Principles of Marketing

🧭 Overview

🧠 One-sentence thesis

This excerpt provides only front matter and preface information about the OpenStax Principles of Marketing textbook structure and licensing, without presenting substantive marketing content.

📌 Key points (3–5)

• The excerpt contains table-of-contents fragments, preface material, and publication information rather than teaching content.
• OpenStax is a nonprofit educational initiative offering openly licensed textbooks under Creative Commons Attribution 4.0.
• The textbook is designed for flexibility, targeting undergraduate business students at various levels with modular chapters.
• Pedagogical themes include employability, ethical awareness, and marketing metrics across chapters.
• No actual marketing concepts, definitions, or theories are presented in this excerpt.

📚 What this excerpt contains

📄 Publication and licensing information

The excerpt opens with:

• Page references to end-of-book materials (discussion questions, critical thinking exercises, answer key, index).
• Preface sections describing OpenStax as part of Rice University, a 501(c)(3) nonprofit.
• Licensing details: the book uses a Creative Commons Attribution 4.0 International (CC BY) license.

What this means:

• Instructors and students can distribute, remix, and build upon the content with proper attribution.
• The material is freely accessible in web view or PDF; low-cost print versions are available.

🎯 Intended audience and design

Principles of Marketing is targeted at the core marketing course for undergraduate business majors and minors.

• Designed for conceptual accessibility to early-stage business students (e.g., second-year).
• Also suitable for more advanced students.
• Provides grounding in core marketing concepts and frameworks to prepare students for upper-level courses.

🧩 Pedagogical approach

The preface states the book:

• Emphasizes marketing concepts relevant to various business functions.
• Uses a modern approach connecting topics, solutions, and real-world problems.
• Balances theoretical and practical aspects.
• Incorporates diverse organizations (for-profit and nonprofit), industries, products, brands, and services.

Key themes throughout chapters:

• Employability
• Ethical awareness
• Marketing metrics

🔗 Modular structure and flexibility

• Chapters are written to be independent, allowing instructors to select and reorder sections.
• However, chapters generally build on understanding from previous chapters, so alternate sequencing should be considered carefully.
• Instructors can create customized versions via OpenStax.org.

📖 Content structure (from table of contents)

📑 What the excerpt reveals

The excerpt shows only the beginning of the table of contents:

• Unit 1: Setting the Stage
  • Chapter 1: Marketing and Customer (title incomplete in excerpt)

The excerpt cuts off before any chapter content begins, so no marketing concepts, customer value definitions, or substantive teaching material is included.

⚠️ What is missing

• No definitions of marketing or customer value.
• No explanations of marketing principles, frameworks, or theories.
• No examples, case studies, or real-world scenarios related to marketing.
• The excerpt provides only structural and administrative information about the textbook itself.

🛠️ Supporting features mentioned

🎨 Art attribution

• All art in the book includes attribution to title, creator/rights holder, host platform, and license within captions.
• Openly licensed art may be reused with proper attribution.

🔧 Errata process

• OpenStax textbooks undergo rigorous review, but errors can occur.
• Updates are made periodically when pedagogically necessary.
• Corrections can be submitted through the book page on openstax.org.
• Subject matter experts review all errata suggestions.
• Past errata changes are listed transparently on the book page.

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Note: This excerpt does not contain teaching content on marketing or customer value. To create review notes on those topics, the actual chapter text would be needed.

🧭 Overview

🧠 One-sentence thesis

Strategic planning in marketing involves developing a marketing strategy, structuring a marketing plan, and measuring results through marketing metrics to deliver customer value.

📌 Key points (3–5)

• Core focus: Chapter 2 explores marketing strategy, the purpose and structure of the marketing plan, and measurement of marketing strategy results.
• Measurement tool: Marketing metrics are used to evaluate the outcomes of marketing strategy.
• Featured examples: Real organizations like Frito-Lay, Procter & Gamble, Emerson Electric, Apple, Everlane, and Starbucks illustrate concepts.
• Placement in curriculum: This chapter is part of Unit 1 ("Setting the Stage"), providing foundational understanding before students move to marketplace analysis.

📋 What strategic planning covers

📋 Three main components

The chapter addresses three interconnected elements:

• Marketing strategy: The overarching approach organizations take to achieve their marketing goals.
• Marketing plan: The documented structure and purpose that guides marketing activities.
• Marketing metrics: The measurement tools used to evaluate whether the strategy is working.

🏢 Real-world context

The chapter uses diverse company examples to demonstrate concepts:

Organization	Type	Purpose in chapter
Frito-Lay	Consumer goods	Illustrate strategic planning concepts
Procter & Gamble	Consumer goods	Show planning applications
Emerson Electric	Industrial	Demonstrate B2B contexts
Apple	Technology	Provide recognizable examples
Everlane	Retail/Fashion	Show contemporary approaches
Starbucks	Service/Retail	Illustrate service sector planning

• These examples span different industries and business models, helping students see how strategic planning applies across contexts.

🎯 Purpose and structure of marketing plans

🎯 Why marketing plans matter

The chapter examines the purpose of marketing plans—not just their format, but why organizations create them.

• A marketing plan provides direction and structure for marketing activities.
• It connects strategy (the "what" and "why") to execution (the "how").
• Example: An organization might use a marketing plan to align different departments around customer value delivery.

🏗️ How plans are structured

The chapter covers the structure of marketing plans:

• This refers to the components and organization of a formal marketing plan document.
• Structure helps ensure all necessary elements are addressed systematically.
• Don't confuse: Structure (the framework of the plan) vs. strategy (the approach itself)—the plan documents and organizes the strategy.

📊 Measuring marketing results

📊 Marketing metrics defined

Marketing metrics: Tools and measures used to evaluate the results of marketing strategy.

• Metrics translate marketing activities into measurable outcomes.
• They answer the question: "Is our marketing strategy working?"
• Example: An organization implements a new marketing strategy and uses metrics to track whether customer value is being delivered as intended.

📈 Why measurement matters

• Without metrics, organizations cannot determine if their strategic planning is effective.
• Measurement connects planning to accountability and continuous improvement.
• The chapter emphasizes that metrics are not an afterthought but an integral part of the strategic planning process.

🔗 Connection to broader curriculum

🔗 Position in Unit 1

This chapter is the second in Unit 1 ("Setting the Stage"):

• Chapter 1 introduces marketing basics, value, the 4Ps, and customer relationship management.
• Chapter 2 (this chapter) builds on that foundation by showing how organizations plan strategically to deliver the value introduced in Chapter 1.
• Together, these chapters prepare students for Unit 2's marketplace analysis tools.

🎓 Audience and approach

• Targeted at undergraduate business majors and minors in core marketing courses.
• Designed for accessibility to second-year students while remaining suitable for advanced students.
• Balances theoretical and practical aspects through realistic company scenarios.
• Chapters are written to be independent but generally build on previous understanding—instructors should consider this when reordering content.

🧭 Overview

🧠 One-sentence thesis

This excerpt is a table of contents that organizes marketing topics into units covering strategic planning, marketplace understanding (including consumer and business purchasing behavior), and the marketing mix elements (product, promotion, price, and place).

📌 Key points (3–5)

• Structure: The content is divided into units—Unit 2 focuses on "Understanding the Marketplace" and includes consumer markets, business markets, segmentation, research, and global/diverse marketing.
• Consumer behavior coverage: Chapter 3 addresses consumer markets and purchasing behavior, including factors influencing buying, the purchasing decision process, and ethical issues.
• Business behavior coverage: Chapter 4 covers B2B markets, buying situations, influences on B2B behavior, and the B2B buying process.
• Common confusion: Consumer markets (Chapter 3) vs. business markets (Chapter 4)—these are distinct buyer types with different purchasing processes and influences.
• Supporting topics: The unit also includes market segmentation/targeting/positioning, marketing research, global marketing, and diversity marketing to provide context for understanding buyers.

📚 Content organization

📚 Overall structure

The excerpt presents a textbook table of contents with three main units:

• Unit 1: Marketing fundamentals and strategic planning
• Unit 2: Understanding the marketplace (consumer and business behavior, segmentation, research, global and diverse contexts)
• Unit 3: The marketing mix (product, promotion, price, place)

Each chapter includes:

• Numbered sections (e.g., 3.1, 3.2)
• Chapter summary, key terms, discussion questions, exercises
• Applied components (personal brand building, marketing plan exercises, company cases)

🎯 Chapter 3 focus: Consumer Markets and Purchasing Behavior

The chapter covers four main sections:

1. Understanding consumer markets and buying behavior
2. Factors that influence consumer buying behavior
3. The consumer purchasing decision process
4. Ethical issues in consumer buying behavior

Don't confuse: This chapter focuses on individual consumers (people buying for personal use), not businesses buying for organizational purposes.

🏢 Parallel coverage: Business vs. Consumer Markets

🏢 Chapter 4: Business Markets and Purchasing Behavior

Immediately following the consumer chapter, Chapter 4 addresses:

1. The B2B (business-to-business) market
2. Buyers and buying situations in B2B
3. Major influences on B2B buyer behavior
4. Stages in the B2B buying process
5. Ethical issues in B2B marketing

🔄 How to distinguish consumer from business markets

Aspect	Consumer Markets (Ch. 3)	Business Markets (Ch. 4)
Buyer type	Individual consumers	Organizations/businesses
Purchase purpose	Personal/household use	Organizational operations/resale
Decision factors	Consumer buying behavior factors	B2B buyer behavior influences
Process	Consumer purchasing decision process	B2B buying process stages

Example: A person buying a laptop for home use follows consumer purchasing behavior (Chapter 3); a company buying 50 laptops for employees follows B2B purchasing behavior (Chapter 4).

🧩 Supporting marketplace topics

🎯 Market Segmentation, Targeting, and Positioning (Chapter 5)

After understanding how consumers and businesses buy, the content addresses:

• Segmentation of consumer markets
• Segmentation of B2B markets
• International market segmentation
• Target market selection
• Product positioning
• Ethical concerns in targeting

🔍 Marketing Research and Market Intelligence (Chapter 6)

This chapter covers how marketers gather information about buyers:

• Marketing research and big data
• Sources of marketing information
• Steps in a marketing research plan
• Ethical issues in research

🌍 Global and Diverse Contexts (Chapters 7–8)

The unit concludes with contextual chapters:

• Chapter 7: Global markets, international trade, entering global markets, ethical issues in global marketing
• Chapter 8: Standardization vs. adaptation, diversity and inclusion marketing, multicultural marketing, marketing to specific demographic groups, ethical issues in diversity marketing

Why these matter: Understanding consumer and business purchasing behavior requires context about different market segments, research methods, and cultural/global factors that influence buying decisions.

📖 Pedagogical features

📖 Learning components in each chapter

Every chapter includes standardized elements:

• In the Spotlight: Opening feature
• Numbered sections: Core content broken into subsections
• Chapter Summary: Review of main points
• Key Terms: Vocabulary list
• Applied Marketing Knowledge: Discussion questions
• Critical Thinking Exercises: Application activities
• Building Your Personal Brand: Career-focused exercises
• What Do Marketers Do?: Professional practice insights
• Marketing Plan Exercise: Practical planning tasks (in some chapters)
• Closing Company Case: Real-world application
• References: Source citations

Note: The excerpt does not provide the actual content of these sections, only their titles and page numbers in the table of contents.

🧭 Overview

🧠 One-sentence thesis

Business markets and purchasing behavior is a core topic in marketing curricula that provides students with analytical frameworks to understand organizational buyers alongside consumer markets.

📌 Key points (3–5)

• Placement in curriculum: Chapter 4 appears in Unit 2 ("Understanding the Marketplace"), following consumer markets and before segmentation topics.
• Purpose: equips students with tools to analyze business-to-business (B2B) purchasing distinct from consumer (B2C) behavior.
• Common confusion: business markets vs consumer markets—both are "customers," but Chapter 3 covers consumers while Chapter 4 addresses organizational/business buyers.
• Pedagogical approach: the textbook uses real company examples, ethical themes, and marketing metrics throughout to connect theory to practice.
• Flexibility: chapters are designed to be independent yet build on prior understanding, allowing instructors to adjust sequence.

📚 Textbook context and structure

📖 Book overview

Principles of Marketing is targeted at the core marketing course for undergraduate business majors and minors, designed for conceptual accessibility to students relatively early in their business curriculum (such as second-year students), yet also suitable for more advanced students.

• The book emphasizes flexibility to accommodate diverse audiences and course approaches.
• It provides solid grounding in core marketing concepts and frameworks, preparing students for more rigorous upper-level courses.
• Concepts are reinforced through detailed, realistic company and organization scenarios from various industries and geographical locations.

🏗️ Three-part structure

The textbook is organized into three units:

Unit	Title	Focus
Unit 1	Setting the Stage	Overview of value as driving concept; strategic process organizations use to realize customer value
Unit 2	Understanding the Marketplace	Analytical tools and frameworks to understand customers (consumers and businesses), segmentation, data gathering, international markets, and diverse segments
Unit 3	Product, Promotion, Price, and Place	The marketing mix elements and implementation

🎯 Pedagogical foundation

• Modern approach: provides connections between topics, solutions, and real-world problems.
• Balanced presentation: theoretical and practical aspects presented equally.
• Strong themes: employability, ethical awareness, and marketing metrics incorporated throughout most chapters.
• Diverse representation: exposes students to for-profit and nonprofit organizations, various industries, products, brands, and services.

🏢 Chapter 4 positioning and purpose

📍 Where it fits

Chapter 4 ("Business Markets and Purchasing Behavior") is the fourth chapter in the 19-chapter sequence:

• Located in Unit 2 ("Understanding the Marketplace").
• Immediately follows Chapter 3 ("Consumer Markets and Purchasing Behavior").
• Precedes Chapter 5 ("Market Segmentation, Targeting, and Positioning").

🔍 Distinguishing business from consumer markets

• Chapter 3 focus: consumer markets—individual buyers purchasing for personal use.
• Chapter 4 focus: business markets—organizational buyers purchasing for business purposes.
• Don't confuse: both chapters address "customers," but the buying context, decision-making processes, and motivations differ significantly between individual consumers and business organizations.

🎓 Learning progression

• Unit 2's goal: provide students with analytical tools to understand a "broad range of customers (whether consumers or businesses)."
• The sequence moves from understanding individual buyers (Ch. 3) → organizational buyers (Ch. 4) → categorizing them into target segments (Ch. 5) → gathering data for decisions (Ch. 6).
• Example: a student first learns how individuals make purchase decisions, then how businesses make procurement decisions, then how to group similar customers together for targeted marketing.

🧩 Chapter independence and sequencing

🔄 Modular design

• Chapters are written to be independent, allowing instructors to reorder topics.
• However, chapters "generally build on the understanding gained in the previous chapters."
• Instructors should "bear this in mind when considering alternate sequence coverage."

⚠️ Sequencing consideration

• While Chapter 4 can theoretically stand alone, it benefits from the foundational concepts introduced in earlier chapters.
• The progression from consumer behavior (Ch. 3) to business behavior (Ch. 4) reflects a logical expansion from simpler to more complex buying contexts.
• Example: understanding basic buyer motivation and decision-making in consumer contexts (Ch. 3) provides a foundation for grasping the more complex, multi-stakeholder purchasing processes typical in business markets (Ch. 4).

🧭 Overview

🧠 One-sentence thesis

The excerpt provides only a table of contents reference to Chapter 5 on market segmentation, targeting, and positioning, without any substantive content explaining these concepts.

📌 Key points (3–5)

• Location in curriculum: Chapter 5 appears in Unit 2 ("Understanding the Marketplace"), following chapters on consumer and business purchasing behavior.
• Context within the textbook: Part of a sequence providing analytical tools and frameworks to understand customers, categorize them into target segments, and gather data for product decisions.
• No definitions or explanations provided: The excerpt contains only the chapter title and its placement in the overall book structure.
• Common confusion: This excerpt is metadata about the textbook structure, not instructional content about the marketing concepts themselves.

📚 What the excerpt contains

📑 Textbook structure reference

The excerpt mentions "Market Segmentation, Targeting, and Positioning" only as:

• Chapter 5 in the table of contents
• Part of Unit 2: "Understanding the Marketplace"
• Positioned between Chapter 4 (Business Markets and Purchasing Behavior) and Chapter 6 (Marketing Research and Market Intelligence)

🎯 Unit 2 context

Unit 2 (Understanding the Marketplace) provides students with analytical tools and frameworks to understand a broad range of customers (whether consumers or businesses), categorize them into target segments, and then gather data to make solid product decisions.

• The unit description suggests Chapter 5 focuses on categorizing customers into target segments
• This is part of a broader analytical framework for understanding customers
• The chapter follows foundational material on how consumers and businesses make purchasing decisions

⚠️ Content limitation

📭 Missing substantive content

The excerpt does not include:

• Definitions of segmentation, targeting, or positioning
• Explanations of how these processes work
• Examples or case studies
• Frameworks or analytical tools
• Any instructional material about the chapter topic

📖 What is present instead

• Preface and introductory material about the textbook itself
• Overall table of contents
• General descriptions of pedagogical approach
• Unit-level summaries (but not chapter-level content)

🧭 Overview

🧠 One-sentence thesis

Marketing Research and Market Intelligence is positioned as a core analytical tool that helps organizations gather data to make solid product decisions after understanding and segmenting their customers.

📌 Key points (3–5)

• Placement in curriculum: Chapter 6 appears in Unit 2 ("Understanding the Marketplace"), following chapters on consumer behavior, business markets, and segmentation.
• Purpose: provides analytical tools and frameworks to gather data for making solid product decisions about target segments.
• Sequence logic: comes after understanding customers and segmentation, before expanding to global and diverse markets.
• Common confusion: this chapter is part of understanding the marketplace (data gathering), not part of executing the marketing mix (product/price/promotion/place).

📚 Course context and structure

📖 Where this chapter fits

The excerpt places "Marketing Research and Market Intelligence" as Chapter 6 within a 19-chapter textbook titled Principles of Marketing.

Unit structure:

• Unit 1 (Setting the Stage): introduces marketing basics and strategic planning
• Unit 2 (Understanding the Marketplace): Chapters 3–8, including Chapter 6
• Unit 3 (Product, Promotion, Price, and Place): Chapters 9–19, covering the marketing mix and execution

🎯 Unit 2's overall goal

Unit 2 provides students with analytical tools and frameworks to understand a broad range of customers (whether consumers or businesses), categorize them into target segments, and then gather data to make solid product decisions.

• The unit starts with consumer and business purchasing behavior (Chapters 3–4).
• Then covers segmentation, targeting, and positioning (Chapter 5).
• Chapter 6 (Marketing Research and Market Intelligence) follows as the data-gathering step.
• The unit concludes with global and diverse marketplace challenges (Chapters 7–8).

🔗 Sequential logic

• Chapters are written to be independent but generally build on understanding gained in previous chapters.
• The excerpt advises instructors to "bear this in mind when considering alternate sequence coverage."
• Example: you first learn who your customers are and how to segment them (Chapters 3–5), then learn how to gather data about them (Chapter 6), before tackling expansion challenges (Chapters 7–8).

🧩 What marketing research enables

🧩 Core function

The excerpt states that Unit 2's chapters help organizations "gather data to make solid product decisions."

• Marketing research is not about executing campaigns; it is about collecting information.
• It comes after identifying target segments and before making product/service decisions.
• Don't confuse: this is a marketplace-understanding tool, not a product-development or promotion tool (those appear in Unit 3).

📊 Relationship to other Unit 2 chapters

Chapter	Focus	How Chapter 6 connects
3 & 4	Consumer and business purchasing behavior	Understand who buys and why
5	Segmentation, targeting, positioning	Categorize customers into target segments
6	Marketing Research and Market Intelligence	Gather data on those segments to inform decisions
7 & 8	Global and diverse markets	Apply research insights to expansion challenges

🎓 Pedagogical approach

🎓 Target audience and flexibility

• The textbook targets undergraduate business majors and minors at the core marketing course level.
• Designed for second-year students but also suitable for more advanced students.
• Provides "solid grounding in core concepts and frameworks" to prepare students for upper-level courses.

🌍 Real-world emphasis

• Concepts are reinforced through "detailed and realistic company and organization scenarios and examples from various industries and geographical locations."
• The book includes "a diverse array of organizations so that students can see themselves and relate to the key concepts discussed."
• Strong themes throughout: employability, ethical awareness, and marketing metrics.

