behoove any other sneaker maker to strive for imagery as
high in the hierarchy as possible.
Beyond the Maslow pyramid, there are other ways to distinguish needs and motivations.
Many consumer psychologists speak of utilitarian vs. hedonic products in fulfilling needs
and wants. A consumer might need a new interviewing suit but want the Armani threads.
Consumer psychologists also point to the motives that co-exist in all of us, for conformity vs. individuality. One need may be more salient than another throughout a person’s
life, or over an array of situations. If conformity is winning, the consumer buys a popular
brand; if individuality is more important, then the consumer finds an atypical, quirky brand.
Luckily, in most product categories, there are large brand assortments; hence, either need
may usually be satisfied.
A final means of distinguishing consumer motivations is whether they are risk seeking
or risk averse. In some product categories, consumers may be very knowledgeable, opinion
leaders, and ready to try the newest that the market has to offer (the latest music, fashion,
etc.). In other product categories, those same persons may be more risk averse for a variety
of reasons, including caring less about the category or not having the expertise to make
choices confidently. For these purchases, the consumers would be more conservative, trying
to prevent a bad purchase, rather than striving for a good purchase.
Predicting the Weather and Brand Choice
We can’t even predict the weather very well, so why would we expect to be able to predict consumer
Weather is simple compared to human decision making and purchasing. It’s comprised of
very few components: wind, water, dirt particles, gravity, and temperature. Yet the best we tend
to say is, “Tomorrow’s weather will look something like today’s.” Similarly, we make the fewest
marketing forecast mistakes if we say, “You’ll buy the same brand of toothpaste this time as you
did last time.”
Consider the factors that enter into a toothpaste purchase: What did mom buy? What’s on sale?
What flavor do I like? Do I need a small tube for travel or a big tube for home? Do I want a whitener?
Are my teeth sensitive? Do I want to try something new? Do I have a coupon? Am I buying this for
myself or someone else? Do I need floss because that brand is bundled with a container of floss? It’s
Yet marketers have sophisticated research techniques to enhance predictions and answers to
questions such as whether this customer is likely to be a brand switcher, sensitive to a price discount,
affected by recent advertising, etc. Methods to gather information from customers are discussed
throughout this book and in particular are concentrated in Ch. 15 on marketing research.
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Chapter 2 Customer Behavior
Eenie, Meanie, Jelly Beanie
In their article, “Active Choice: A Method to Motivate Behavior Change,” Professors Punam Keller and
Bari Harlam studied different kinds of so-called opting behaviors:
1. Opt-in:
Check this box if you wish a reminder to . . .
2. Opt-out:
Check this box if you do not wish a reminder to . . .
Options 1 and 2 did okay, but the setup that was much more effective was:
3. Check one:
I will remind myself to . . . vs.
Yes, please send me a reminder to . . .
Getting reminders is very important to engaging in a variety of behaviors, such as getting flu shots,
signing an organ donation card, or enrolling in a company’s 401k program.
2-3d Attitudes and Decision Making
Marketers want to understand how consumers think and what motivates them so that
they might persuade the consumers to have positive regard for a particular brand and see
it as superior to all others, at least for their needs. Attitudes and decision making affect
the extent to which consumers will buy a brand, repeatedly purchase it, become loyal, and
recommend it to others. If we’re really lucky, our brand fans will prefer our brand so much
that they’d even be price insensitive if we had to, or wished to, raise prices. So if we seek to
enhance attitudes about brands and encourage particular brand choices, let’s begin with two
questions: What are attitudes? What does the decision making process look like?
Attitudes are conceptualized as a mix of beliefs and importance weights. Beliefs are
opinions, such as BMWs are fast, they’re nice to look at, they’re expensive, etc. Importance
weights are things like, “I don’t care much about whether my car is fast, but I would like
it to be attractive” or “I care about the cost.” People can differ on both their beliefs and
importance weights. Some people might say that BMWs aren’t that attractive or expensive
relative to other cars. Some people might not care how much a car costs but care very much
about speed.
Importance weights are like the concept of customer involvement. It is an important
truism in marketing, with its natural implications, that, in any purchase category, customers
can be classified according to how much they care about the given purchase. For the things
consumers care about, they spend more time learning about the options and brands, and
they’re usually willing to pay more for excellence. For the things consumers care less about,
they spend less time investigating, and it’s likely that they won’t want to pay much.