⚖️ Balance and integration

• "Theoretical and practical aspects are presented in a balanced manner."
• The book uses "a modern approach, providing connections between topics, solutions, and real-world problems."
• Maintains a modular chapter structure while integrating concepts across a multifaceted framework.

🧭 Overview

🧠 One-sentence thesis

Marketing is the comprehensive process of identifying, anticipating, and profitably satisfying customer needs through the strategic integration of product, price, place, and promotion activities.

📌 Key points (3–5)

• What marketing is: the activity and processes for creating, communicating, delivering, and exchanging offerings that have value for customers and society—not just advertising or selling.
• Core marketing process: identifying customer needs, anticipating future needs, satisfying those needs, and doing so profitably.
• The marketing mix (4Ps): product, price, place, and promotion must be optimally integrated and adapted over time.
• Common confusion: marketing is often mistaken for only advertising or selling, but it encompasses the entire journey from understanding customer needs to delivering value.
• Why it matters: marketing skills apply across career fields because they connect people, brands, and businesses; successful marketing drives profitability and customer satisfaction.

🎯 What marketing really means

📖 Definition and scope

Marketing: "the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large." (American Marketing Association)

• At its most basic level, marketing includes every process involved in moving a product or service from the organization to the consumer.
• It is not limited to advertising or selling—these are only parts of marketing.
• Marketing encompasses: discerning customer needs, developing products/services, identifying likely purchasers, promoting offerings, and moving them through distribution channels.
• Don't confuse: marketing with just promotion; marketing is about understanding what customers want and using that understanding to drive the entire business.

🔄 Alternative definition

Marketing can also be defined as the set of activities involved in:

1. Identifying customer needs
2. Anticipating customer needs
3. Satisfying those needs profitably

🔍 The marketing process breakdown

🔎 Identifying customer needs

• This is where marketing research comes in.
• Methods help a company develop a detailed picture of its customers, including a clear understanding of their wants and needs.
• Example: a company conducts surveys and focus groups to learn what features customers value most in a product.

🔮 Anticipating customer needs

• After analyzing collected data, marketers can predict how products might be changed, adapted, or updated.
• This involves looking ahead to what customers will want in the future, not just what they want now.
• Example: analyzing trends to forecast how customer preferences might shift over time.

✅ Satisfying customer needs

• If marketers have done their homework correctly and clearly understand their customers' needs, consumers will be pleased with their product purchase.
• Satisfied customers are more likely to make additional purchases.
• This step is the payoff for the identification and anticipation work done earlier.

💰 Profitably

Profitability: when a company's revenue is greater than its expenses.

• In marketing terms, the road to profitability means adding value to a product so that the price customers pay is greater than the cost.
• Marketing must not only satisfy customers but do so in a way that generates profit for the organization.
• Don't confuse: customer satisfaction alone with success; marketing must balance customer value with organizational profitability.

🧩 The marketing mix (4Ps)

🏗️ What the marketing mix includes

The excerpt introduces the marketing mix through the Gatorade example, showing how PepsiCo integrated four elements:

Element	What it covers	Gatorade example
Product	The offering itself, features, innovation	Scientifically formulated sports drink; launched Gatorade Zero (no sugar) and G Series Performance line
Price	Pricing strategy and policies	Originally premium pricing; shifted to competitive pricing when competitors entered
Place	Distribution channels	(Not detailed in excerpt)
Promotion	Advertising, campaigns, communication	2020 "GOAT Camp" campaign with Michael Jordan, Serena Williams, etc.; digital strategy with #Game6Live

🔄 Continuous adaptation

• The Gatorade example demonstrates that the marketing mix must be continually adapted to meet changing consumer demands.
• Gatorade maintained 67.7% market share by understanding how to integrate these elements for its target market.
• Example: when consumers became concerned about sugar, Gatorade launched Gatorade Zero to address this need while retaining the core product line.

🌟 Why marketing matters

🎓 Broader applicability

• Marketing skills are not only for marketers—they apply to almost any career field.
• Marketing teaches basic principles that connect people, brands, and businesses.
• Don't confuse: marketing as a specialized skill set with marketing as a universal business competency; the excerpt emphasizes that "marketing isn't only for marketers."

🏢 Benefits to multiple stakeholders

The AMA definition mentions value for:

• Customers
• Clients
• Partners
• Society at large

This indicates that marketing serves broader interests beyond just the selling organization.

📈 Path to market dominance

• The Gatorade case shows how optimal integration of the marketing mix throughout a product's life cycle can build market dominance.
• Successful marketing drives both customer satisfaction (through meeting needs) and organizational success (through profitability).

🧭 Overview

🧠 One-sentence thesis

Marketing is the comprehensive process of identifying, anticipating, and profitably satisfying customer needs while authentically reflecting diversity and balancing segmentation with respect for individual differences.

📌 Key points (3–5)

• What marketing really is: not just advertising or selling, but the entire process of creating, communicating, delivering, and exchanging value from organization to consumer.
• The four-step cycle: identifying customer needs → anticipating future needs → satisfying those needs → doing so profitably.
• The segmentation paradox: marketers must group customers into segments with common characteristics while simultaneously respecting individual preferences and celebrating diversity.
• Common confusion: segmentation vs stereotyping—segmentation uses predictable behaviors based on research, not fixed assumptions that ignore individuality.
• Who marketing serves: both internal interested parties (within the organization) and external interested parties (outside stakeholders).

🎯 What marketing actually means

📖 The formal definition

Marketing: "the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large."

• The excerpt simplifies this: marketing is every process involved in moving a product or service from the organization to the consumer.
• It's not limited to advertising or selling—those are just parts of marketing.
• Core idea: understanding what customers want and using that understanding to drive the business.

🔄 The alternative definition

Marketing: the set of activities involved in identifying and anticipating customer needs and then attempting to satisfy those needs profitably.

• This definition emphasizes the forward-looking nature: not just reacting to current needs but predicting future ones.
• The "profitably" component is essential—marketing must add value so that revenue exceeds costs.

🔍 The four components of marketing

🔎 Identifying customer needs

• This is where marketing research comes in.
• Methods help develop a detailed picture of customers, including a clear understanding of their wants and needs.
• It's about gathering data to know who your customers are and what they actually want.

🔮 Anticipating customer needs

• After analyzing collected data, marketers predict how products might be changed, adapted, or updated.
• This is proactive: looking ahead to what customers will want, not just what they want now.
• Example: trends in the data suggest customers will need a modified version of the product in the future.

✅ Satisfying customer needs

• If marketers have done their homework correctly and clearly understand their customers' needs, consumers will be pleased with their product purchase.
• Satisfaction leads to repeat purchases—customers are more likely to buy again.
• This step validates whether the identification and anticipation steps were accurate.

💰 Profitably

Profitability: when a company's revenue is greater than its expenses.

• In marketing terms: adding value to a product so that the price customers pay is greater than the cost of making the product.
• Without profitability, the marketing process is not sustainable.
• Don't confuse: profitability is not just "making money"—it's specifically about the relationship between added value, price, and cost.

🌍 Reconciling segmentation and diversity

🤝 Why diversity matters in marketing

• We live in a multicultural world where diversity, equity, inclusion, and belonging (DEIB) is imperative, not optional.
• As the consumer population diversifies, brands must authentically reflect a wide range of backgrounds and life experiences to effectively connect with consumers.
• Marketers must respect individual preferences, celebrate differences, and promote customization of products and services.

📊 The segmentation requirement

• To profitably produce and sell a viable product or service, marketers must identify potential customer groups with certain characteristics in common.
• This is market segmentation: assigning individuals to predefined categories with predictable behaviors, based on standardized assumptions.
• Segmentation is necessary because treating every customer as completely unique is not economically viable.

⚖️ The tension and the solution

Aspect	Segmentation	Diversity
Focus	Groups with common characteristics	Individual preferences and differences
Method	Predefined categories, predictable behaviors	Customization, celebration of uniqueness
Risk	Can become stereotyping if done poorly	Can be unprofitable if taken to extreme

• Key question: How does segmentation differ from stereotyping? How can segmentation support diversity?
• The excerpt does not answer these questions directly but points to external resources for exploration.
• The implication: segmentation and diversity are not opposites; they must be balanced and reconciled in modern marketing.

🚫 Don't confuse: segmentation vs stereotyping

• Segmentation uses research-based predictable behaviors and standardized assumptions for business purposes.
• Stereotyping applies fixed, often negative assumptions that ignore individuality and real differences.
• The excerpt emphasizes that marketers must navigate this distinction carefully to avoid harm while remaining profitable.

👥 Who marketing serves

🏢 Interested parties defined

Interested parties: those persons or entities that have an interest in the success or failure of a company.

• Also referred to as "stakeholders" in business writing.
• Marketing must consider and serve all these parties, not just customers.
• They are categorized into two types: internal and external.

🔒 Internal interested parties

Internal interested parties: entities that reside within the organization and that affect—or are affected by—the actions of the company.

• These are people and groups inside the organization.
• Example: employees, managers, departments within the company.
• Marketing decisions impact them directly because they are part of the organization.

🌐 External interested parties

• The excerpt mentions external interested parties but does not provide a full definition in the provided text.
• Implied: entities outside the organization that have a stake in its success or failure.
• Example: customers, suppliers, partners, society at large (as mentioned in the AMA definition).

📈 How marketing benefits all parties

• The excerpt's heading asks how marketing benefits "the organization, its interested parties, and society."
• The implication: effective marketing creates value not just for the company but for everyone connected to it.
• Internal parties benefit from a successful, sustainable organization.
• External parties benefit from products and services that meet their needs and contribute positively to society.

🧭 Overview

🧠 One-sentence thesis

Products and services exist on a continuum where marketers must understand how to position offerings through strategic decisions about product lines, life cycles, branding, and packaging to create value and build customer loyalty.

📌 Key points (3–5)

• Product vs. service distinction: Products are tangible and can be owned/stored; services are intangible experiences where customers participate in delivery.
• Product classification matters: Consumer products (convenience, shopping, specialty, unsought) require different marketing approaches based on purchase behavior and price.
• Product life cycle stages: Products move through introduction, growth, maturity, and decline stages, each requiring different marketing strategies.
• Brand equity is valuable: Brands are intangible assets with tangible financial value built through positioning, customer experience, and emotional connections.
• Common confusion: Product line depth (number of products in one line) vs. product mix width (number of different product lines a company offers).

🛍️ Understanding products and services

🛍️ What defines a product

Products: tangible items that are part of an exchange between buyer and seller that can be seen, touched, owned, and stored.

• Products have physical form—you can hold them, keep them, use them later
• Example: A computer or tablet is a pure product because you can touch it, own it, and store it for future use
• The tangible nature allows possession by the consumer

🤝 What defines a service

Services: intangible solutions that are also an exchange between buyer and seller but cannot be touched, owned, or stored for later use.

• Services lack physical form—they are experiences or actions performed
• Example: A college marketing course is a pure service—you cannot own the course or store it for later
• Key difference: The customer is typically part of the service experience (you must attend a concert to realize the benefit)
• Don't confuse: Most offerings fall somewhere on the product-service continuum, not at pure extremes

🎯 The product-service continuum

• Most real-world offerings combine both product and service elements
• Example: A restaurant breakfast includes products (eggs, bacon, coffee) plus services (taking orders, serving food, cleaning up)
• Marketers must understand where their offering falls on this continuum to influence consumer behavior effectively

✨ Customer experience (CX)

Customer experience: the overarching impression that customers have of a brand across all touchpoints with products or services.

• Strong CX integrates technology, marketing, sales, and customer service
• Each touchpoint reinforces brand perception
• Example: Apple Stores create immersive experiences where every element—from iPad check-in to product displays—reinforces the brand
• Brands with strong CX tend to have more loyal customers who become brand advocates

📦 Product classification systems

📦 Consumer product categories

Four main types based on purchase behavior, price, and distribution:

Type	Price	Decision Process	Distribution	Examples
Convenience	Low	Habitual/automatic, little comparison	Widespread at many outlets	Frozen waffles, soap, milk
Shopping	Low-Mid	Time spent comparing price/quality	Selective at matching outlets	Exercise equipment, clothing, airline tickets
Specialty	High	Specific brand in mind, little comparison	Exclusive at select outlets	Luxury cars, fine art, jewelry
Unsought	Variable	Unaware/uninterested, little thought	Variable by product	Flat tire repair, funeral services

• The classification determines marketing approach needed
• Convenience products need wide availability; specialty products need exclusivity
• Don't confuse: Shopping products (comparison shopping) vs. specialty products (no comparison, specific brand desired)

🏭 Business and industrial products

Four categories for B2B purchases:

1. Raw materials: Products needed to make consumer goods (flour, sugar, yeast for a bakery)
2. Manufactured materials and parts: Products used to create the final product (baking sheets for a bakery)
3. Capital items: Valuable assets with tangible value (large ovens for a bakery)
4. Supplies and services: Goods/services that are disposable without tangible value (boxes to package products)

• Classification matters because businesses purchase to create consumer goods
• Different from consumer products because the purchase decision-making process differs

🎚️ Product levels and organization

🎚️ Three levels of a product

Products exist at three conceptual levels:

1. Core product: What the customer is actually buying (convenience, ego, ease, flexibility)

   • Example: Buying bottled water = purchasing convenience, not just H2O
   • This is the problem the consumer is solving

2. Actual product: The tangible item itself (toaster, waffle, sports car)

   • Includes features, brand, quality level, packaging, design
   • This is what you physically receive

3. Augmented product: The unseen aspects essential to service (warranties, customer service, product support)

   • Example: Butterball's turkey talk-line for Thanksgiving cooking questions
   • Example: Hotel concierge services, dry cleaning, restaurant recommendations
   • These enhance the value beyond the physical product

📊 Product organization structure

Three key concepts for organizing products:

• Product item: A particular good a company sells (Domino's hand-tossed pizza)
• Product line: A set of similar or complementary products (all Domino's pizza crust types: hand-tossed, thin, pan, Brooklyn style, gluten-free)
• Product mix: All products a company sells (Domino's entire menu: pizzas, salads, sandwiches, appetizers, pasta, desserts, beverages)

Benefits of product lines and mixes:

• Products within mix are easily cross-sold (adding dessert to pizza order)
• Efficiency in advertising spend when promoting multiple products
• Breadth prevents competitors from entering the same space
• Supply efficiencies when products share packaging

Risks:

• Too-similar offerings may cannibalize each other
• Extra inventory costs if product line is too broad

📏 Product line dimensions

• Product line depth: Number of products in one line (Domino's has 5 pizza types)
• Product mix width: Number of product lines a brand carries (Domino's has 7 product lines)
• Don't confuse: Depth is within one category; width is across categories

🔧 Product line strategies

Two main strategies for adjusting product lines:

Product line filling: Adding products to existing line to block competitors

• Keeps competitors from entering your market space
• Example: Domino's many pizza toppings may be filling strategy
• Risk: Too many similar options may not increase overall sales

Product line stretching: Adding new product lines in three ways:

1. Stretching downward: Introducing less expensive line (Tesla Model 3 after Model S)
2. Stretching upward: Introducing more expensive line (Godiva gold collection)
3. Stretching both ways: Adding lines above and below simultaneously (Dell's range from everyday laptops to gaming laptops)

🔄 The product life cycle

🔄 Four stages of the life cycle

Product life cycle: maps the stages a product goes through, tracking its sales and profitability over time.

Stage 1: Introduction

• Consumer awareness is building
• Sales starting to grow
• High marketing investment in advertising and promotion
• Low profitability due to launch costs
• Goal: Encourage trial and adoption

Stage 2: Growth

• Increasing sales rapidly
• Copycat competitors may enter market
• Products require less marketing investment
• Higher profitability
• May invest in product improvements despite short-term profit reduction

Stage 3: Maturity

• Sales growth slows
• Profitability levels off or may decline with competition
• Typically the longest stage (years or decades)
• Low marketing investment to remind consumers
• Example: Kraft Macaroni & Cheese has stabilized as mature product

Stage 4: Decline

• Significant decrease in sales and profitability
• Product no longer sustainable
• Caused by: technology evolution, consumer taste shifts, rising costs, or competition
• Companies typically divest (sell or discontinue) products in this stage
• Example: Apple iPod declined when iPhone was introduced

⚠️ Important qualifications

• Products don't always move linearly through all stages
• Some go directly from introduction to decline without gaining traction
• Fads may grow rapidly then decline quickly
• Products can remain in maturity for decades

💰 Marketing strategies by life cycle stage

💰 Introduction stage strategies

Four pricing approaches based on price level and promotion investment:

Rapid skimming strategy: High price + extensive advertising

• Establishes product quickly in marketplace
• Attracts early adopters willing to pay premium
• Fends off potential competitors
• Example: Technology innovations, new truck/SUV models

Slow skimming strategy: High price + low advertising

• Used when competitor influx not anticipated
• Makes product exclusive
• Example: Tesla's initial launch strategy

Rapid penetration strategy: Low price + high promotion

• Volume sales increase market share quickly
• Encourages trial and brand switching
• Works with many competitors and price-sensitive customers
• Example: Old Navy's $8 jeans promotion at 1994 opening

Slow penetration strategy: Low price + low promotion

• Captures share slowly in markets not responsive to promotion
• For necessities without brand equity
• Example: Store brand butter at everyday low price

📈 Growth stage strategies

Focus on maximizing market share and scaling:

• Product improvement: Add features based on introduction stage lessons and to fend off competitors
• Example: OXO uses universal design to continuously innovate kitchenware
• Expand distribution: Bring product to more customers in various settings
• Example: Home Run Inn Pizza expanded from restaurants to grocery stores
• Shift promotion: Move message from awareness to preference for mass market
• Investment in advertising increases as product becomes mainstream

🛡️ Maturity stage strategies

Focus on defending market share:

Market modification: Extend product to new customers

• Example: Cheerios positioned to baby boomers as heart-healthy breakfast
• Opens new market to increase share

Product modification: Alter products to fit market

• Can modify function, quality, or style
• Example: Chobani changed yogurt container in 2015 to "flip" design allowing customers to mix toppings

📉 Decline stage strategies

Focus on protecting portfolio:

Divest: Sell brand or discontinue product

• Protects rest of portfolio
• Example: Coca-Cola discontinued New Coke in 2002 after 17 years

Harvest: Reduce all unnecessary expenses to retain remaining revenue

• Allows investment in more profitable products
• Products typically don't reemerge after harvesting
• Example: Smartphones are harvested as new models launch; refurbished units sold at discount

🏷️ Branding fundamentals

🏷️ What is a brand

Brand: an intangible asset with tangible value; a feeling made up of the organization's promotion efforts along with consumer meaning.

• Cannot see, touch, or put on balance sheet
• Often the most valuable part of a company
• The reason customers purchase and advocate
• Must be reinforced at every touchpoint
• Example: Harley-Davidson brand evokes specific images and feelings that give it marketplace currency

Branding: the process of developing a brand through engaging customers on personal level, connecting to emotions and needs.

💎 Brand value concepts

Brand value: The financial asset associated with a brand

• Measured when company is sold
• Subjective valuation based on visibility, loyalty, perception, plus financial measures like revenue
• Not on balance sheet but part of financial transactions

Brand equity: The additional value a brand has over a substitute

• The premium consumers will pay for one product over similar alternatives
• Example: Tide commands higher price than competitor detergents due to brand equity
• Measured by price difference between branded product and substitutes

🎯 Brand positioning approaches

Brand positioning: the way a brand signals emotions in consumers' minds.

Three methods:

1. Attribute-based: Position on one product/service aspect

   • Example: Taco Bell positioned for late-night cravings
   • Risk: Easily replicated by competitors

2. Benefit-based: How product solves consumer's problem

   • Example: Eggo positioned on convenience for morning rush
   • Works well for convenience products

3. Values-based: Links to consumer's personal beliefs (most robust)

   • Example: Ford's "Built Ford Tough" connects to American values of hard work and determination
   • Most effective because connects to consumer's sense of self

🔤 Brand name considerations

Strong brand names should:

• Evoke feelings harmonious with the brand
• Help consumers see the benefit
• Example: Frosted Mini-Wheats tells you it's wheat with sugar
• Translate effectively into various languages
• Be unique to that product
• Example: Pop-Tarts distinctive name reflects product popping from toaster

Trademarks: Legal protection for "word, phrase, symbol, design or combination that identifies your goods and services"

• Can trademark names, logos, packaging, specific colors
• Look for "TM" or "R" symbol near name/logo
• Prevents competitors from causing customer confusion through replication

🏢 Brand ownership types

🏢 Four forms of brand ownership

Type	Description	Advantages	Disadvantages
National brands	Name brands selling under corporate identity	Well-known; can charge premium prices	Some consumers unwilling to pay more
Private-label brands	Store brands similar to national brands	Attract price-sensitive customers	More difficult to build brand equity
Licensed brands	Brand name used by manufacturer for fee	Gain recognition from existing equity	Expensive licensing fees reduce profit
Co-brands	Two+ brands collaborate on product	Benefit from equity of both brands	Revenue split between brands

National brands (Heinz, Smartwater, Morton's Salt):

• Sell under corporate name and identity
• Command higher prices due to brand equity
• Pay for premium retail space for convenience
• Risk: Price-sensitive shoppers may avoid

Private-label brands (Walgreens "Wal-" prefix products):

• Store brands as alternatives to national brands
• 45% of brand switchers motivated by price
• Can develop loyalty if differentiated properly
• Must create relevant point of differentiation like national brands

Licensed brands (Tiffany, Kate Spade eyeglass frames):

• Brand provides likeness for fee
• Quick way to gain recognition
• Example: Luxottica manufactures frames for multiple fashion brands
• Risk: Licensing fees can reduce manufacturer profitability

Co-brands (Doritos Locos Tacos):

• Two brands collaborate for combined equity
• Works when brands have similar target audience
• Benefit from awareness and equity of both
• Risk: Revenue must be split, impacting financial results

🔧 Brand development strategies

🔧 Four approaches to adding products

Based on two dimensions: new/existing brand name and new/existing product category:

Line extensions: New products under existing brand in same category

• Example: Oreo adding holiday flavors
• Advantages: Sells to already-aware customers; low risk
• Risk: May overextend with too-similar products that don't increase total sales

Brand extensions: Existing brand name in new product category

• Example: Starbucks bottled coffees
• Advantages: Instant recognition and affinity; may increase sales rapidly
• Risk: If new product is inferior, entire brand portfolio at risk

Multibrands: New brand names in existing product category

• Example: Nabisco's Chips Ahoy, Oreo, Teddy Grahams—each with own equity
• Advantages: Each brand can have significant market share independently
• Risk: Doesn't work when products have small share or poor shelf space

New brands: Entirely different entity from parent company

• Example: Starbucks owns Ethos Water (kept separate name)
• Advantages: Works when new brand is distinct with defined target market
• Risk: Expensive to maintain separate marketing strategy over time

💙 Brand loyalty levels

Four categories of customer loyalty:

1. Switchers: Continually change purchasing behaviors

   • Motivated by price, convenience, or innovation
   • Example: Always buying lowest-price laundry detergent

2. Shifting loyals: Loyal to one product, then shift to another, then back

   • Move back and forth between products over time
   • Example: Purchasing Toyota, then Honda, then Toyota again

3. Split loyals: Have consideration set of 2-3 brands in category

   • Will buy from select set without hard-core loyalty to any
   • Can be converted to hard-core loyals with consistency and loyalty programs
   • Example: Loyal to Gap, Banana Republic, and J.Crew for workwear

4. Hard-core loyals: The "holy grail"—only purchase one brand in category

   • Make purchases with less price concern
   • Provide word-of-mouth marketing
   • Example: Dunkin' rewards these customers through DD Perks program

📊 Measuring brand effectiveness

📊 Three key brand metrics

Since brand sentiment is not easily quantifiable like sales, three measures help:

Brand lift: Measures perception changes over time

• Survey customers and noncustomers pre- and post-campaign
• Shows if campaign improved perceptions
• Important note: Positive perception doesn't guarantee purchase—only indicates positive feeling toward brand

Brand engagement: Measures emotional identification depth

• Deeply engaged customers make more purchases and become advocates
• Measured through: social media metrics, time on site, subscriptions, bounce rate
• Indicates strength of customer connection

Brand preference: Measures degree brand is preferred over category alternatives

• Most accurate predictor of sales among the three measures
• Focuses on behavior rather than attitudes
• Best assessed through marketing research

💰 Profit margin calculations

Two types measure profitability after expenses:

Gross profit margin: Net sales minus cost of goods sold (COGS)

• Formula: (Revenue - COGS) / Revenue
• Shows profit before deducting selling, general, and administrative costs
• Expressed as percentage

Net profit margin: Deducts all expenses from profitability

• Formula: (Revenue - All Expenses) / Revenue
• Includes: administrative, sales, amortization, debt, taxes, depreciation
• More accurate because considers all costs of producing and selling
• Expressed as percentage

Example: Sandwich shop with $6.25 revenue, $3.50 COGS, $0.75 admin/sales, $0.50 other expenses:

• Gross profit margin: 44%
• Net profit margin: 24%
• Net profit is more accurate measure

📦 Packaging and labeling value

📦 Packaging as brand extension

Package serves as container for product with functional purpose to protect from harm, but also extends brand identity.

The package-brand connection:

• Consumers see packaging before seeing product
• Must represent brand effectively
• Example: Apple's sleek white packaging with metallic logos creates experience
• Packaging is extension of brand identity

🎨 Sensory and perceptual benefits

Sensory experience:

• Colors, fonts, logos appeal to sight
• Packaging material appeals to touch
• Clues give customer sense of what to expect inside
• Example: LaCroix brightly colored cans create excitement feeling

Perceptual benefits:

• Packaging with logos can indicate customer status
• Signals customer's values about quality
• Example: Tiffany's "little blue box" indicates status and quality
• The specific blue color is copyrighted as intellectual property

🛡️ Functional packaging benefits

Six key functional purposes:

1. Storage: Protects product in transit from manufacturer to customer

   • Foam and cardboard shield from damage and keep clean

2. Convenience: Easy for customers to carry and store at home

   • Example: Tide Pods plastic container with child-locked lid

3. Safety: Protects customers from harm

   • Example: Child-proof lids on cleaning products

4. Usability: Aids in product use or becomes part of experience

   • Example: Drinkable yogurt bottles become part of consumption experience

5. Legality: Ensures compliance with laws

   • Federal Trade Commission Act prohibits false/misleading labels
   • Allows clear, accurate, transparent communication

6. Differentiation: Sets brand apart through design or function

   • Example: Potato chip bags filled with air deliver uncrushed chips
   • Example: American Girl doll boxes with windows serve as keepsakes

🌍 Environmental and ethical packaging concerns

🌍 Environmental impact issues

Packaging contributes significantly to environmental problems:

Waste concerns:

• Discarded packaging found in: landfills, street litter, water sources
• Single-serve plastics cannot be recycled
• Cardboard and foam from electronics end up in landfills
• Harms environment and wildlife

Resource depletion:

• Manufacturing depletes critical resources (trees)
• Adds to air pollution
• Energy used for packaging adds to product's environmental burden

♻️ Sustainable packaging strategies

Companies innovating to address environmental concerns:

Material substitution:

• Fiber-based packaging replacing plastics
• Compostable and recyclable options
• Example: Chipotle adopting sustainable packaging
• Example: Boxed Water Is Better uses 75% paper, 100% recyclable cardboard

Cradle-to-cradle design: Eliminates waste from package life cycle

• Designed to be reused or 100% recycled
• Imitates nature's regenerative processes
• Keeps biological materials in biological cycle
• Technical materials flow in technical cycle for new products
• Don't confuse: This is circular design, not just recyclable

Reduction strategies:

• Use only necessary packaging components
• Reduce packaging to minimum needed
• Example: Boxed Water ships flat to reduce truck space and carbon footprint

E-commerce considerations:

• Must balance: product protection, efficiency, cost, sustainability
• Use recycled or recyclable materials
• Provide return-ready packaging (same package for returns)

⚖️ Ethical packaging obligations

Beyond sustainability, brands have ethical responsibilities:

Accurate representation:

• Must not mislead about size, quality, ingredients, health claims
• Graphics must properly represent product inside
• Risk: Package photo showing larger/better product than reality

Product protection:

• Packaging must ensure product survives entire journey
• From manufacturer → wholesaler → retailer → customer home
• Example: Egg cartons minimize damage despite fragility
• Unethical to reduce packaging to save money if it leaves customer with damaged product

Safety information:

• Must inform customers of important safety issues
• Example: Choking hazard warnings for small parts
• Protects vulnerable populations like children

Stakeholder considerations:

• Must consider: government, advocacy groups, NGOs
• Ethical packaging may become legal mandate
• Brands should prepare now for sustainable future

This comprehensive view shows how products, branding, and packaging work together to create value while navigating life cycle stages and meeting ethical obligations to consumers and society.

🧭 Overview

🧠 One-sentence thesis

Successful new product development requires navigating multiple stages from idea generation through commercialization while balancing factors like consumer needs, market timing, and resource synergy to achieve competitive advantage.

📌 Key points (3–5)

• New product categories: Five types exist—new-to-world, new-to-firm, product line additions, improvements/revisions, and repositioned products—each requiring different strategies.
• Customer perception of newness: Innovations range from discontinuous (radical behavior change required) to continuous (minimal habit change) to dynamically continuous (moderate adjustment).
• Nine-stage development process: From idea generation through evaluation of results, each stage filters and refines concepts to maximize success probability.
• Success vs. failure factors: Success correlates with unique benefits, proper planning, and synergy; failure stems from misunderstanding needs, wrong targeting, or poor timing.
• Common confusion: Not all "new" products are equally novel—a product can be new to a company but already exist in the market, requiring different adoption strategies than truly innovative offerings.

🎯 Categories and perceptions of new products

🎯 Five product categories

The excerpt identifies distinct types of new products based on their relationship to existing markets and company offerings:

Category	Definition	Example from excerpt
New-to-world	Create entirely new markets	Biomagnetic ear stickers, portable blenders
New-to-firm	New to company but exist elsewhere	Nature Valley adding granola bars to cereal line
Product line additions	Extensions within existing lines	Coca-Cola Cherry, Vanilla varieties
Improvements/revisions	Enhanced versions of current products	Meta's Oculus Quest 2 updating original Quest
Repositioned	Retargeted for different use	Bayer aspirin for heart attack prevention

Why this matters: Understanding the category helps determine development resources needed, competitive positioning, and consumer education requirements.

📊 Three levels of innovation newness

Discontinuous innovation: New-to-the-world products requiring significant consumer behavior changes when adopted.

Continuous innovation: Marginal product changes that don't alter customer habits.

Dynamically continuous innovation: Some consumer habit changes necessary, but not as extensive as discontinuous innovation.

Plain language: Think of a spectrum—at one end, smartphones completely changed how we communicate (discontinuous). At the other end, sharper TV pictures didn't change viewing habits (continuous). In the middle, personal computers changed typing from typewriters but kept the same keyboard layout (dynamically continuous).

Don't confuse: The product category (new-to-world vs. new-to-firm) with the innovation level (discontinuous vs. continuous). A new-to-firm product might only be continuous innovation if similar products already trained consumers.

🎢 The nine-stage development process

🎢 Early stages: Generating and filtering ideas

Stage 1: Idea generation

• Goal: Create as many ideas as possible from internal sources (R&D, employees) or external sources (customers, suppliers, competitors)
• Example from excerpt: A food company marketer identifies a gap for high-protein freeze-dried yogurt powder for smoothies

Stage 2: Idea screening and evaluation

• Purpose: Filter ideas to those most likely profitable, dropping less favorable ones
• The team sifts through numerous product concepts to reach the best idea

Stage 3: Concept development and testing

Product idea: A new product that a company could potentially offer to the market.

Product concept: The perception of a new idea or innovation.

Concept testing: A market research method in which customers are presented with a description of a product or service.

The excerpt illustrates this with three concepts for yogurt powder:

1. Instant breakfast drink
2. High-protein snack more nutritious than plain juice
3. Post-workout protein replenishment for athletes

Each concept defines different competition—breakfast foods, beverages, or protein shakes respectively.

Testing process: Present target customers with descriptions and ask questions like "How likely would you be to purchase?" using five-point scales (definitely would purchase to definitely would not purchase).

🏗️ Middle stages: Strategy and analysis

Stage 4: Market strategy development

• Develop preliminary marketing strategy addressing target market, positioning, pricing, distribution, promotion, budget
• Set short- and long-term goals for sales, market share, profit

Stage 5: Business analysis

• Assess business appeal: Will sales be sufficient for desired profit?
• Two key analyses:
  • Payback: Time frame to recover investment
  • Break-even analysis: Units that must be sold before making profit

If anticipated profits don't satisfy company objectives, the concept is shelved.

🔬 Later stages: Building and testing

Stage 6: Product development

Prototype: A physical version of the product concept.

The excerpt warns that sometimes concepts can't translate into commercially feasible products. Example: Maxwell House determined a desired coffee blend was too expensive to produce commercially, so they changed it—but the new taste didn't meet expectations and flopped.

Testing methods: Functional tests (Shaw Industries pays temporary employees to walk on carpet samples eight hours daily) and customer tests (Gillette volunteers test razors and complete questionnaires).

Stage 7: Test-marketing The excerpt describes several methods:

• Sales-wave research (least costly): Consumers try product free, then are reoffered it or competitor's product at reduced price multiple times to measure selection and satisfaction
• Controlled test-marketing: Company arranges for certain stores to carry product, manages shelf position and pricing, measures scanner results
• Full test-marketing (most expensive but best): Launch in representative cities with full advertising campaign before national/global scale
• Simulated test-markets: Expose consumers to simulated situations, interview at concept stage and after use
• Crowdsourcing: Use large group input, particularly useful for apps and websites

Top US test-market cities mentioned: Nashville, Cincinnati, Indianapolis, Charleston, Jacksonville.

🚀 Final stages: Launch and evaluation

Stage 8: Commercialization

• Launch with full-scale production, distribution, advertising, sales promotion
• Cost varies by product, industry, and competition

Stage 9: Evaluation of results Monitor questions like:

• Is the product accepted by consumers?
• Is there sufficiently high demand, sales, profits?
• Are competitors introducing similar products?

Make changes as needed in marketing plan and marketing mix strategy.

Don't confuse: Test-marketing (Stage 7) with commercialization (Stage 8). Test-marketing is limited-scale to gauge viability; commercialization is full launch.

📏 Measuring new product success

📏 Key performance indicators (KPIs)

Product metrics: Quantifiable data that a business tracks and analyzes to determine how successful its new product(s) are.

The excerpt identifies several important metrics:

R&D spending as percentage of sales

• Compares effectiveness between companies in same industry
• Formula: R&D dollars spent ÷ total sales
• Note: Varies widely by industry (pharmaceutical/software spend more than consumer products)

Current year percentage of sales

• Calculates cost of goods sold, inventory, cash as percentage of sales
• Applies that percentage to future sales estimates
• Described as "quick and dirty" estimation method

Time to value (TTV)

• How long until new users recognize product value (the "aha!" moment)
• Varies by product: Kindle book downloads in seconds vs. magazine subscriptions taking days/weeks

Product adoption rate

• Process by which people learn about product and start using features
• Formula: Number of new users ÷ total number of users

Return on investment (ROI)

• Measures profitability of investment
• Formula: (Sales growth - marketing costs) ÷ marketing costs × 100
• Example from excerpt: $100,000 sales growth with $20,000 marketing cost = 400% ROI

✅ Success factors for new products

✅ What makes products succeed

The excerpt identifies a "recipe for success" with key factors:

Delivering unique benefits to users

• Product design, features, and benefits are often the bellwether
• Research shows innovative products with unique benefits have five times the success rate of products with fewer differentiation elements
• Example: Dollar Shave Club succeeded by recognizing Gillette's prices were too high, men prefer not shopping in stores for shaving supplies, and subscription boxes were gaining traction

Planning before development

• Thoroughly define product before development: target market, product concept, customer needs/wants, requirements
• Research demonstrates: Products with well-defined predevelopment activities had 75% success rate vs. just over 31% for products lacking these activities

Technological synergy and quality

Technological synergy: When a new product is built on the firm's existing technological resources.

Products with strong fit between project needs and company's existing technological/production resources are typically much more successful. The further from current technology, the less likely success.

Marketing synergy and quality

Marketing synergy: The fit between the needs of the new product development project and the company's sales, advertising resources, customer service capabilities, distribution, and marketing research.

Products where marketing synergy existed were 2.3 times more likely to be successful than products lacking it.

Market attractiveness

• Considers: short/long-term profit, market growth rate, current competition, cost of entry, customer need satisfaction
• Example: KFC's 11 Herbs and Spices Firelog addressed falling holiday sales by making homes smell like fried chicken—sold out in three hours with 5,000 user-generated social posts

❌ What causes products to fail

Failure statistics: The excerpt cites Harvard professor Clayton Christensen suggesting 30,000 new products launch yearly with 95% failure rate. Product Development and Management Association found rates varying from 35% (healthcare) to 49% (consumer goods).

Failure to understand consumer needs and wants

• Example: Google Glass "smart glasses" (2013) claimed "technology should work for you," but consumers didn't want or need the product
• Other devices had longer battery life, faster processors, better cameras, lower prices
• Google discontinued development in 2015

Targeting the wrong market

• Even great technology fails if you can't reach right people at right time
• Example: Microsoft's Zune (2006) tried challenging Apple iPod but Microsoft admitted it was "just chasing Apple" with little incentive for consumers to switch

Lack of product point of difference

• Products must satisfy unique need or satisfy existing function in new ways
• Example: Google+ (2011) couldn't distinguish itself from Facebook
• Google shut down personal accounts in 2019

Prolonged development/delayed market entry

• Taking too long allows economy downturns, consumer need changes, or new competitors
• Example: Amazon Fire Phone took four years to develop; by 2014 launch, Apple and Android had several smartphone generations available
• Amazon ceased production after just one year

Poor pricing or cost structure

• Adding too many innovative features increases production costs
• Market may not be willing to pay more for "new and improved" product

Don't confuse: Factors contributing to success with factors preventing failure—they're not simply opposites. Success requires proactive strengths (unique benefits, synergy); failure often results from reactive mistakes (wrong targeting, poor timing).

👥 Consumer adoption process and categories

👥 Five stages consumers go through

Consumer adoption process: Stages consumers go through in adopting a new product (also called "hierarchy of effects model").

Stage 1: Product awareness

• Creating awareness that product is available
• Strategy might include social media presence to reach many customers at low cost
• Example: Seeing TV commercial for mouthwash that whitens teeth while rinsing

Stage 2: Product interest

• Consumers aware and intrigued
• Company should provide accessible information: website, blog posts, tutorials, videos
• Example: Calling your dentist brother to ask about the mouthwash product

Stage 3: Product evaluation

• Consumers examine, compare, evaluate before buying
• Often look to social media, online reviews, recommendations
• Example: Internet search to read mouthwash reviews before purchasing

Stage 4: Product trial

• Consumer actually tries product
• Might be free sample in store or "100% money-back guarantee" trial
• Stage where marketers hope product delivers on expectations

Stage 5: Product adoption

• Consumers ready to buy online or in retail store
• Marketers should make acquisition and payment process seamless

🌊 Diffusion of innovation characteristics

Diffusion of innovation: Theory about how products gain momentum and spread through a population or society.

Five characteristics affecting adoption rate:

Relative advantage: How much better is the new product than what it replaces? (Based on consumer perception; easier to recognize advantages = quicker adoption)

Compatibility: Level at which innovation fits into society due to economic, lifestyle, cultural reasons. Example: PCs were compatible with middle-class lifestyles (quick adoption) vs. birth control incompatible with some religious beliefs/cultural values (slow adoption)

Complexity: How difficult for adopter to understand and use? Higher difficulty = less likely adoption. Example: Returning products because too complicated to use.

Divisibility: Ability to give product a "test run" before purchasing. Example: Touchless test drives during COVID-19—car brought to shopper's home, wiped with disinfectant, consumer drives alone while delivery person waits.

Communicability: Ability to effectively communicate benefits and results, when observable and describable to others. Example: Would you share Peloton bike results with others if results weren't favorable?