The job of marketers is to play with both components of attitudes—beliefs and importance weights. Marketers seek to make the beliefs in an attribute or benefit more positive
and to make the attributes on which the brand dominates other brands seem even more important. The beliefs and importance weights are modified or strengthened through learning
and memory and by appealing to consumer motivations that the brand purportedly satisfies.
Attitudes contribute to decision making and brand choice. In some product categories,
there aren’t that many choices, so brands can be compared fairly readily. In categories with
a lot of choices, consumers usually proceed through two stages. In the first, quick stage,
they decide which brands should be considered in more detail vs. those that don’t make the
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Part 1 Marketing Strategy
cut to be in the consideration set. The second stage is relatively prolonged, during which
consumers compare the brands in the set to make a purchase choice.
The first stage is thought to be conducted quickly by non-compensatory mechanisms.
“Non-compensatory” means that some attributes are very important. If the brand has them,
then it may be considered further; otherwise, the brand is precluded. Even if the brand
excels at something else, that other excellent attribute does not compensate for the lack of
the first, important quality. For example, if a consumer is set on buying a hybrid car, then
that’s the first attribute that reduces the set—cars that are not hybrids are cut from further
consideration. Whichever brands make the cut on this first dimension continue to be considered. The consumer proceeds lexicographically, selecting the attribute or dimension that
is next most important, etc. That subset of brands is compared on the next most important
attribute and so on until the set is reduced to only a few brands.
Once the consideration set has been reduced to a manageable number, consumers switch
gears and use a compensatory model. This model uses a costs and benefits logic, whereby
excellence on one attribute can make up for the fact that the brand is not so great in some
other ways. One such model is that of averages, e.g., if a brand is strong on attribute A and
only so-so on B, it may dominate a brand that is average on both attributes A and B.
A lot of online sites allow consumers to select from a number of brands or models to enable side-by-side comparisons. This information sorting helps consumers see which brands
are best on the attributes they care most about. The algorithms request that consumers first
select the brands to be compared. This stage mimics the non-compensatory stage in reducing the number of possible brands to a more manageable number for further consideration.
The online comparators facilitate the second, compensatory stage, in that the attributes are
lined up for easy viewing. A brand choice is made, and the decision process is completed.
Cross-Cultural Consumer Behavior
When multi-national companies launch brands internationally, they face the global-local decision.
Should the brand be a unitary, global entity, the same in every market, or should it be tailored for the
tastes and preferences for local customers. Those who argue for a single global brand say that there
needs to be brand consistency across markets to keep a brand strong and its image clear, and to allow
some financial and operational efficiencies. Those who argue for tailored offerings say that customers
will be more favorably inclined to build a connection to a product that is more meaningful to them.
The essence of this strategic decision will be revisited throughout the book, but in this chapter, the
main concern is an understanding of consumers.
There may be ways to leverage some similarities across some countries and cultures so that a
company can enjoy some efficiencies and not have to reinvent a truly unique brand for every
marketplace. Many researchers have studied the similarities and differences among many countries,
but perhaps the best-known framework is that of Geert Hofstede. He uses 5 dimensions to
differentiate countries:
1. “Power distance”: clear delineation between those who have power and those who do not. High
power distance cultures are typically very hierarchical, such as Brazil, England, Japan, Portugal,
and many Latin, Asian, and African countries. Low power distance cultures are more egalitarian,
such as Israel, New Zealand, Norway, and the U.S.
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Chapter 2 Customer Behavior
2. Cultures also vary along the continuum from “individualism,” in which people mostly look out for
themselves, to “collectivism,” in which people’s identities and esteem are rooted in the groups
to which they belong—their families, their companies, their country, etc. Does a person tend
to think in terms of “I” or “we”? Individualistic countries include the U.S. and Canada, Australia
and New Zealand, England, France, and Germany. Collectivistic cultures dominate Asia, Latin
America, and Africa.