Important note: Diffusion is a two-step process:

1. From mass media (advertising) to individual
2. Personal influence: Communication between individuals where people affect others' purchasing decisions due to authority, knowledge, or position (Example: Kylie Jenner with 250+ million Instagram followers)

👤 Five adopter categories

Scholar Everett Rogers (1962) identified five categories:

Category	Characteristics	Percentage	Example behavior
Innovators	Risk-takers, higher income, well-educated, buy immediately	~2.5%	Lines around Apple stores on release day
Early adopters	Opinion leaders, well-educated, best target for innovations	~13.5%	Friends/neighbors seek their product advice
Early majority	Above-average education/income, followers, accept innovation before "average person"	~34%	Look to innovators/early adopters before buying
Late majority	Slow to catch on, limited income/education, unwilling to take chances	~34%	Buy only after half the population does
Laggards	Leery of new ideas, more in tune with past than future	~16%	By the time they adopt, new version already replacing it

Don't confuse: Someone being a laggard in one category with being a laggard in all categories. The excerpt asks: "Can someone be a laggard in one category and an early majority in another?" (This is posed as a discussion question, suggesting the answer is yes.)

⚖️ Ethical considerations

⚖️ Intellectual property protection

Key definitions:

Patents: Secure the right to exclude others from making, using, or offering for sale the invention you've developed. US patents generally last 20 years from application filing.

Copyrights: Original works of authorship including software, songs, television shows, motion pictures.

Trademarks: Words or symbols legally registered or established by use as representing a company or product.

Intellectual property (IP): Collective term for patents, copyrights, and trademarks.

Real consequences: The excerpt notes "Big Tech" companies like Apple, Microsoft, Google have paid hundreds of millions in patent lawsuits. Examples:

• March 2021: Jury ruled Apple infringed patents, ordered to pay $300+ million to Personalized Media Communications LLC
• 2021: Judge ruled Google infringed five Sonos patents, potentially banning imports of Google Home and Pixel smartphones

Penalties include: Civil damages, lost profits, injunctions, payment of other party's attorneys' fees, even felony charges with prison time.

⚖️ Three methods of exercising due care

Conduct a trademark search

• Know if anyone else already uses the mark before investing time/resources
• Example: Takeda Pharmaceuticals required to change antidepressant drug name from Brintellix to Trintellix due to consumer confusion with anti-blood-clotting drug Brilinta

File a trademark application

• Provides bona fide statement of intention to use mark within six months

Conduct a patent search

• For technological/scientific inventions
• Patent excludes others from making, using, selling claimed invention for 20 years

⚖️ Personal data ethics

Companies collecting personal data must consider:

• What information is embedded in systems design
• How much data is really needed from users
• Where data will be stored
• When and how it will be disposed of after use

Example: Meta (Facebook)

• Came under fire including whistleblower scandal revealing company "chooses profits over safety"
• Hired Zvika Krieger to Responsible Innovation Team (RIT) to focus on ethical issues in engineering and design
• RIT involved in decision to disallow filtering dating app results by race
• Note: Krieger departed Meta and RIT was dissolved in 2022, with members moving to other areas where they might influence decisions more directly

Don't confuse: Legal compliance with ethical responsibility. The excerpt emphasizes companies must go beyond avoiding IP violations to carefully considering data collection, storage, and disposal practices.

🧭 Overview

🧠 One-sentence thesis

Services—intangible economic activities that dominate the US economy—require distinct marketing approaches because they are produced and consumed simultaneously, vary in quality, and cannot be stored, making customer satisfaction dependent on employee performance and organizational support systems.

📌 Key points (3–5)

• Services dominate the economy: Service industries contribute 67% of US GDP versus only 10.8% for manufacturing, making understanding service marketing critical.
• Four defining characteristics: Services are intangible (cannot be touched/seen before purchase), inseparable (produced and consumed simultaneously), variable (quality depends on who/when/where), and perishable (cannot be stored).
• Employee satisfaction drives profit: The service-profit chain model shows that internal service quality → employee satisfaction → customer value → customer loyalty → profitability.
• Common confusion: People-based vs. equipment-based services—the distinction is whether people or machinery primarily deliver the service, though both may be present.
• Five service gaps exist: The Gap Model identifies where service failures occur, from misunderstanding customer expectations to failing to deliver on promises.

🏷️ What services are and how they're classified

🏷️ Services defined

Services: the nonphysical, intangible economic activities.

• Services contrast with physical goods (tangibles)—things we can touch or handle.
• Examples include education, banking, medical treatment, transportation, insurance.
• More than half of the US workforce produces "intangibles."
• Marketing challenge: consumers cannot touch or see the service before purchase, making it difficult to examine or evaluate benefits.

📊 Classification by delivery method

Classification	Definition	Subcategories	Examples
People-based services	People primarily deliver the service	Unskilled labor<br>Skilled labor<br>Professionals	Parking attendants, babysitters<br>Plumbers, hairstylists<br>Doctors, attorneys, professors
Equipment-based services	Equipment/machinery performs service tasks	Automated<br>Unskilled operator<br>Skilled operator	Car washes, parking meters<br>Dry-cleaning equipment<br>X-ray machines, ultrasound

🔄 Lovelock's four categories

Christopher Lovelock proposed categorizing services by two dimensions: the direct recipient and the nature of the service act.

Category	What it targets	Production/consumption	Examples
People processing	Customer's physical body	Simultaneous	Barbershops, restaurants, physical therapy
Possession processing	Customer's physical possessions	Separate	Oil changes, dry cleaning
Mental stimulus processing	Customer's mind	Requires mental effort	Education (reading textbooks), psychotherapy
Information processing	Intangible assets/information	Most intangible	Financial advice, legal services, banking

• The first two involve tangible actions toward physical things.
• The last two involve intangible actions toward mind or information.
• Example: In people processing, you must be present at the service facility; in possession processing, you drop off the item and leave.

🎯 Four critical characteristics of services

🌫️ Service intangibility

• Services cannot be seen, tasted, felt, smelled, or heard before purchase.
• Increases uncertainty for consumers choosing between providers.
• Services can seldom be tried out, inspected, or test-driven.
• Customers buy a promise and must rely on marketers' word.
• Marketing solution: Create physical "evidence" to help consumers picture the service—e.g., hair salons use imaging software to show how different styles would look; eyeglass companies offer virtual try-on mirrors.
• Example: Automobile insurance is completely intangible except for the physical policy document; what you've paid for is the company's promise to pay claims.

🔗 Service inseparability

Service inseparability: services are sold, then produced and consumed simultaneously; they cannot be separated from service providers.

• Differs from physical products, which follow: production → storage → sale → consumption.
• Services follow: sale → production and consumption (simultaneous).
• You cannot separate delivery from the provider's presence—cannot get money from a bank without an ATM on weekends, cannot get a haircut without the stylist present.
• Marketing implication: Service providers (frontline employees) are physically connected to the service and evaluated on communication skills, language, demeanor, hygiene, and clothing.
• Their conduct may determine likelihood of repeat business.
• Other factors: customer cooperation/participation and influence from other customers present.

🎲 Service variability

Service variability: the quality of service depends on who provides it, when it is provided, and how it is provided.

• Quality varies because services are provided by humans who have different energy levels and states of mind.
• Example: One visit to a restaurant has stellar service (cheerful hostess, attentive waitstaff, prompt seating); the next visit has slower, less cheerful service—same restaurant, different experience.
• Don't confuse with products: Physical products like iPads have little variability; each unit is built to specifications and virtually identical.
• Marketing challenge: Standardize processes where possible, conduct frequent audits, use customer surveys, and prioritize customer feedback.
• Example: Delta Air Lines prides itself on exceeding expectations, but service may vary between employees depending on their personal state.

⏳ Service perishability

Service perishability: services cannot be produced and stored for later use or sale.

• Services are performances that occur at a specific time.
• Missed concert due to traffic? The ticket cannot be used for tomorrow's performance.
• Hotel rooms not occupied, airline seats not purchased, unused gym memberships cannot be reclaimed.
• Marketing challenge: Perishability and fluctuating demand create problems in capacity planning, scheduling, product planning, and pricing.
• Marketing solution: Manipulate demand—e.g., restaurants offer "happy hours" with discounted food/drinks during the late afternoon/early evening lull before dinner rush.

⛓️ The service-profit chain model

⛓️ What the model shows

Service-profit chain model: establishes relationships between profitability, employee satisfaction, loyalty, and productivity.

• Core concept: Happy workers make happy customers who keep coming back and tell their friends.
• All points link together, are equally important, and depend on one another—no shortcuts to profitability.
• Created by Harvard researchers in the 1990s.

🔄 The chain's seven links

The model flows in this sequence:

1. Internal service quality → 2. Employee satisfaction → 3. Employee retention and productivity → 4. External service value → 5. Customer satisfaction → 6. Customer loyalty → 7. Profit and growth

🏢 Internal service quality

• The support frontline employees receive from the rest of the organization.
• Example: In restaurants, "back of house" (cooks, dishwashers, bussers) supports "front of house" (servers, hosts).
• If silverware is dirty or steak isn't prepared correctly, both customer and server satisfaction suffer.
• Solution: Create an employee feedback loop so frontline employees can communicate problems.
• Research shows 100% of problems are known by employees, but only 4% are known by top management (the "Iceberg of Ignorance").

😊 Employee satisfaction

• The level of happiness or contentment employees have with their jobs and work environment.
• Direct result of company policies and support services that empower employees.
• Example: Zappos made Fortune's "100 Best Companies to Work For" list; late CEO Tony Hsieh focused on team and customer happiness, encouraging employees to go above and beyond.

🔄 Employee retention and productivity

• Employee retention: keeping employees motivated so they choose to remain with the company.
• Turnover costs six to nine months of an employee's annual salary (SHRM estimate).
• Employee satisfaction is inversely related to turnover: ↑ satisfaction = ↓ turnover.
• Low turnover leads to increased organizational productivity (efficiency and output).
• Example: Taco Bell discovered restaurants with high employee retention had twice the sales and 55% higher profits than high-turnover stores; in response, the company gave employees more decision-making latitude.

💎 External service value proposition

External value proposition: the promise of value that a customer expects a business to deliver.

• Employees (frontline and behind-the-scenes) play a major role in ensuring customer value.
• Example: Getting a haircut—quality matters, but so does the experience from the person who books appointments, checks you in, keeps the salon clean, and processes payment.
• Satisfied, motivated employees genuinely care about the company and convey this honestly and positively to consumers.

😊➡️❤️ Customer satisfaction and loyalty

• Customer satisfaction: measure of how happy customers are with products, services, and capabilities.
• Customer loyalty: ongoing positive relationship between customer and business; drives repeat business.
• These two are directly linked: dissatisfied customers will not be loyal and likely won't return.
• Greater satisfaction → more likely to return + spread positive word-of-mouth as unofficial "ambassadors."
• Definition of loyalty: when a person chooses the same company for subsequent services even if more expensive than competitors.

💰 Profit and growth

• In the service-profit chain model, profit is the result, not the goal.
• Formula: Happy employees → happy customers → repeat business + word-of-mouth → profit and growth.
• Example: Ritz-Carlton empowers employees to spend up to $2,000 to solve customer problems without manager approval; this makes sense when average customer lifetime value is $250,000.

🔺 The Service Marketing Triangle

🔺 The triangle's structure

Service Marketing Triangle: a visual model showing the importance of people in a company's ability to keep its service promises.

• Think of it as a three-legged stool: remove one leg and the stool won't stand.
• Three aspects must be achieved or exceeded for customer delight.
• The three "parties": the company, employees, and customers.

📢 External service marketing—making promises

• Promotion of services in the external environment.
• Uses traditional techniques: pricing, advertising, direct marketing, public relations, personal selling.
• Aims: create/increase awareness, set price expectations, set service delivery expectations.
• Example: Restaurant's Facebook page touts extensive wine list and experienced servers who recommend pairings.

🏠 Internal service marketing—enabling promises

• Employees are "internal customers."
• Process of motivating employees to deliver customer value and ensure satisfaction by acting as a team.
• Applies to all employees, including behind-the-scenes staff who support frontline workers.
• Key components: motivating employees, training in customer satisfaction, ongoing communication of goals, good pay and working conditions.
• Example: Restaurant owner holds "huddles" at shift start to train servers about daily specials and wine pairings.

🤝 Interactive service marketing—keeping promises

• Communication between service provider and customer (the service encounter).
• Where external marketing promises are upheld, exceeded, or broken by employees.
• Sets short-term and long-term customer satisfaction.
• When customers are happy short-term, they're more likely to be happy long-term.
• Example: Restaurant servers give full descriptions of menu items and daily specials, recommend wine pairings, leading to more satisfying dining experience.

📏 The Gap Model of Service Quality

📏 What the model measures

Gap Model of Service Quality: demonstrates that customer satisfaction is a function of perception.

• Also called Customer Service Gap Model or Five-Gap Model (proposed 1985).
• If service meets or exceeds expectations → satisfied; if not → dissatisfied.
• Dissatisfaction likely results from one of five customer service gaps.

🔍 The five gaps

Gap	Name	Definition	Example
Gap 1	Knowledge gap	Difference between customer expectations and what managers think they expect	Hotel manager thinks guests want hot breakfast, but guests actually care more about room cleanliness or Internet speed
Gap 2	Policy gap	Difference between management's understanding and translation into service delivery policies	Management wants phones answered "quickly" but doesn't specify whether that means 2, 4, or 6 rings
Gap 3	Delivery gap	Difference between service standards/policies and actual delivery	Policy says answer phones by second ring, but employees let phones ring much longer
Gap 4	Communication gap	Difference between service delivery and what is communicated to customer	Coffee shop advertises gluten-free food but doesn't deliver; promise vs. reality mismatch
Gap 5	Customer gap	Difference between customer's expectations and their perception of experience	Customer perception is subjective, shaped by word-of-mouth, personal needs, past experiences

🔍 Gap 1: Knowledge gap

• Company doesn't know exactly what customers want.
• Causes: lack of communication between frontline employees and management, inadequate market research, failure to listen to customer feedback/complaints.

📋 Gap 2: Policy gap

• Management understands customer needs but hasn't established performance standards ensuring appropriate employee behaviors.
• Key issue: lack of specificity in policies.

🚚 Gap 3: Delivery gap

• Frontline workers know what to do but aren't doing it.
• Causes: improper training, lack of capability, unwillingness to meet standards, staff shortages.
• Example: Southwest Airlines has no delivery gap—its mission is "dedication to highest quality Customer Service with warmth, friendliness, pride, and Spirit"; it doesn't overhype, so it delivers on promises (33.9% excellence rating vs. other airlines).

📣 Gap 4: Communication gap

• Company promises one thing but delivers another.
• What the company promised vs. what it delivered.
• Failure to deliver on promises hurts credibility.
• Quote: "A brand is two words: the 'promise' you telegraph, and the 'experience' you deliver."

👤 Gap 5: Customer gap

• Customer perception is totally subjective.
• Shaped by word-of-mouth, personal needs, past experiences.
• Problem: everyone perceives reality differently—reality is fixed, but perception of reality is variable.

⭐ The RATER framework of service quality

⭐ What RATER measures

RATER framework of service quality: five dimensions customers use when evaluating service quality.

• Identified by researchers Zeithaml, Parasuraman, and Berry in Delivering Quality Service.
• These five dimensions result in service excellence and lead to higher customer loyalty.
• RATER stands for: Reliability, Assurance, Tangibles, Empathy, Responsiveness.

🔧 Reliability

• Organization's capability to provide accurate, dependable, on-time service.
• Consistency is critical.
• Companies providing on-time, error-free service tend to have repeat customers.
• Research: service reliability is three times more important than latest equipment or flashy uniforms.
• Key question: Do you deliver as promised?

🛡️ Assurance

• Degree to which the organization inspires trust in customers.
• Customers expect service providers to be experts.
• Communicating expertise is important; if customers aren't aware, they have less confidence.
• Examples of communicating expertise: plumber's card says "licensed, bonded, insured"; hairstylists display state licenses; doctors have framed diplomas.
• Helps shape expectations and influence assessments before service is performed.

🏢 Tangibles

• Physical appearance of facility and employees.
• Does your organization present itself professionally?
• Hard to define because it depends on customers' subjective perceptions.
• Example: Fine-dining restaurant tangibles include knowledgeable uniformed staff, soft lighting, background music, appealing menu, clean restrooms.
• Example: Mayo Clinic displays Warhol prints, Chihuly sculptures, 500 original art pieces from 70 US artists; professionally attired staff projects caring and expertise.
• Challenge: Customers may not notice positive tangibles unless feedback is negative; listening to complaints is critical.

💚 Empathy

• Focusing on customers attentively to ensure they receive caring and distinguished service.
• Not just efficiency/thoroughness—also about "connecting" with customers and making them feel valued.
• "It's not what was said, it's how it was said."
• Example: Restaurant busser cleans spill effectively and efficiently but doesn't make eye contact, smile, or ask if you need anything—tasks performed fully, but you didn't feel they cared.

⚡ Responsiveness

• Service staff's desire to treat customers with respect and provide satisfactory, quick service.
• Focuses on promptness and willingness.
• Customers must get quick service without delay, with effort showing the company genuinely wants to help.
• Directly related to wait time for answers/solutions.
• Example: Calling a company and navigating an automated phone system with multiple prompts ("press 1 for...") frustrates customers and shows poor responsiveness.

🧭 Ethical considerations in service

🧭 Why ethics matter

• Over half of US consumers stop buying from companies they perceive as unethical (Mintel research).
• Ethics are central to consumers, employees, and company reputation/customer loyalty.
• "Just OK is not OK" when it comes to ethical culture.

📋 How to ensure ethical service

National Ethics Association (NEA) suggestions:

1. Make customer service a core component of your ethics program.
2. Promote values and ethics; include them in rules for frontline workers with consequences.

Steps include:

• Identify unethical customer service behaviors (lying, failing to show sensitivity).
• Train employees on an ongoing basis in desired behaviors.
• Ensure customers know promises are commitments, not empty words.
• Monitor interactions between frontline employees and customers to spot ethical gaps, especially during high stress/volume.
• Lead by example—managers must "walk the talk," not just "talk the talk."

🏢 Company examples

Royal Caribbean Group:

• Code of Business Conduct and Ethics connects core values (fairness, integrity, honesty, trustworthiness) to all actions.
• CEO: "Simply complying with the law is not enough; we need to be ABC (Above and Beyond Compliance)."
• Established ethics hotline managed by third-party provider; employees can anonymously report concerns 24/7 by phone or Internet.

Nasco Gulf (insurance agent in Dubai):

• Customer service mission: "provide customers with timely, responsive service with integrity, simplicity, and passion for excellence while meeting or exceeding expectations."
• Three principles: Trust, Understand, Resolve.
• Values: word is good, bold partner, works to earn loyalty, focuses on what matters.

🧭 Overview

🧠 One-sentence thesis

Price is the only revenue-generating element of the marketing mix and must balance perceived customer value with profit maximization through careful analysis of costs, demand, competition, and strategic objectives.

📌 Key points (3–5)

• Price as dual value creator: Price creates perceived value for customers while harvesting monetary value (revenue) for the company—unlike other marketing mix elements that only represent costs.
• The five critical Cs framework: Cost, customers, channels of distribution, competition, and compatibility must all be considered when setting prices.
• Demand elasticity distinction: Elastic demand means quantity changes significantly with price changes (many substitutes, optional goods); inelastic demand means quantity changes little (necessities, few substitutes).
• Common confusion—psychological vs. actual value: Buyers don't care about a company's costs; they evaluate price through perceived benefits minus perceived costs, influenced by psychological factors like price anchoring and odd-even pricing.
• New vs. existing product strategies: New products typically use price skimming (high initial price, lowered over time) or penetration pricing (low initial price to capture market share), while existing products use tactics like bundle pricing and captive pricing.

💰 Price fundamentals and the marketing mix

💰 What price means

Price: the exchange of something of value between a buyer and a seller.

• Price takes many forms depending on context: tuition (education), fee (legal services), toll (road use), rent, etc.
• All these terms represent the same basic exchange concept.
• Price is the only marketing mix element (of the 4Ps: product, price, promotion, place) that directly produces revenue; all others are costs.

📊 The profit equation

Profit: the financial gain of a company, or the difference between the amount earned and the amount spent.

Formula: Profit = Total Revenue − Total Costs

• Total revenue = sales price × quantity sold
  • Example: Wireless earbuds at $19.99 × 5,000 units = $99,950 revenue
• Total costs = fixed costs + variable costs
  • Fixed costs: expenses that don't change with production volume (e.g., building lease, salaries)
  • Variable costs: expenses that change with production volume (e.g., component parts, materials)
  • Example: If mortgage is $5,000/month, it stays $5,000 whether you make 1 unit or 1 million units (fixed). If materials cost $1.50/unit, making 10,000 units costs $15,000 in materials (variable).

Don't confuse: Profit maximization with simply covering costs—marketers must set prices that both appeal to buyers and generate optimal profit, not just break even.

🎯 The price-value equation for buyers

Formula (from buyer perspective): Value = Perceived Benefits ÷ Perceived Costs

• Perceived benefits can include: quality, convenience, brand status, time saved, durability
• Perceived costs include: the price tag, time to acquire, effort, opportunity cost of alternatives
• Value is subjective and varies by buyer and situation.

Example: A $11,000 Chanel handbag may represent high value to a buyer who perceives benefits of quality craftsmanship, longevity, and social status. The convenience store milk at higher price than the grocery store five miles away offers value through time saved, even at higher cost.

🧠 Psychology of pricing

⚓ Price anchoring

Price anchoring: relies on the first piece of information a buyer sees, which acts as a frame of reference for expected price.

• The initial "anchor" price sets buyer expectations.
• When Steve Jobs introduced the iPad in 2010, he showed "$999" on screen first, then revealed the actual price of "$499"—making buyers feel they were saving $500.
• Buyers didn't know the iPad's true worth; the anchor created the perception of value.

⏰ Artificial time constraints

Artificial time constraints: pricing strategy that triggers urgency in buyers' minds.

• Creates fear of missing out (FOMO).
• "One-day sale" or "limited time offer" pushes consumers to buy immediately rather than deliberate.
• Retailers use this tactic frequently, so consumers often find the same "limited" prices repeatedly throughout the year.

👁️ Price appearance

Price appearance: the way a customer perceives price based on visual representation.

• Longer prices (more digits, syllables) seem more expensive because they take longer to read and mentally process.
• $1,555.83 feels more complicated and expensive than $1555 (no comma, no cents).
• Fancy restaurants often use small fonts and write "$29" instead of "$29.00" to minimize price perception.
• Removing dollar signs also reduces psychological impact.

🚫 Price gouging

Price gouging: when companies take advantage of emergencies or natural disasters to charge exceptionally high prices.

• Illegal in many states during declared emergencies.
• New York enacted the first price gouging law in 1978 during an oil shortage.
• During COVID-19, items like masks, PPE, ventilators were protected from gouging.
• After Hurricane Katrina, a hotel manager who raised room prices was sentenced to five years in jail.

Don't confuse: Normal supply-and-demand price increases with price gouging—gouging specifically exploits emergency situations where buyers have no alternatives.

🎯 The five critical Cs of pricing

💵 Cost

• Must know both fixed and variable costs before setting price.
• Cost alone cannot be the only basis—buyers don't know or care about a company's production costs.
• If costs aren't covered, the business will fail; but pricing based solely on cost ignores customer value perception.

👥 Customers

• Marketers must determine what customers expect to pay AND what they're willing to pay.
• Different target markets have different price expectations.
• Example: Toyota targets middle class with moderate pricing; Lexus (same parent company) targets luxury market with higher pricing.

🚚 Channels of distribution

• Intermediaries (distributors, wholesalers, retailers) move products from manufacturer to end users.
• Each channel member needs to make a profit, affecting final price.
• Example: IKEA's distribution includes manufacturer → dealer → wholesaler → retailer. Each member must find value in the pricing structure, or the entire channel becomes unsustainable.

🏆 Competition

• Every product faces competition, even unique ones (competing for buyer dollars).
• Buyer perception of one product versus alternatives impacts pricing decisions.
• Example: Gazelle Bikes starts at $1,499; competitor Giant starts at $1,720. A new brand at $200 wouldn't be positioned alongside these premium brands.

🤝 Compatibility

• Price must be consistent with other marketing objectives and target market.
• Example: Panama City Beach hotels price for college spring-breakers (affordable for that segment); family-friendly Florida hotels price for families.
• A $20 ribeye steak at McDonald's would be incompatible with the brand's fast-food, low-price positioning.

Additional consideration—Context: Some practitioners add a sixth C. Context refers to changing prices based on external variables (e.g., ice cream truck charging more in summer, less in winter).

📋 Five-step pricing policy procedure

1️⃣ Step 1: Determine pricing objectives

Objective	Description	Key characteristic
Customer value-based	Price set according to value-added benefits	Based on customer interviews/research about perceived value
Cost-based	Price set to cover costs plus desired profit	Simple but risks overpricing or underpricing vs. customer perception
Sales-oriented	Price adjusted to boost sales volume	May lower price temporarily to hit unit-sold targets
Market share-oriented	Price set relative to competitors	Pricing at, below, or above competition (e.g., Apple, Samsung, Google price similarly)
Target return	Price calculated to return specific profit in timeframe	Based on estimated units sold; e.g., recover 10% of $1M investment in year one
Competition-based	Price set according to competitors' prices	Amazon uses data intelligence to price just below competitors
Customer-driven	Price determined by what customer will pay	Auctions, eBay bidding—highest bidder sets the price

Don't confuse: Cost-based pricing with value-based pricing. Cost-based focuses on covering expenses; value-based focuses on what customers perceive the product is worth.

2️⃣ Step 2: Estimate demand

Demand: buyer's desire and willingness to purchase a product at various prices.

The demand curve: A graph showing that as price increases, quantity demanded typically decreases (inverse relationship), assuming other factors remain constant.

• Vertical axis = price (p)
• Horizontal axis = quantity demanded (q)
• Downward-sloping line shows the inverse relationship

Exception—Prestige pricing:

Prestige pricing: strategy that sets high prices knowing demand will increase with higher prices because higher price increases perceived value.

Example: Adidas Yeezy Boost 750 costs ~$76 to produce but sells for over $1,000 due to exclusivity and brand allure. The D Rose 5 Boost costs ~$43 and sells for ~$100. The Yeezy uses prestige pricing; higher price creates higher perceived value.

📊 Demand elasticity

Demand elasticity: measure of the change in quantity demanded in relation to the change in price.

Formula: (Percent change in quantity demanded) ÷ (Percent change in price)

Type	Definition	Example
Elastic demand	Quantity changes significantly with price changes	New homes—many alternatives (apartments, roommates, condos); price heavily influences decision
Inelastic demand	Quantity changes little with price changes	Gasoline—few substitutes; people still need to drive to work even when prices rise to $5/gallon

Factors affecting elasticity:

1. Substitutes: More substitutes → more elastic

   • English muffins out of stock? Buy bagels instead (elastic)
   • Gasoline as a category has few substitutes (inelastic), but choice of gas station is elastic (can easily switch stations)

2. Income effect: How price changes affect buyer's real income

   • Higher prices mean less money left over → buy less (demand decreases)
   • 8.6% inflation (May 2021–May 2022) reduced real income → consumers purchased less

3. Time: Buyers need time to adjust to price changes

   • Sharp decrease in car prices won't cause immediate purchases—buyers need time to save, secure loans
   • Demand increases over time, not instantly

4. Cross-elasticity of demand: Change in demand for one good when price of similar good changes

   • Coffee price increases → tea demand increases (consumers switch to substitute)

3️⃣ Step 3: Estimate costs

• Divide costs into fixed and variable.
• Fixed costs: don't change with production volume (lease, salaries)
• Variable costs: change with production volume (materials, components)
• Example: Smartphone manufacturer pays same lease whether making 1,000 or 100,000 units (fixed), but material costs increase with each unit produced (variable).

4️⃣ Step 4: Analyze external environment

PESTLE framework for external analysis:

Factor	Question to ask	Pricing example
Political	What's the current political situation affecting the market?	Price caps on pharmaceuticals limit what companies can charge
Economic	What's the economic climate?	Inflation/deflation may require price increases/decreases
Social	How is culture shaping the industry?	Indian market purchases more vehicles in latter months of year
Technological	What technologies are trending?	Obsolete technology may require price decreases
Legal	What legislation impacts the industry?	New emission laws may increase vehicle prices due to required technology
Environmental	What are environmental concerns?	Toxic products may need higher prices for safe disposal

Additional external factors:

• Competitors' costs, prices, products: Must constantly analyze current and potential competition
• Product life cycle stage: Introduction, growth, maturity, decline—each stage may require different pricing
• Economic status:
  • Unemployment rate: Higher employment → more discretionary income → more demand
  • Discretionary income: Money left after taxes and necessities; when it decreases, demand for nonessentials decreases
  • Inflation: Rising prices reduce real income → consumers buy less
  • Consumer confidence: Optimism about the economy; low confidence → people save rather than spend

5️⃣ Step 5: Select pricing strategies or tactics

After gathering all data from steps 1–4, choose specific strategies/tactics that:

• Align with other marketing mix elements
• Create value for customers
• Maximize profits for the company

🆕 Pricing strategies for new products

📈 Price skimming

Price skimming: new-product strategy that initially sets a high price and lowers it over time.

• Goal: Attract the market segment willing to pay the highest price first, then lower price to capture additional segments layer by layer.
• Example: Sony PlayStation 3 launched at $599, then lowered annually until reaching $299, gaining new customers at each price point.
• Works well for innovative technology with little competition and strong brand.

📉 Penetration pricing

Penetration pricing: new-product strategy that sets the lowest price possible to penetrate the market.

• Goal: Gain as many customers across all segments as possible from the start.
• Example: Netflix in late 1990s offered low monthly subscription for unlimited movie rentals (four at a time, no return date). Low price let customers try the new service with minimal financial risk.

⚖️ Break-even pricing

Break-even pricing: pricing strategy that covers all manufacturing costs; the point where units produced equals revenue (zero profit but all costs covered).

Formula: Break-even point (units) = Fixed Costs ÷ (Unit Price − Variable Cost per Unit)

Example: Gourmet cookie shop

• Fixed costs: $20,000 (rent, deliveries, ingredients, signage)
• Variable cost per unit: $1.50/cookie
• Selling price: $2.00/cookie
• Break-even = $20,000 ÷ ($2.00 − $1.50) = $20,000 ÷ $0.50 = 40,000 cookies

Must sell 40,000 cookies before making any profit.

🔄 Pricing strategies for existing products

📦 Product line pricing

Product line pricing: setting different price points for different product lines to capture various target markets.

• Example: Unilever owns Dove, Axe, Hellman's. It divides products into price categories—higher-priced items have higher perceived value, lower-priced items target different segments.
• Allows one company to serve multiple market segments.

🔗 Captive product pricing

• Requires both a core product and a captive product.
• Example: Printer (core) requires ink (captive). Marketers may price printer low to attract buyers, knowing they'll need to purchase ink repeatedly.
• Maximizes profit by pricing both products to increase perceived value while ensuring ongoing revenue from captive product.

🎁 Bundle pricing

Bundle pricing: promoting purchase of multiple products at once, often at lower total price than buying separately.

• Example: Fast-food "value meal" costs same or slightly more than just a burger alone, encouraging customers to buy fries and drink too.
• Prods customers to spend more than originally intended.

🔢 Odd-even pricing

Odd-even pricing: psychological pricing using odd or even numbers to attract customers.

• Odd pricing ($19.95): Feels like "still in the teens," not $20—signals value/bargain
• Even pricing ($50.00): Nice round number signals higher quality, used for luxury items
• Historical origin: Forced cashiers to open registers to make change, recording the sale (now used for psychological effect)

💵 Economy pricing

Economy pricing: setting prices much lower than competitors to sell high volume with minimal advertising costs.

• Example: Store brands vs. name brands at grocery stores—store brands price lower because they spend less on advertising
• Example: Allegiant Air offers no-frills travel at lower prices than competitors, but charges extra for luggage

Don't confuse: Economy pricing with simply "cheap" products—it's a deliberate strategy to minimize costs (especially marketing) and pass savings to consumers in exchange for high volume.

⚖️ Ethical considerations in pricing

🚫 Price fixing

Price fixing: when two or more competitors agree to set prices at a specific level.

• Illegal under antitrust laws.
• Forces customers to pay higher prices with no substitute alternatives.
• Example: Class-action lawsuit against auto manufacturers (Audi, BMW, Buick, Chevrolet, others) for conspiring to artificially inflate prices of auto parts.

🎭 Deceptive/illegal price advertising

Deceptive price advertising: misleading consumers about the advertised price.

• Example of deceptive: Advertising "suggested retail price $9.99, our price only $4.99" when the product is never actually sold for $9.99 anywhere.
• Example of deceptive: Selling hats at $29.99, then raising price to $59.99 just before a "buy one get one free" sale—not a real bargain.
• Regulated by the Federal Trade Commission (FTC).

🎯 Predatory pricing

Predatory pricing: pricing goods so low that competitors cannot compete, with intent to drive them out and create a monopoly.

• Often involves selling below cost.
• Illegal under antitrust laws when it seeks to eliminate competition and create monopolies.
• Example: Walmart accused in 2000 by Wisconsin of selling butter and milk below cost to drive out competition.
• Undermines free market where supply and demand should set prices.

💰 Price discrimination

Price discrimination: charging different prices to different customers based on what the seller believes they'll pay.

• Not illegal unless it causes specific economic harm.
• Risk: Can create customer disloyalty if buyers discover they're not getting the best price.

🏢 Monopoly gouging

Monopoly gouging: increasing prices of goods/services to unfair or non-competitive levels when there are no/few substitutes.

• Example: Utilities are heavily regulated because they're near-monopolies—electric company can't randomly raise prices; must follow regulated process.
• Example: During Texas winter storm 2020–2021, hotels raised prices dramatically (Super 8 at ~$400/night vs. normal rates). While supply-demand economics might expect higher prices with higher demand, price gouging during declared disasters is illegal in many states.

Don't confuse: Normal price increases due to supply-demand with monopoly gouging—gouging exploits situations where buyers have no alternatives and cannot refuse to purchase necessities.

💡 Case study: Warby Parker

Problem: Eyewear industry dominated by single company keeping prices artificially high; average eyeglasses cost $263.

Solution: Direct-to-consumer approach with uniform pricing—all Warby Parker eyeglasses priced at $95.

Strategy:

• Bypassed traditional supply chains
• Made glasses in-house
• Talked directly to customers to understand needs
• Offered prescription eyeglasses at fraction of typical cost
• Made it easy for consumers to distinguish value (no confusion between $200 vs. $400 glasses—all one price)

Social mission: Donates one pair of glasses for every pair sold, addressing global problem of people who need but cannot afford glasses.

🧭 Overview

🧠 One-sentence thesis

Integrated marketing communications (IMC) combines multiple promotional methods—advertising, sales promotion, personal selling, public relations, direct marketing, and digital marketing—to deliver a consistent, unified message that reaches target audiences through various touchpoints and moves them through the customer journey.

📌 Key points (3–5)

• The promotion mix includes six core elements: advertising, sales promotion, personal selling, public relations, direct marketing, and Internet/digital marketing, each serving different communication objectives.
• Communication is a complex process: involves sender, encoding, message, medium, receiver, decoding, feedback, and noise—marketers control only the first four elements.
• IMC delivers better results through consistency: sending the same message across multiple channels increases brand awareness, cuts through clutter, and improves customer satisfaction.
• Common confusion—promotion vs. advertising: promotion is the umbrella term for all communication methods; advertising is just one paid, nonpersonal element within the promotion mix.
• The 5A framework maps the customer journey: Aware → Appeal → Ask → Act → Advocacy, guiding marketers to create appropriate messages for each stage.

🎯 The Promotion Mix Elements

📺 Advertising

Advertising: paid, nonpersonal communication from an identified source that allows for creative messaging about products, services, ideas, persons, or places.

• What it does: Reaches large audiences with company-controlled messages through various media (TV, radio, print, digital, billboards).
• Key advantage: Relatively inexpensive per person reached due to scale; highly repeatable, which increases recall.
• How frequency works: The more often an ad runs, the better the return on production costs and the stronger the consumer recall.

Example: A Super Bowl ad costing $6 million reaching 96 million viewers costs only $0.06 per person reached.

🎁 Sales Promotion

Sales promotion: a method for inducing sales in the short term through incentives that create immediate action.

• Purpose: Generate quick sales increases, encourage product trial, or clear inventory—not a long-term strategy.
• Common tactics include:
  • BOGO (Buy One Get One): Domino's offers a free pizza with purchase to drive immediate sales
  • Contests/Sweepstakes: Lay's "Create a Flavor" campaign offering $1 million prize
  • Coupons: Digital or physical discounts to induce trial (e.g., Cumberland Farms' $1 off ice cream)
  • Rebates: Cash back requiring proof of purchase and customer information

Don't confuse: Sales promotion creates short-term spikes; advertising builds long-term brand awareness.

🤝 Personal Selling

Personal selling: one-on-one, person-to-person communication to inform and persuade customers in an exchange situation.

• When it's used: Complex products, high-price items, customizable offerings—common in B2B markets (pharmaceuticals, machinery) and B2C for cars, home improvement, insurance.
• Why it's expensive: Costs hundreds to thousands of dollars per person reached; time-consuming process.
• The sales process: Prospecting → qualifying → presenting → servicing after the sale.
• Key principle: Good salespeople don't "talk people into" products—they match solutions to genuine needs for repeat business and positive word-of-mouth.

📰 Public Relations

Public relations: nonpaid, nonpersonal promotion with high credibility because a typically unbiased third party delivers the message.

• What it includes: Press releases, press conferences, events, annual reports, cause marketing.
• Broader audience: Not just customers—also community, media, government, educators, investors.
• High credibility factor: Because it's not paid advertising, consumers perceive it as more trustworthy.

Example: Nordstrom's Manhattan flagship opening with VIP celebration featuring Anna Wintour and celebrities generated extensive media coverage. TOMS Shoes' cause marketing (one-third of profits to Grassroot Good) creates positive PR through annual reports highlighting social impact.

Crisis communication: Johnson & Johnson's 1982 Tylenol recall (removing 30 million products after tampering deaths) turned a potential disaster into a trust-building moment through transparent, decisive action.

📬 Direct Marketing

Direct marketing: allows direct communication with customers, with messages tailored to specific segments or individuals, typically including a call to action.

• Evolution: From telephone and mail to text messaging and email marketing.
• Key advantage: Immediate feedback on effectiveness; highly targeted and personalized.
• Scale: The direct mail industry was valued at $44.2 billion in 2019—the second-largest ad spend channel in the U.S.

Example: Timmy Global Health used email for digitally-responsive donors and postal mail for older, non-digital segments in its end-of-year fundraising campaign.

💻 Internet/Digital Marketing

Internet/digital marketing: uses technology to reach customers at multiple interaction points through websites, landing pages, social media, widgets, and CRM systems.

• Key characteristic: Two-way, interactive communication providing immediate feedback.
• Targeting power: Reaches consumers when they signal purchase intent (e.g., shoe ads appearing after searching for shoes).
• Budget allocation: Two-thirds of promotional budgets now go to digital (2020 CMO survey).
• Analytics advantage: Immediate effectiveness assessment; messages can be tested and changed quickly.

Don't confuse: Digital marketing is interactive (two-way); Internet marketing sends messages to mass audiences (can be one-way).

Example: SPANX built its brand primarily through digital marketing and social media, having friends in the target demographic post about the product.

📡 The Communication Process

🔄 How communication flows

The communication process involves multiple elements, with marketers controlling only some:

Element	Who Controls	Description
Sender	Marketer	Source of the message (company, marketer, or spokesperson)
Encoding	Marketer	Creating the message—putting thoughts into words/symbols
Message	Marketer	The actual content developed from encoding
Medium	Marketer	How the message is delivered (TV, email, salesperson, etc.)
Receiver	Outside control	The customer or target audience
Decoding	Outside control	Receiver's interpretation of the message
Feedback	Outside control	Response indicating if message was understood
Noise	Outside control	Distractions interfering with message reception

🎨 Encoding the message

• What it involves: Writing press releases, developing taglines, creating jingles, designing brand symbols.
• Critical factor: Encoding should depend on audience characteristics—deep understanding of the receiver is essential.

Example: Nike's "Just Do It" and Dove's "Real Beauty" campaign messages resulted from careful encoding processes.

📻 The medium matters

• Definition: The channel through which the message travels—TV ad, email, news story, salesperson, billboard.
• Selection criteria: Based on target audience characteristics, message type, and campaign objectives.