3. Countries and cultures differ on whether they are characterized as “masculine,” focused on
achievement, success, and assertiveness or “feminine,” and more focused on modesty, caring
for others, and enhancing the quality of life. Masculine countries include China, Hungary,
Italy, Mexico, the U.K., and the U.S. Feminine countries include Chile, Denmark, Finland, the
Netherlands, Portugal, and Sweden.
4. “Uncertainty avoidance” is the extent to which people are uncomfortable by ambiguity and
therefore try to resolve such situations, usually by imposing rules and structure. Countries with
high uncertainty avoidance are: Belgium, France, Germany, Greece, Italy, Portugal, and Spain.
Countries with relatively more tolerance for ambiguity are: Denmark, Ireland, Poland, Sweden,
the U.K., and the U.S.
5. “Long-term orientation” is the extent to which people of the culture look to long-term traditions
and look to and save for the future compared to short-term orientation which is a focus on
achieving quick results. Countries that are longer-term oriented are China, Hong Kong, Japan,
compared to shorter-term oriented U.K., U.S., and Latin American countries.
These differences have clear marketing implications. For example:
The marketer can expect more conspicuous consumption, in masculine countries, in which
achievement is celebrated, thus helping Cartier, Rolex, and Philippe Patek be judicious in the
marketing dollars they allocate across countries.
Similarly, in high power distance countries, such as Brazil or Japan, people tend to dress up, a bit
formally, to show respect and to reflect their own position. By comparison, people in low power
distance countries will dress more casually. It’s no accident that “casual Friday” was invented in
the U.S.
2-3e How Do Cultural Differences Affect Consumers’
In addition to individual differences in how consumers respond to ads and brands, there
are also predictable sociocultural effects. We’ll consider two examples: social class and age.
Some societies have clearer class distinctions than others, but gradations in socioeconomic standing are discernible even in relatively classless societies. People tend to be more
comfortable with others in comparable standing.
Social class is a construct that is more complicated than just economic access to resources.
Income is important, but so is family background (e.g., old money vs. nouveau riche) and
career paths (e.g., some allowance for social mobility). Old-monied people seek exclusivity
in their brands, to affirm their special standing in society. They are alarmed by the massclass movement, in which designers of high-end luxury goods produce far less expensive
lines (albeit not of the same quality) to allow access by us peasants.
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Part 1 Marketing Strategy
In contrast, nouveaus try to make purchases to attain their status, the purchases being
the so-called status symbols. They indulge in conspicuous consumption, e.g., buying goods
with garish, loud branding that shows the world they’ve made it. Obviously, designing
products, brands, and marketing communications for these two different groups calls for
different approaches.
Age cohorts also produce reliable, predictable shopping patterns. Some patterns are obvious, following the household composition and income availability. Young people first buy
furniture and kitchenware, entertainment and travel, and large screen TVs. They proceed
to the stage of buying diapers and toys and minivans. Soon there is college to pay for, then
maybe travel, and, soon, health care. All highly predictable.
Age groups are particularly important when they are large in size. The infamous baby
boomer group is beginning to retire. Older people are traditionally ignored by advertisers
who like to feature youth, but the deep wallets of baby boomers will soon force companies
to pay attention. Cruises will sell, whereas sophomoric movie comedies might decline.
The baby boomer generation was always societal minded, so we might expect to see
large-scale altruism and record levels of infusions of resources into nonprofits. In an odd
contradiction, this generation was also dubbed “the me generation,” and indeed sales of
Viagra and cosmetic surgeries have also begun inching upward.
Social class and age cohort are among the various sociocultural factors that impinge
on how buyers form impressions and preferences, collect information, form opinions, and
make brand choices. Gender matters: Men and women are socialized differently, they think
about products differently, and they shop differently.
Finally, ethnicity and country culture provide different perspectives, and they can be very
interesting (and complicated). We’ll see examples throughout the book. Be forewarned: It
is difficult to provide generalizations without devolving into stereotypes, so note there are
always exceptions. To foreshadow a few observations now:
• Wealthy Chinese like their consumption conspicuous. Due to their purchases,
Louis Vuitton has found its busy season has moved to late-January and early-February, just before Chinese New Year (from traditional 4th quarter peaks, attributable
to Christmas shopping).
• Danes are fond of luxury goods, and their society is so egalitarian that they believe
luxury goods should be accessible to all.
• European brands tend to dominate the high e…
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