🧩 Decoding challenges

• What affects decoding: Receiver's knowledge, experience, and context.
• Potential for misunderstanding: If Red Bull's "gives you wiings" message is decoded literally (thinking you can fly), an error occurred.
• Marketer's responsibility: Extensive research about receivers helps create messages that decode correctly.

🔁 The feedback loop

• Purpose: Tells the sender if the receiver understood the message as intended.
• Forms of feedback: Return email, website click, coupon redemption, purchase.
• Richest feedback: Personal selling—salesperson can hear voice tone and see body language in real time.

📢 Noise interference

• What it is: All elements that prevent the receiver from getting, decoding, or responding to the message.
• Examples: Getting a snack during a TV ad, talking to friends, channel surfing, competing messages from thousands of other advertisers.
• The 7-10 rule: Because of noise, receivers typically need 7-10 exposures to a message before taking action.
• Marketer's job: Understand noise sources and create encoding/media choices that reduce interference.

🔗 Why IMC Works

💪 Better results through integration

• The bike analogy: Separate promotional pieces lying around don't work; when assembled into an integrated whole, they glide smoothly.
• How it works: Consumer receives the same message multiple ways—TV ad, radio spot, email, Instagram post, billboard—creating urgency and clarity.

Example: Taco Bell's Grilled Steak Burrito "limited time" message delivered across all channels, with proximity-based push notifications when customers pass a location.

⚡ Increased efficiency

• Streamlined communication: All channels work toward a unified goal, reducing waste and increasing productivity.
• Focused effort: Clear, simple message allows team members to use their specializations (PR, advertising, etc.) while pursuing a shared goal.

🎯 Improved brand awareness

• Repetition principle: Like a child hearing "brush your teeth" from parent, dentist, and Elmo—multiple sources reinforce the message.
• Consistency builds recognition: Southwest Airlines publishing fares on website, TV, radio, email, and mobile app ensures customers know the brand promise.

😊 Customer satisfaction

• Knowledge + connection: Repeated, consistent messaging educates customers and sets realistic expectations.
• Result: More informed customers with appropriate expectations lead to higher satisfaction.

🔄 Repeated success

• Metrics-driven: Success measured by ROI, cost per impression, cost per lead, customer lifetime value.
• Consistency in objectives: With truly integrated campaigns, objectives remain constant while execution strategies vary across promotional methods.

📋 The IMC Planning Process

1️⃣ Identify the target audience

• Foundation: All successful IMC campaigns start with deep audience understanding through primary and secondary research.
• Why it matters: The more known about the target audience, the higher the likelihood of correct encoding and appropriate medium selection.

2️⃣ Determine marketing communications objectives

• SMART criteria: Simple, Measurable, Actionable, Realistic, Time-bound.
• Purpose: Define what needs to be done; keep strategy and tactics aligned; enable analysis of effectiveness.

3️⃣ Apply the 5A framework

The 5A framework maps the customer journey:

Stage	What Happens	Marketing Goal
Aware	Customer learns product exists	Create awareness through ads, PR, social media
Appeal	Customer understands benefits; adds to consideration set	Communicate value proposition
Ask	Customer actively seeks information; opens communication	Provide accessible information channels (chatbot, contact form, phone)
Act	Customer makes purchase decision (buy or don't buy)	Facilitate transaction; analyze response
Advocacy	Loyal customer provides positive word-of-mouth	Calculate lifetime value; leverage testimonials

Example: ICONI activewear created awareness by running ads on Amazon where customers could easily find and purchase products.

4️⃣ Design the message

Message appeals influence how consumers respond:

🧠 Rational appeals

Rational appeals: prompt consumers to choose a product based on how they will benefit from its features.

Example: Toyota advertising alternative-fuel vehicle features and explaining the benefits to consumers.

❤️ Emotional appeals

Emotional appeals: advertising messages that play to human emotions including happiness, fear, trust, sadness, anger, and guilt.

• Happiness: Coca-Cola's #choosehappiness campaign associating drinking Coke with being happy.
• Fear: Public health campaigns warning of negative consequences (e.g., anti-smoking ads showing health risks).
• Effectiveness: Fear appeals can be very effective in changing behavior when used appropriately.

⚖️ Moral appeals

Moral appeal: pushes consumers to want the product because of a sense of morality or social good.

• Approach: Encourages consumers to do the "right thing."
• Message: If you don't act, the situation will worsen.

Example: "Don't Drink and Drive" campaigns appeal to moral responsibility.

5️⃣ Determine the budget

Common budgeting methods:

Method	How It Works	Pros/Cons
Objective and Task	Determine objectives → identify tasks → price tasks → estimate reach/frequency → set budget	Best method but least used; ties spending directly to goals
Top Down	Executives allocate from operating budget	Considers overall organization; ignores campaign-specific needs
Percent of Sales	Arbitrary percentage of sales revenue allocated to marketing	Difficult to attribute sales solely to marketing activities
Affordable	Allocate only what's left after other expenses	Doesn't support growth mindset; treats marketing as afterthought
Competitive Parity	Mirror competitor spending	Maintains market position; doesn't allow for increased market share

6️⃣ Develop strategies and tactics

• Strategy: The promotional methods chosen to achieve objectives.
• Tactics: The specific actions within each method.

Example: Panera Bread wanting 10% increase in Christmas cookie awareness (Nov 26–Dec 30):

• Strategy: Internet/digital campaign with "try for limited time" message
• Tactics: Push ads via mobile app, Google pop-up banners, Instagram posts, Facebook posts

7️⃣ Select promotional tools

• Decision factors: Marketing objectives and how best to reach the consumer.

Example: Timmy Global Health's end-of-year fundraising used email for digital-responsive donors and postal mail for older, non-digital segments.

8️⃣ Design the promotion

Three key considerations:

💬 Message strategy

Message strategy: ties the brand to the target audience by determining appeal, desired action, and brand positioning.

• Options: Highlight points of parity (how product compares) or points of difference (how product is unique).
• Core question: "What's in it for me?" from the customer's perspective.

🎨 Creative strategy

Creative strategy: translates the message into words, images, and sounds.

• Purpose: Cut through clutter and get target audience attention.
• Function: Serves as guiding principles for developing good content.
• Risk: If message and creative don't match, communication objectives may fail.

📡 Communication channel

Communication channel: the delivery mechanism taking the message from company to consumer.

Personal channels: Social networks (friends, family, neighbors), paid/unpaid experts, company sales force.

Nonpersonal channels: Television, radio, billboards, direct mail.

Example: World Food Championships reached home cooks and professional chefs with "Golden Ticket" qualifying events, big prize money, and opportunities to meet food celebrities and gain TV exposure.

9️⃣ Schedule the promotion

Three scheduling approaches:

Schedule Type	How It Works	When to Use
Continuous	Year-round on regular schedule	Products with steady demand; maintain awareness
Flighting	Heavy promotion periods alternating with no promotion	Avoid message wear-out; seasonal products
Pulsing	Regular promotions with periodic heavy bursts	Maintain presence with seasonal emphasis

Key metrics:

• Reach: Number of consumers exposed to the message at any given time.
• Frequency: Number of times a consumer sees the message.
• Formula: Reach × Frequency = total exposures

Example: MyPillow runs commercials regularly on one broadcast station (2-3 times per broadcast), with increased frequency during holidays plus special discount codes—this is pulsing.

🔟 Evaluate and measure objectives

Common KPIs (Key Performance Indicators):

• Return on investment (ROI)
• Cost per lead
• Cost per sale
• Conversion rate
• Engagement

Digital-specific analytics:

• Website traffic
• Page views
• Bounce rate
• Conversion rate
• Impressions
• Cost per click

ROCI (Return on Customer Investment):

ROCI: a marginal analysis showing the efficiency of marketing communications spending, considering both short-term and long-term customer value.

Formula: ROCI = (Profit from customer in current period + Change in customer's value in current period) ÷ Customer's value at beginning of period

• What it measures: How revenue grows over time, not just in response to one campaign.
• Why it matters: Determines which marketing communication campaigns yield the most profitable customers.
• Advantage over other metrics: Considers the entire IMC relationship, not just single campaign effectiveness.

⚖️ Ethical Marketing Communications

🛡️ Self-regulation and oversight

Three levels of regulation:

1. Self-regulation: Marketers' first line of defense; maintaining ethics serves customers and grows organizations.
2. Trade association regulation: Industry groups monitoring member practices.
3. Federal regulation: Government agencies with enforcement power.

Key federal agencies:

• FTC (Federal Trade Commission): Oversees commercial speech, unfair competition, deceptive advertising.
• FCC (Federal Communications Commission): Regulates broadcast communication (radio, TV, telephone).
• FDA (Food and Drug Administration): Authority over labeling, packaging, branding, ingredients, and advertising of food, pharmaceuticals, cosmetics.
• CAN-SPAM Act: Monitors commercial email practices.

🚫 Common ethical violations

🎈 Puffery

Puffery: when marketers exaggerate at extreme levels with unsubstantiated claims.

• Unethical example: "10x stronger than the competition" without independent third-party research to support it.
• Acceptable puffery: General terms like "awesome," "fabulous," "best."
• The line: Specific claims require proof; general superlatives are acceptable.

💰 Paid sponsorship

Paid sponsorship: when a person promoting a product is paid by the company to make the endorsement.

• The problem: Consumers can't tell if an Instagram influencer genuinely likes a product or is being paid to promote it.
• Disclosure requirement: Paid influencers must disclose their relationship to the brand.
• Where it applies: Advertorials, native advertising, paid links, influencer marketing, affiliate marketing, any "pay for play" content.

Don't confuse: Obvious paid ads (Ford commercial saying "Built Ford Tough") vs. subtle influencer posts that may or may not be sponsored.

🌱 Socially responsible communications

Why it matters:

• Good brands are built on trust
• Customers expect companies to "do good"
• Supporting causes important to customers builds loyalty
• Benefits customers, communities, environment, and shareholders

Example: Subaru's 14-year "Share the Love" event (celebrating in 2021) supports ASPCA, Make-A-Wish, Meals on Wheels, National Park Foundation, and local charities selected by retailers. The campaign showcases people, places, and pets impacted by Subaru's social responsibility.

✅ Maintaining ethical practices

Key principles:

• Avoid withholding information
• Don't make misleading claims
• Never misstate information
• Provide transparent disclosure
• Support claims with evidence
• Build lifetime customer relationships through trust

Example: Farmer Direct Organic (Canada/U.S. cooperative) maintains 100% organic, 100% farmer-owned products with complete transparency and traceability from farm to table, sharing family farm stories on social media and providing recipes to help consumers eat better food.

🧭 Overview

🧠 One-sentence thesis

Advertising and public relations are essential promotion mix elements that help organizations communicate with audiences, build brand awareness, and maintain favorable public images through both paid and earned media channels.

📌 Key points (3–5)

• Advertising vs. public relations: Advertising is paid communication to reach large audiences; public relations is earned media focused on creating favorable public image.
• Advertising planning process: Involves setting objectives, choosing push/pull strategies, budgeting, developing strategy, executing, and assessing effectiveness.
• Key metrics matter: Brand recognition, impressions, conversion rates, and ROAS help measure advertising campaign success.
• Common confusion: Product advertisements promote specific products; institutional advertisements promote the entire organization's image.
• Ethical responsibility: Both advertising and public relations require transparency, truthfulness, and awareness of potential harm to vulnerable audiences like children.

📢 Advertising Fundamentals

📢 What advertising is

Advertising: paid communication messages that identify a brand or organization and are intended to reach a large number of recipients.

• Traditional media channels include newspapers, magazines, television, radio, Internet, and billboards.
• Digital expansion now includes mobile phones, email, social media, and other digital devices.
• The key characteristic is that advertising is paid communication, distinguishing it from public relations.

💰 Cost structure trade-offs

• High total cost: Advertising is expensive (e.g., $6 million for a 30-second Super Bowl ad in 2021).
• Low per-exposure cost: With 96.4 million viewers, the cost per exposure is only about 6 cents per viewer.
• Challenge: Messages are nonpersonal and can be misunderstood; difficult to change quickly or measure immediate reception.

🎯 Product vs. institutional advertisements

Type	Focus	Purpose	Example
Product advertisements	Specific product	Bring brand awareness or differentiate from competitors	PepsiCo's Halloween ad comparing Pepsi to Coca-Cola
Institutional advertisements	Entire organization	Create positive image or support for the organization	Anheuser-Busch's hand sanitizer production during COVID-19

Don't confuse: Product ads sell a specific item; institutional ads build the company's overall reputation without directly selling a product.

🎯 Advertising Objectives

📚 Informative advertising

Informative advertising: advertising intended to raise awareness of a product through educational communication to increase demand.

• Most often used when introducing new products to the market.
• Goal is to educate audiences about product existence and benefits.
• Message complexity varies: established brands like Apple can use simple teasers; truly new products need more detailed information.

💪 Persuasive advertising

Persuasive advertising: advertising that aims to highlight the benefits of a product or service being advertised.

• Focuses on emotions rather than just facts and figures.
• Convinces consumers to purchase by emphasizing benefits.
• Example: Automobile ads showing families to emphasize safety benefits appeal to emotional decision-making.

⚖️ Comparative advertising

Comparative advertising: advertising that showcases the benefits and values of one product over its competitors.

• Directly compares one brand to competitors.
• Example: Wendy's "fresh never frozen" beef campaigns comparing to McDonald's.
• Often uses humor to make comparisons more palatable.

🔔 Reminder advertising

Reminder advertising: advertising aimed at bringing a product back into the forefront of the consumer's mind.

• Typically used during the maturation stage of the product life cycle.
• For well-established brands, most advertisements are reminder ads.
• Example: McDonald's 2021 ads reminding consumers about their fries—not introducing new products but maintaining brand presence.

📋 Advertising Plan Development

🔄 Push vs. pull strategies

Push strategy:

Push strategy: advertising strategy aimed at pushing the brand in front of an audience.

• Places product in front of consumers through multiple media forms.
• Common tactics: postcards, emails, print ads, television ads.
• Goal: Ensure repeated exposure across multiple touchpoints.

Pull strategy:

Pull strategy: advertising strategy intended to bring audiences to the product.

• Attracts consumers to seek out the product.
• Example: Advertising a new game app within another game app, where interested consumers click through.
• Goal: Create interest that draws consumers toward the brand.

💵 Budget approaches

Approach	Definition	Advantages	Disadvantages
Percentage-of-sales	Budget set as percentage of prior/predicted sales	Simple; works in stable markets	Backward logic—assumes sales create ads rather than ads creating sales
All-you-can-afford	Budget set after all other expenses covered	Practical; ensures other needs met first	Often results in insufficient advertising funds
Return-on-investment (ROI)	Budget based on expected dollar return	Views advertising as investment	Difficult to attribute specific returns to specific ads
Competitive-parity	Budget based on competitor spending predictions	Works well in stable markets	Loses sight of internal objectives; reactive rather than proactive
Objective-and-task	Budget based on advertising objectives	Aligns spending with goals	Can lead to overspending if other factors ignored

Don't confuse: Percentage-of-sales uses past data; objective-and-task focuses on future goals regardless of past performance.

📝 Creating the advertising message

Five key components work together:

Component	Purpose	Example
Headline	Grabs attention	"Buy One Get One Free! (BOGO)"
Subheading	Clarifies headline or adds details	"Buy a couch, get a matching recliner free"
Copy	Answers immediate questions	"Add a stylish yet comfortable look to your living room..."
Image(s)	Visual enhancement	Family sitting on couch watching television
Call to action	Tells audience what to do next	"Come to our showroom today to select your couch!"

All components must be consistent with each other and with the company's overall strategy, values, and mission.

📊 Key advertising metrics

Reach:

Reach: the estimated number of potential customers that can be reached with an advertising campaign.

Frequency:

Frequency: how many times someone is exposed to an advertisement in a given time period or how many times an advertisement is shown in a time period.

Impact:

Impact: how quickly members of the audience receive an advertising message.

Engagement:

Engagement: any interaction with advertising content.

• Includes clicks, likes, shares, comments.
• Can be positive or negative (dislikes, negative comments).
• Particularly important in digital marketing.

Trade-off consideration: Reaching the most people once versus reaching fewer people multiple times—marketers must decide which approach better serves their objectives.

📺 Media alternatives

Print media: Magazines, newspapers, brochures, fliers.

Broadcast media: Radio and television.

Outdoor advertising: Banners, flags, wraps, events, billboards, vehicle advertising—very economical due to large reach.

Digital media: Internet, mobile phones, devices other than TV/radio (Kindles, iPads, etc.)—where most companies have shifted budgets.

Selection factors: Product/service type, target market characteristics, budgetary constraints.

Example: Senior citizens respond better to traditional media; millennials are more likely reached through digital channels.

🧪 Testing and Evaluation

🔬 Pretesting methods

Pretesting advertising: research that predicts the performance of an advertisement before it airs.

Portfolio tests:

Portfolio tests: respondents browse through various versions of an advertisement and then are asked to recall certain details from each.

• Uses target audience members.
• Ads with highest recall are selected for full campaign.

Jury tests:

Jury tests: a form of pretesting in which respondents discuss the advertisements most likely to induce a purchase.

• Sample audience discusses which ads would motivate purchases.
• Provides qualitative feedback on persuasiveness.

Theater tests:

Theater tests: a form of advertising pretest in which the audience is shown advertisements—usually television ads—in the context that they would be shown to the entire market.

• Shows ads in realistic viewing context.
• Most applicable to television advertising.

📈 Post-testing methods

Aided recall:

Aided recall: a type of advertising posttest that uses cues to assist a sample audience in recalling brands and products in an advertisement.

• Uses prompts or cues to help respondents remember.

Unaided recall:

Unaided recall: a type of advertising posttest that does not use any cues or prompts to test the recollection of the advertisement message.

• Open-ended questions gauge information retention.
• More challenging but reveals stronger memory impact.

Attitude tests:

Attitude tests: a type of advertising posttest that investigates the attitudes of a sample target audience toward a product or service.

• Often asks respondents to compare advertised product with competitors.

Inquiry test:

Inquiry test: a type of advertising posttest that runs two or more similar ads on a limited scale and determines which of the ads are most recalled by and effective for respondents.

Sales test:

Sales test: a type of posttest in advertising that determines how many sales will be made based on a test market.

• Can be used as pretest (prediction) or posttest (actual measurement).
• Links advertising directly to sales outcomes.

📊 Key Performance Indicators

🏷️ Brand recognition vs. awareness

Brand recognition:

Brand recognition: the ability of a campaign audience to recognize and identify a specific brand.

• Measures ability to identify brand from logo or photo alone.
• Example: Showing someone the Adidas logo and asking which brand it represents.

Brand awareness:

Brand awareness: the extent to which audiences can recall information about the brand.

• Goes beyond recognition to measure recall of brand information.
• Seeks to determine emotions and impressions created by campaigns.

Don't confuse: Recognition is identification; awareness includes remembering details and associations.

👁️ Impressions calculation

Impressions: quantifying how many times an advertisement appears in a medium.

Formula: Impressions = Frequency × Target audience × Rating

Example calculation:

• Advertisement runs 2 times
• Target audience: 1 million people
• Rating: 30% (0.30)
• Impressions = 2 × 1,000,000 × 0.30 = 600,000

The rating (percentage of target audience reached) is often gathered by outside research firms like Nielsen.

🔄 Conversion rate

Conversion rate: the percentage of an audience that has completed a desired action.

Formula: Conversion rate = (Number of converts ÷ Audience size) × 100

Example calculation:

• Web page audience: 500,000 viewers
• Number who clicked ad: 100,000
• Conversion rate = (100,000 ÷ 500,000) × 100 = 20%

Industry benchmarks:

• Traditional marketing: 2–5% is considered effective
• Digital marketing: Above 10% is considered effective

💰 Return on ad spend (ROAS)

Return on ad spend (ROAS): a metric that measures the amount of revenue earned for every dollar spent on advertising.

Formula: ROAS = Revenue from advertising ÷ Advertising cost

Example calculation:

• Advertising spend: $1,000
• Revenue generated: $5,000
• ROAS = $5,000 ÷ $1,000 = $5 (or 5:1 ratio)

This means for every $1 spent on advertising, the company generated $5 in revenue.

🤝 Public Relations Fundamentals

🌟 What public relations is

Public relations: any actions that help to create and maintain a favorable public image.

Publicity: notice or attention given by the media (the result of public relations).

Key distinction: Public relations is earned media, not paid like advertising.

Two sides of public relations:

1. Positive side: Sharing stories of organizational good deeds; promoting positive brand image.
2. Crisis management: Damage control when negative events occur; addressing issues that could harm reputation.

Example: PepsiCo's 2017 Kendall Jenner ad trivializing Black Lives Matter protests—required crisis communication and public apology after backlash.

🎯 Role in the promotion mix

• Increasingly important as consumers seek brands aligned with their values.
• 86% of consumers (2017 survey) say authenticity is key when deciding which brands to support.
• Companies can no longer hide mistakes or miss opportunities to highlight good deeds.
• Example: CVS, Dove, and Target limiting Photoshop use to challenge unrealistic beauty standards and demonstrate authenticity.

🛠️ Public relations tools

Press relations:

Press relations: efforts to establish and maintain positive relationships with those in the media by sending press releases and other stories that help to maintain a positive image of the brand.

• Controlled internally by marketing team.
• Media decides whether to disseminate stories to public.
• Example: Local bakery sends press release about charity fundraiser to local news station.

Public affairs:

Public affairs: efforts to influence public policy and engage with public officials and trade associations.

• Often aligns with nonprofits and government agencies.
• For-profit organizations increasingly involved.
• Example: Walmart executives explaining economic impact to local legislators when opening new stores.

Lobbying:

Lobbying: networking and other efforts that have the intention of influencing public policy and law.

• Companies influence legislation in their favor.
• Large part of US political system.
• Example: National Association of Realtors spent over $200 million in 2020 to impact legislation.
• Has come under scrutiny as companies use large resources to influence laws.

Events:

• Organizations sponsor or host special events to show support for causes.
• Showcases company, products, services, or brands to public.
• Demonstrates values and ideals are part of business model.
• Example: Kroger's sponsorship and volunteering for Susan G. Komen Race for a Cure generates positive publicity.

Digital/Social media:

• Reaches larger audiences quickly.
• Fairly inexpensive compared to other mediums.
• Allows real-time communication.
• Example: Make-A-Wish Foundation's #SFBatkid campaign went viral, generating massive positive publicity.

⚖️ Advantages and Disadvantages

✅ Advantages of public relations

Increased brand credibility:

• Unpaid and from objective source (news media).
• Most credible and persuasive form of promotion.
• Consumers value news media and opinion leaders over company advertising.

Increased sales and leads:

• Credible information source helps drive purchases.
• Example: Campfire Treats gained industry publicity and popularity by embracing Better Chicken Commitment for humane animal treatment.

Positive brand image:

• Consumers patronize organizations whose values align with their own.
• Authentic organizational values translate to increased loyalty and brand equity.

Cost-effectiveness:

• Not a paid tool in promotion mix.
• Good stories can be picked up by multiple media outlets.
• Example: Ice Bucket Challenge raised over $115 million for ALS research through viral social media—extremely cost-effective.

❌ Disadvantages of public relations

No direct control:

• Media controls how organization is portrayed.
• Media decides when, if, and where coverage appears.
• This is why press relations is integral to public relations strategy.

Lack of guaranteed results:

• Even perfect press releases and excellent media relationships don't guarantee coverage.
• Stories may be buried or receive minimal attention.
• Media ultimately decides whether to publish.

Difficulty evaluating effectiveness:

• Hard to measure impact on audience.
• Public relations cannot be targeted as precisely as other promotion mix elements.
• Marketers should monitor website traffic, social media mentions, and shares to gauge reach and response.

🛡️ Ethical Considerations

⚠️ Advertising ethics

Legal and ethical awareness:

• Federal Trade Commission (FTC) has laws protecting consumers against false claims.
• Truth in Advertising watchdog group empowers consumers against false advertising and deceptive marketing.

Advertising to children:

• Children view over 40,000 commercials per year.
• Children and youth cannot decipher persuasive intent of advertisements.
• Marketers must avoid advertising harmful, inappropriate, or illegal products to children.
• Example: Juul accused in 2019 of marketing vapes to teens through ads on Nickelodeon, Cartoon Network, and Seventeen.

Advertising harmful products:

• Companies can be held legally liable for claims and harm caused.
• Even without legal liability, business reputation can be damaged.
• Example: Prescription drug commercials must spend considerable time on side effects and include disclaimers (required by FFDCA, FDA, and FTC).

🔍 Public relations ethics

Transparency:

• More transparent companies build greater consumer trust.
• Example: Whole Foods faced scrutiny over mislabeling genetically engineered foods; made transparency top priority with verification process for all non-GMO products.

Selective truth telling:

• Telling portion of truth while omitting other portions.
• Increasingly, organizations tell whole truth upfront to avoid being called out later.
• Better to be proactive than reactive in crisis situations.

Verifying facts and information:

• Fact-checking verifies information before release.
• In era of "fake news," consumers are more skeptical.
• Presenting non-factual information leads to decreased public trust.

Example of ethical alignment: TOMS shoes built company around One for One model (item purchased = item donated) and commits one-third of profits to grassroots movements. Company remains transparent, and behavior aligns with stated values across all marketing channels.

🧭 Overview

🧠 One-sentence thesis

Personal selling and sales promotion are two distinct promotional strategies—personal selling builds long-term customer relationships through one-on-one interaction, while sales promotion creates short-term incentives to stimulate immediate purchases.

📌 Key points (3–5)

• Personal selling is one-on-one interaction between a salesperson and buyer, focused on understanding needs and building relationships; best used for complex, high-price, customizable products.
• Sales promotion provides short-term incentives (coupons, samples, contests, rebates) to stimulate immediate purchase; effective for generating trial and increasing sales volume quickly.
• Common confusion: Personal selling vs. sales promotion—personal selling is relationship-focused and long-term; sales promotion is transaction-focused and short-term.
• Sales force structure can be organized by territory, product, or customer type; compensation typically combines salary, commission, and bonuses to balance stability with motivation.
• Ethical issues include misuse of expense accounts, inflating sales data, kickbacks in personal selling; hidden fees and ambiguous terms in sales promotion.

🤝 Personal Selling Fundamentals

🤝 What personal selling is

Personal selling: the one-on-one interaction between a company representative (salesperson) and the buyer (customer or prospect).

• The interaction aims to uncover the needs and wants of the prospect.
• The salesperson discusses how the product or service will satisfy those needs.
• The goal is to develop a relationship that leads to purchase and repeat business.
• Example: A real estate agent working with HGV (Hilton Grand Vacations) spends time educating clients about time-share memberships, explaining various purchase levels and how to use the membership.

🎯 When to use personal selling

Personal selling is the promotional strategy of choice when:

• The product is higher in price and represents a significant investment.
• The product requires explanation or education about features, benefits, or applications.
• The product has variation or customization according to customer needs.
• The product is in the introductory stage of the product life cycle.
• The product requires significant follow-up after the sale.
• The context is business-to-business (B2B), where relationship-building is critical.

Example: TalEx (a human resource company) uses sales representatives as trusted advisors to collaborate with clients and find the right staffing solutions for growing companies.

🔗 Relationship selling

Relationship selling: a method of personal selling used to better understand the needs and wants of the buyer.

• The salesperson strives to become a trusted advisor to the customer.
• This approach is ideal when the product is relatively high in price and has customizable attributes.
• The salesperson develops trust and fits the best product to fulfill customer needs and solve problems.
• Don't confuse: Relationship selling is not about pushing product; it's about listening, understanding, and advising.

👥 Types of Sales Roles

📥 Order takers

Order takers: sales personnel responsible for taking orders from customers, identifying the customer, and finding the right product fit.

Inside order takers:

• Work when customers walk into the business, call, or place orders online.
• Serve as the liaison between customer and company.
• Example: A cashier at Walmart scanning products and completing the sale; a restaurant calling its supplier to reorder paper products and cleaning supplies.

Outside order takers:

• Work with customers who routinely buy products; their role is to take in and process those orders.
• Not required to persuade; they are a resource for fulfilling orders.
• May offer insight on inventory patterns and expected delivery times.
• Example: A beauty products salesperson who routinely checks in with a hair salon owner to replenish product stock.

📤 Order getters

Order getter: responsible for finding customers and persuading them to purchase; may also increase orders from current customers.

• Typically well-versed in products and has superior knowledge about the industry.
• Often viewed as a trusted advisor by customers.
• Must listen to customers and respond with mutually beneficial solutions.
• The sales cycle can be lengthy—sometimes 6 to 18 months or more.
• Example: iSalus sales force selling patient engagement software to health systems; must identify decision makers, educate multiple teams, and wait on budget approvals.

🛠️ Support personnel

Support personnel: help facilitate the sales process through marketing, prospecting, setting appointments, educating customers, building goodwill, checking inventory, and providing service after the sale.

Missionary salespeople:

• Employed by manufacturing firms to represent the company and call on retailers.
• Inform or persuade retailers to buy the firm's products.
• Provide education on new products, leave samples, and maintain regular contact.
• Example: A McKesson Corporation pharmaceutical salesperson meets with physicians, provides education on new products, and leaves samples.

Technical specialists:

• Serve as assistants to a firm's existing customers.
• Advise on technical specifications, application, design, and installation.
• Highly technical role; often requires formal training in science or engineering.

👨‍👩‍👧‍👦 Team selling

Team selling: involves the lead salesperson bringing in other functional support people from within the organization (finance, engineering, accounting) to address specific customer problems or issues.

• Used when customers and products are complex.
• More expensive and high-tech products benefit from team selling.
• Bringing extra skills and knowledge can make for a better product fit and outcome.

📋 The Seven-Step Selling Process

🔍 Step 1: Prospecting and qualifying

Prospecting: the act of finding strong potential customers and creating a database of potential customers (sales leads) through lead generation.

• Methods include digital advertising campaigns, trade shows, referral programs, or purchasing lists.
• Qualification: reducing the list to include only leads who are a good fit and likely to be receptive.
• Qualification ensures the contact has the authority to make purchasing decisions.
• Tools: Sales force automation (SFA) software is used to acquire customers; Customer relationship management (CRM) software is used to retain and manage customers after the sale.

🔬 Step 2: Pre-approach

Pre-approach stage: thorough analysis or research of the potential candidate.

• Conduct detailed study of the prospect: specific product needs, current brands used, brand awareness, decision makers, personal interests, financial standing.
• Research may include interviews with other clients, financial reports, credit histories, public information.
• Information is added to prospect records in the CRM system.
• Don't confuse: Pre-approach is research before contact; approach is the initial contact.

👋 Step 3: Approach

Approach: the stage where the sales professional contacts the prospect to build rapport and gather more information on needs and wants.

• Use insights from pre-approach to create a positive impression.
• Ask the right questions and begin building a relationship.
• A soft approach is generally best; the goal is to build the relationship, not push product.
• The salesperson's role is to ask questions and listen.
• Information gathered is used in the presentation stage.

🎤 Step 4: Presentation

Presentation: the stage where the goal is to showcase the features about the product that will be of most benefit to the prospect based on needs uncovered earlier.

• Educate on aspects of the product that will solve the prospect's problems.
• Highlight benefits and answer questions.
• Example: College admissions departments showcase the university through campus tours, meetings with current students, attending classes, and experiencing campus life.

Presentation methods:

Method	Description
Stimulus-response format	Salesperson provides a stimulus; customer provides a response. Salesperson counters every response with a new stimulus. Follows a script based on pre-identified needs.
Formula selling (AIDA model)	Takes customer through Attention, Interest, Desire, and Action stages. Salesperson provides stimuli and responses for each stage.
Need/satisfaction format	Salesperson opens by probing with questions to uncover needs, then tailors presentation to show how product satisfies those needs.
Adaptive selling	Salesperson rapidly customizes approach to meet needs of different customers; adapts selling strategy and even the product.
Consultative selling	Salesperson becomes a consultant who develops a relationship and takes on an advisory role to help solve problems (even if solution is not the product).

🛡️ Step 5: Handling objections

• Good research and understanding of how the product helps can allow the salesperson to avoid objections.
• Strategies for handling objections: listening, restating the question, responding with additional questions.
• Price is generally always voiced as an objection.
• Knowing common objections and having a strategy in advance helps advance to the close stage.

✅ Step 6: Closing

• Asking for the order is often the hardest step; many sales professionals fear rejection.
• If the salesperson has prepared, they know this is the point where they make the prospect a customer.
• Trial close: talking about financial terms or delivery to gauge the prospect's readiness to purchase.
• The customer's response to trial close questions alerts the salesperson to readiness.

🔄 Step 7: Follow-up

• After the order is placed, the real work begins.
• The salesperson is tasked with onboarding the customer and ensuring everything progresses smoothly.
• Follow-up is critical for creating lifetime customer value (LCV).
• It is more lucrative to keep current customers happy than to prospect for new ones.
• Follow-up is a critical step in getting repeat business, customer referrals, and upsells.

📊 Sales Force Management

🎯 Setting sales force objectives

Objectives convey expectations and how the sales force will be evaluated. They should include:

• Measurement metrics and a time frame for completion.
• A mix of generating new customers and working with current customers.

Common objectives:

• Serving existing customers: Keep customers satisfied for reviews, referrals, repeat purchases, and upsells. May include frequency of contact.
• Developing new customers: Obtain a certain number of new customers; maintain a lead pipeline.
• Increasing market share and profit: Focus on increasing the firm's sales proportion in the industry.
• Enhancing customer satisfaction: Work with customers to obtain reviews and endorsements.

🗺️ Sales force structure

Structure Type	Description	Example
Territorial	Based on number of prospects/customers, customer size, potential revenue. Geographic territories consider time in field and coverage area.	Sales rep covers specific zip codes.
Product	Structured according to product portfolios; sales force becomes knowledge experts on products they sell.	Wine distribution: some reps serve restaurants ("on-premise"), others serve retail outlets.
Customer (Market)	Structured according to industry or customer type.	Restaurant industry: quick service, fast fresh, food truck, fine dining.

💰 Compensation structures

Structure	Advantages	Disadvantages
Commission only	Company only pays if sale is made; provides incentive and motivation.	Potential burnout; possible aggressive practices.
Salary only	Stability; easy to administer; control over sales expense.	No incentive to make sales; expenses remain same when sales decline.
Salary and commission	Financial stability plus incentive; control over activities.	Difficult to administer; selling expense less predictable.
Salary and individual bonus	Control over expense; incentive to meet goals.	Complex administration; must ensure bonus is sufficient.
Salary, commission, and bonus	Security plus two levels of incentive; keeps sales force engaged.	Most complex to manage and track.

📈 Sales performance metrics

Productivity metrics:

• Percentage of time spent on selling activities
• Percentage of time spent updating the CRM
• Percentage of lead follow-up
• Percentage of leads generated

Lead response time metrics:

• Time to contact a new lead
• Time to respond to a customer question
• Time to prepare a new prospect presentation
• Time to create a proposal

Opportunity win rate: measures the effectiveness of the sales force by tracking how many leads become prospects and customers.

• Helps determine where sales force needs extended training on closing sales.
• Helps determine how many leads are needed to convert to clients.

🎁 Sales Promotion Fundamentals

🎁 What sales promotion is

Sales promotion: a promotional strategy focused on inducing sales in the short term; solely focused on a direct call to action to buy something.

• Can be targeted to intermediaries through a push strategy or directly to consumers through a pull strategy.
• Often used in tandem with other promotional strategies.
• Example: McDonald's advertises "Free fries on Friday when you purchase a menu item through the app"—combines advertising with sales promotion.

🎯 When to use sales promotion

• When products are at the introductory stage of the product life cycle to induce trial.
• When there is greater competition to get consumers to switch or try a new product.
• At the point of purchase in-store to set apart the brand or product.
• To create short-term sales and meet targets.

📢 Importance in the promotion mix

Spreading of information:

• Effective at spreading information about new products and product modifications.
• Creates awareness of the brand to new markets and customers.

Stimulation of demand:

• Gives customers an immediate incentive to purchase.
• Example: Sonic Drive-In offers half-price drinks and slushes from 2:00 to 4:00 as a "happy hour" special—incentivizes purchase during slow times.

Customer satisfaction:

• Research shows coupons can affect brain chemistry and make customers happier.
• An online shopper who received a $10 coupon was 11% happier and had 38% higher oxytocin levels.

Stabilization of sales volume:

• Drives sales to meet targets through time-limited incentives.
• Example: Buy-one-get-one-half-off available by a certain time.

🛍️ Consumer-Oriented Sales Promotion

🎟️ Coupons

Coupons: reduce the price of the product and prompt the consumer to make an immediate purchase.

• Goal: increase sales quickly, attract repeat purchases, or induce trial of new versions.
• Forms: printed, digital, mobile.
• Because coupons must be redeemed, manufacturers can determine effectiveness of the offer and delivery method.
• Example: HelloFresh sends a direct mail piece with a coupon for 16 free meals; includes a code for online use.

🧪 Samples

Samples: most often used to induce trial of a new product.

• Effective to increase sales volume during early stages of product life cycle and improve distribution.
• Can be given out in stores, at events, or through the mail.
• Expensive but highly effective at inducing purchase.
• Example: Costco regularly has samples in aisles and at point of sale; Creminelli Fine Meats distributed free mini packs at SXSW conference.

🎁 Premiums

Premiums: items offered free or at minimum cost alongside the purchase of a product.

• Good for attracting new buyers and providing incentive for customer loyalty.
• Example: McDonald's Happy Meal toys; Cracker Jack prize inside.

🏆 Contests

Contests: make consumers use their skills to compete for prizes.

• Allow customers to engage with products and become invested.
• Based on analytical or creative skills.
• Example: Pepperidge Farm challenged consumers to create an Instagram duet with a pro basketball player to see who could hold more Goldfish crackers; winners received Goldfish for a year.

🎰 Sweepstakes

Sweepstakes: based on chance (not skill); contestants submit their names for inclusion in a drawing for prizes.

• Used to increase sales volume in the short term.
• Example: Publishers Clearing House conducts sweepstakes; purchase not necessary to enter, but company adds to its mailing list when consumers enter.

🔄 Loyalty programs

Loyalty programs: when consumers spend, they get points toward something free.

• Increasingly popular and tied to mobile apps.
• Example: Wired Coffee Bar offers $5 off in-store when customers spend $50.

📍 Point-of-purchase displays

Point-of-purchase displays: allow manufacturers to showcase products in a way that stands out from other products in the store.

• Used for new products being introduced to the market.
• Forms: outdoor signs, window displays, countertop containers, display racks, self-serve cartons.
• Key: attract customers and enhance brand image.

💵 Rebates

Rebates: provide reimbursement of the cost of a product when the consumer completes certain information about the time, place, and price of purchase.

• Consumer must submit rebate form by a certain date with receipts or bar codes.
• Induce purchase at a perceived cheaper price.
• Consumers often fail to submit required materials (process seen as too laborious).

🏢 Trade-Oriented Sales Promotion

💸 Allowances and discounts

• Manufacturers provide retailers or wholesalers with allowances to pass along as price breaks to the end customer.
• Example: Ford Motor Company might offer a $3,000 trade-in allowance for the new F-150; dealer passes savings to consumer as incentive.

📺 Cooperative advertising

Cooperative advertising: manufacturers help with the cost of advertising in exchange for the retailer advertising the manufacturer's products.

• Advertising can be expensive for retailers.
• Example: When Publix advertises Boar's Head meats and cheeses, Publix uses cooperative advertising from Boar's Head.

💰 Cash bonuses

• Manufacturers provide bonus cash as incentive for retail sales associates to push products.
• Bonuses can be given to the sales associate who sells the most or to the store with highest sales.

💳 Credit terms

Credit terms: favorable payment terms that allow the wholesaler or retailer to sell products long before having to pay for them.

🤝 Dealer conferences

• Companies hold conferences to incentivize the dealer sales force.
• Good method of training and educating dealers to work with customers and sell the product.

📤 Push incentives

• Create demand through discounts that retailers pass on to customers.
• Focus on selling directly to the customer.
• Tactics: point-of-sale displays, direct approaches from retail store sales professionals.
• Example: Apple may provide a discount on phones through a retail partner to encourage buyers to choose the iPhone.

⚖️ Ethical Issues

⚠️ Ethical issues in personal selling

Misuse of company credit cards or expense accounts:

• Can happen through double billing, padding the expense account, or overcharging.
• Best practice: have policies and procedures; require receipts for all expensed items.

Inflating sales data (channel stuffing):

• Forcing more products through the distribution channel than it can actually sell.
• Helps meet short-term targets but adversely affects long-term sales.
• Example: Wells Fargo employees created millions of fraudulent accounts to meet sales goals; fined $185 million by the Consumer Financial Protection Bureau in 2016.

Accepting kickbacks:

Kickbacks: illegal payment for preferential or improper service.

• Common in some countries; sales professionals with long-term relationships can be tempted.
• Typically involves two people who work together to change pricing structure and pocket profit.
• Under the 1977 Foreign Corrupt Practices Act (FCPA), it is unlawful to pay or promise to pay another person for the purpose of retaining business.

⚠️ Ethical issues in sales promotion

Hidden fees:

Hidden fees: fees that are not made known to the buyer.

• Common in travel and hospitality industry.
• Example: Airline advertised prices may not include baggage and airport fees; hotel advertised prices may not include resort fees.
• The promotional discount isn't as attractive once hidden fees are added.

Ambiguous terms and conditions:

Ambiguous terms and conditions: when a contract is unclear and misleading.

• Legal documents can be tricky; consumers may not read or understand what they're agreeing to.
• Best practice: companies should look out for the best interests of customers; providing ambiguous terms does nothing to protect the customer relationship.

Fraud and scams:

• Example: McDonald's Monopoly game scam—the head of security for the company that ran the promotion took out all the winning game pieces in a scam worth $24 million.

Don't confuse: Short-term sales gains from unethical practices vs. long-term customer loyalty—the end goal should be long-term customer satisfaction and lifetime customer value.

🧭 Overview

🧠 One-sentence thesis

Direct and online marketing have evolved from traditional channels like mail and telemarketing into sophisticated digital tools that allow marketers to engage individually with consumers through websites, email, social media, and mobile devices, driving measurable actions while raising important privacy concerns.

📌 Key points (3–5)

• Traditional direct marketing uses channels like direct mail, catalogs, telemarketing, and direct-response TV to engage consumers directly with a call to action.
• Online direct marketing leverages digital tools (websites, email, content, video, blogs) to target individuals with personalized offers at lower cost and with better measurement than traditional channels.
• Social media and mobile marketing capitalize on billions of active users across platforms like Facebook, Instagram, and smartphones, enabling real-time engagement and highly targeted campaigns.
• Metrics matter: online marketing success is measured through website traffic, conversions, bounce rates, click-through rates, cost per click, and social engagement.
• Common confusion: privacy vs. targeting—while digital tools enable precise targeting through data collection, consumers increasingly demand transparency and control over how their personal information is used.

📬 Traditional Direct Marketing Tools

📬 What direct marketing means

Direct marketing: using communication tools to engage directly with individual consumers for the ultimate purpose of calling them to take some marketing action.

• The defining feature is direct engagement with a specific person or household, not mass broadcasting.
• Every direct marketing piece includes a call to action: visit a website, call a phone number, scan a QR code, or make a purchase.
• Example: A catalog from Lands' End shows products and includes a phone number and website URL—the consumer can respond directly.

📮 Direct-mail marketing

Direct-mail marketing: communicating promotional messages and offers directly to people's homes or places of business, typically via postal service.

• Forms: postcards with offers, seasonal catalogs, glossy look books, coupon mailers.
• Advantages:
  • Stands out in a digital-saturated world (Warby Parker and Casper use it despite being digital-first brands).
  • Reaches entire households, useful for products requiring family decisions.
  • Lingers: average lifespan is 17 days, allowing repeated exposure.
• Disadvantages:
  • Many consumers view it as "junk mail" and discard it unread.
  • Slower delivery than digital channels; faster options cost more.
• Targeting: highly targeted by demographics (age, income, zip code) and buying behavior.

📖 Catalog marketing

Catalog marketing (direct mail order): distributing product catalogs in a magazine-like format with vivid images, designed to drive consumers to call or visit a website.

• Dates back to the 19th century; one of the oldest promotion forms.
• Resurgence: response rates have jumped 170% over the last decade (per Harvard Business Review, 2020).
• Consumers report excitement about receiving catalogs; they remain in homes longer than emails or ads.
• Example: Target and Amazon use catalogs to feature seasonal products and drive online or phone orders.

📞 Telemarketing

Telemarketing: a company representative placing or answering customer calls to guide a consumer toward making a purchase.

• Outbound telemarketing: company contacts the prospect directly by phone.
• Inbound telemarketing: demand is generated through other channels (ads, email, direct mail), and the customer calls the company.
• Call centers: centralized spaces where agents handle high volumes of inbound and outbound calls, collecting customer information and routing to the right representative.
• Regulation: the National Do Not Call Registry (2003) bans unsolicited telemarketing calls; consumers must opt in, and violations carry hefty fines.
• Example: A car dealership's website invites visitors to fill out a form; a sales rep then calls to schedule a test drive.

📺 Direct-response TV (DRTV)

Direct-response television marketing: TV commercials designed to compel viewers to take immediate action, such as calling a toll-free number or visiting a website.

• Formats:
  • Short commercials (60–120 seconds).
  • Infomercials: 30+ minute programs featuring product demonstrations and spokesperson endorsements.
• Channels: QVC and HSN are dedicated DRTV networks.
• Effectiveness: easy to measure (track calls and website visits); captures customers in real time.
• Example: Dollar Shave Club's viral commercial (27 million views) featured the website domain multiple times and a clear call to action; Proactiv generated $1 billion in sales in 2020 through infomercials.
• Don't confuse: DRTV is not passive brand advertising—it demands an immediate, measurable response.

🎓 Seminars and trade shows

Seminars:

Allow companies to share expertise and knowledge on a topic, issue, or industry, in person or virtually.

• Build trust, relationships, and brand awareness.
• Can introduce new products and ultimately drive sales.

Trade shows:

Exhibition events where companies present themselves and their offerings to industry peers, sponsored by trade organizations.

• Suited for B2B markets.
• Benefits:
  • Visit existing customers to grow sales and partnerships.
  • Connect with new buyers.
  • Network with industry professionals.
• Example: Consumer Electronics Show (CES) attracts thousands of tech companies; MailCon brings together email marketing professionals, brands, and agencies.

💻 Online Direct Marketing Evolution

💻 How digital technology changed direct marketing

Online direct marketing: using a rich collection of digital tools to target individual consumers with an offer that requests a response or action.

• Why it emerged:
  • Explosion in internet usage and online shopping.
  • 3.5 billion smartphone users worldwide; 65.6% of Americans check smartphones 160 times/day.
  • Advancement of digital technologies enabling personalization and real-time engagement.
• Spending shift: US advertisers spent $139.8 billion on digital marketing in 2020, expected to reach $200 billion by 2025.
• Key difference from traditional: digital tools allow instant interaction, precise targeting, and easy measurement; traditional channels (mail, TV) are slower and harder to measure.
• Example: LendingTree matches consumers searching for financing with banks by inviting them to fill out an online form, then displays tailored plans and follows up via email.

🌐 Website marketing

Website marketing: promoting a website to drive traffic (visitors) so they learn about the product/company or make a purchase.

• Purposes:
  • Informational: Toyota and Honda show product details and options; consumers configure features but purchase at a dealership.
  • Transactional: Amazon facilitates direct purchases from third-party sellers.
  • Community-building: Bleacher Report offers sports articles, scores, and live streaming; fans comment and engage.
• User experience (UX): websites must be designed for positive, intuitive navigation.
• Example: Shopify offers sellers e-commerce websites, inventory management, and payment processing—positioning itself as the "anti-Amazon."

📧 Email marketing

Email marketing: a type of direct marketing that is highly personal and designed to build relationships with consumers by communicating promotions and relevant content.

• Usage: over 4 billion daily email users; 99% check email daily.
• Types:
  • Transactional emails: sent after a commercial transaction (order confirmation, return receipt).
  • Marketing emails: promotional, featuring offers, coupon codes, or free shipping.
• Permission-based: marketers must get consent (opt-in) before sending emails; consumers can unsubscribe (opt-out) at any time.
• Advantages: low cost, high reach, highly targeted, easy to measure.
• Platforms: Mailchimp offers automation tools that send personalized email campaigns based on consumer interaction.
• Example: Old Navy sends marketing emails during sales events with relevant product categories based on past purchases and coupon codes; Buzzfeed sends tailored newsletters with articles and GIFs that drive subscribers to the site.

📝 Content marketing

Content marketing: creating and distributing content that is valuable and relevant to a company's target customers.

• Goal: drive customers to take a desired action (visit site, make purchase, share content).
• Requirements: content must be useful, relevant, high-quality, and engaging.
• Engagement: consumers can like, share, retweet, mark as favorite—all measurable actions.
• Challenge: constantly changing; requires continuous creation of fresh, engaging stories.
• Example: Dotdash Meredith's digital brands (Verywell, The Spruce, Byrdie) create valuable content without pop-up ads; HubSpot produces high-quality blog content on marketing and business topics, driving visitors to its suite of programs.

🎥 Online video marketing

Online video marketing: creating videos that tell a story about a product, company, or brand, designed to drive consumer engagement (liking, sharing, retweeting).

• Why it's growing:
  • Cost of video production has dropped significantly.
  • Consumer demand has doubled since 2018.
  • Instagram, Facebook, Twitter have pivoted to video-first platforms.
• Impact: 86% of businesses use video; 94% believe videos help customers understand products; 99% of video marketers will continue using video (Wyzowl 2022 survey).
• Tools: Biteable offers cost-effective, customizable brand video creation.

📰 Blogs and online forums

Blog: an online journal of interests, beliefs, or topics published by a person, group, or organization.

• Purposes:
  • Share valuable, relevant information with targeted audiences.
  • Attract visitors and convert them to customers.
  • Nurture online communities (groups with similar interests connecting online).
• SEO benefit: frequent, high-quality blog content improves organic ranking on Google (higher position on search results page as popularity grows).
• Example: HubSpot creates blog content for marketing and business professionals on topics from marketing to HR to workplace communication, driving visitors to its CRM programs.
• Challenge: requires dedicated time and resources to update content regularly; delays can lose visitor interest.

✅ Advantages of online direct marketing

Advantage	Explanation
Global reach	Not restricted by geography; internet is available to most consumers worldwide
Low cost	Much less expensive than traditional channels (e.g., mailing catalogs globally)
Easy measurement	Track campaign performance based on consumer interaction (clicks, views, conversions) in real time
Highly targeted	Focus on specific groups by geography, social media preferences, demographics, psychographics
Retargeting	Show similar ads to consumers across different websites based on their online behavior
Real-time interaction	Engage with consumers throughout the online buying process, from search to purchase

• Don't confuse: online direct marketing's "low cost" is relative to its global reach—it still requires investment in website development, content creation, and campaign management.

📱 Social Media Marketing

📱 What social media marketing is

Social media marketing: using social media platforms to deliver content that drives engagement with your brand.

• Platforms: YouTube, Facebook, Instagram, LinkedIn, Pinterest, Twitter, TikTok, Snapchat.
• How it works: companies create brand profiles and sponsored content (paid); users can click, read/reply to comments, like, mark as favorite, or share.
• Example: Warby Parker uses Instagram to showcase eyeglass styles based on face shape; users engage with posts and may visit the website to virtually try on glasses and purchase.

📱 Advantages of social media marketing

• Highly targeted: create campaigns targeting demographic (gender, age, location) and psychographic (interests, viewing behavior) attributes.
  • Example: Facebook creates "lookalike audiences" matching a company's customer attributes to Facebook users.
• User engagement: multidirectional communication between company, users, and brand communities (unlike one-way mass advertising).
• Content distribution: excellent vehicle for sharing online video, blog content, and promotional offers.
• Drives website traffic: users click on social media content and link directly to the company's website.
• Highly measurable: evaluate clicks, likes, shares; optimize campaigns based on metrics (e.g., posting at 1 p.m. EST gets most shares; 3 p.m. EST gets most clicks).

📱 Disadvantages of social media marketing

• Loss of message control: consumers can freely write harmful comments that damage brand reputation.
  • Example: Jeff Bezos tweeted "Happy Earth Day" while dogsledding in Norway; Twitter users criticized Amazon for underpaying and overworking employees.
• Resource-intensive: requires time and money to continuously create engaging content and monitor/reply to comments.
• Growing distrust: 60% of social media users have believed false information on Facebook; 50% of millennials say Facebook fosters division.

📘 Facebook

• Size: largest social media platform; over 2.9 billion monthly active users; $117.92 billion revenue.
• Demographics: growing percentage of baby boomers; teens prefer TikTok and YouTube.
• Challenges: scrutiny over personal data use; false information; concerns about fostering division.
• Why marketers use it: behemoth size and reach make it essential for delivering content and driving engagement.

📷 Instagram

• Size: 1 billion active users monthly.
• Demographics: attracts younger audience (mostly under 30).
• Ownership: purchased by Facebook (now Meta) in 2012.
• Integration benefits: users can cross-post on Facebook and Instagram; companies manage campaigns across both platforms easily, resulting in stronger performance (clicks, views, conversions).
• Instagram Stories: photos/videos that disappear after 24 hours; 500 million users post stories daily.
• Example: Spotify's #yearwrapped campaign lets users share their most-listened-to artists and songs on Instagram Stories; 60 million users engaged, resulting in 3 billion playlists streamed.

💼 LinkedIn

• Purpose: networking, partnership, and employment opportunities for business professionals.
• Size: 722 million members.
• Trust: most trusted social media platform; 73% of members agree LinkedIn protects privacy.
• LinkedIn Live: live streaming feature for engaging with community members.
• Example: Vimeo held a "Working Lunch" series using LinkedIn Live, bringing together experts to engage with the audience and drive platform use.
• B2B focus: important tool for connecting with business professionals.

📌 Pinterest

• Purpose: visual exploration of ideas (recipes, home decor, crafts, personal style).
• Size: 478 million monthly users.
• Key advantage: 97% of searches are unbranded—consumers aren't looking for specific brands, making it ideal for placing ads near relevant content.
• Example: A user searches "vintage running shoes"; a New Balance ad for its vintage 720 sneaker placed near search results would be strategic.

🐦 Twitter

• Format: microblogging news and networking site; users post short messages (tweets).
• Character limit: expanded from 140 to 270 in 2017.
• Size: 238 million daily active users; 14.5 million in the US; steady international growth.
• B2B use: 67% of B2B businesses use Twitter to reach business customers.
• Expectation: users expect companies to respond to tweets; marketers must be prepared to engage directly.
• Note: ownership and policy changes in 2022 led to reconsideration by some users/companies, but it remains a major marketing force.

🎙️ Podcasts

Podcasts: often free, on-demand, downloadable audio recordings covering various topics, typically released weekly or monthly.

• Distribution: Apple Podcasts, Google Podcasts, Spotify, Audible, company websites.
• Growth: 200% year-on-year growth; Spotify acquired Megaphone (2020) to become the "go-to" platform for premium podcast content.
• Trust: 52% of listeners trust advertising when endorsed by the host.
• Effectiveness: hyper-target niche audiences with relevant topics; create value, build relationships, engage subtly without overt marketing noise.
• Example: Harappa Education's "Habits Matter" podcast focuses on learning and personal growth; listeners attracted by value, not marketing messages.

🔗 Integrated social media marketing

Integrated social media marketing: creating a clear, consistent, and synergistic message across all social media platforms.

• Benefit: coordinated messages increase brand awareness and purchase intention.

🚀 Social media opportunities and challenges

Opportunities:

• Global reach: connect with billions of users worldwide.
• Increase brand awareness: expose brands to targeted consumers (e.g., Cupshe swimwear: $150 million sales in 2020 without storefronts, via Facebook/Instagram ads).
• Direct engagement: multidirectional communication between company, users, and communities.
• Drive website traffic: users click on sponsored ads to browse and purchase.

Challenges:

• Growing distrust: concerns about what platforms do with private information.
• Resource demands: requires dedicated campaign managers to post fresh content, monitor engagement, respond to comments.
• Uncontrolled dialogue: users can share negative experiences or opinions, tarnishing the brand.

📲 Mobile Marketing

📲 What mobile marketing is

Mobile marketing: using multiple digital marketing channels designed to reach consumers on their smartphones and tablets.

• Why it matters: 6.4 billion smartphone users worldwide; US mobile advertising spend expected to reach $137.13 billion in 2022 (up from $100 billion in 2021).
• Key difference: marketing for mobile devices is not the same as for desktops; consumers expect more personalized experiences on smartphones.

📲 Elements of a successful mobile strategy

📱 Responsive web design

Responsive web design: when people visit your website via mobile device, menus and content display in a way that is easy to read and engage with (no pinching, expanding, or scrolling needed).

• Standard since 2015: Google prioritizes mobile-friendly websites in search results.
• Critical: ensures visitors have a good experience navigating your website.

📧 Mobile-friendly emails

Mobile-friendly emails: emails whose images, text, and links display in a user-friendly way when accessed via mobile device.

• Importance: 68% of emails are opened on mobile devices.
• Best practices:
  • Subject lines: 41–50 characters; capture attention and paint a benefit.
  • Pre-header: first line of text in email; provides context.
  • Concise content with clear, easy-to-find call to action (e.g., rectangular button with "Get Started" or "Shop the Sale").

📱 Developing an app

• Why: 90% of people's mobile usage is on smartphone apps.
• Benefits:
  • Direct communication and engagement at the touch of a button.
  • Convenience: easier than opening a browser, typing a URL, and searching.
• Example: Amazon's app makes it easy to search and purchase products from mobile devices.

🔗 Short/memorable URLs

URL (uniform resource locator): an internet site's address on the web.

• Why shorter URLs matter:
  • Easy for people to remember.
  • Easier to share (email, text, social media).
  • Easier for Google to find and display in search results.
• Tools: TinyURL and Bitly can shorten long URLs, though search engines' trust in these is uncertain.

📲 Mobile marketing opportunities and challenges

Opportunities:

• Growing usage: consumers stratify time across various devices; mobile usage continues to grow.
• Constant connectivity: ignores boundaries of time and place (e.g., Nothing Bundt Cakes' store hours are 10 a.m.–6 p.m., but website orders can happen anytime, anywhere).
• Consumer behavior: using mobile devices to conduct product research, view reviews, interact with brands on social media.

Challenges:

• Finding the right mix: determining which mobile channels (SMS texting, push notifications, in-app messages) make sense for your target audience.
• Measuring results: easy to measure in-app purchases and email opens/clicks; difficult to measure whether someone has seen a push notification or in-app message.

📊 Metrics for Evaluating Online Marketing Success

📊 Why metrics matter

• Metrics: goals marketers try to reach through campaigns; typically quantitative.
• Purpose: measure the performance of online marketing campaigns.
• Example: social media campaigns measure likes, shares, comments in response to content.

🌐 Website traffic

Website traffic: the total number of visitors to a company's website.

• Sales funnel: a visual representation of the customer journey from product awareness to product purchase (wide at top, narrow at bottom as consumers dwindle to actual purchase).
• Goal: increase traffic (top of funnel) to move consumers closer to purchase (bottom of funnel).

🔍 Traffic by source

Traffic by source: paying attention to the site from which website traffic came.

• Sources: social media, email, paid search, organic search, paid social, affiliates.
• How to track: attach tracking code to links on social media pages and other sources.

Paid search:

Digital advertising where marketers pay search engines (Google, Bing) to place ads in sponsored spots at the top or bottom of a search engine results page (SERP).

• SERP: the list of search results displayed after someone enters key search terms.
• How it works: companies bid on key search terms (e.g., "plumbers near me"); highest bid secures top position; when users click, they're directed to the company's website or landing page.

Organic search:

The list of websites on a search results page that have not been paid for by marketers.

• Search engines use algorithms to deliver results relevant to key search terms.
• Companies do not pay for traffic from organic search listings.

Paid social:

Marketers pay social media companies to display sponsored digital advertisements to targeted customers on their platform.

• Users who click are directed to the company's website or landing page.

Affiliates:

People or companies that earn a commission for driving traffic to another person's or company's website where they make a purchase.

• Example: CJ Affiliate provides a marketplace connecting affiliates with brands.

✅ Conversions

Conversions: when a company turns a visitor into a customer.

• Example: A consumer purchases a LEGO set on the company's website; a new user signs up for TikTok.
• Importance: measures success of online marketing campaigns and the purchase experience.

⬅️ Bounce rate

Bounce rate: the percentage of visitors who visit the site, view one page, and then leave.

• Goal: aim for bounce rate lower than 40%.
• High bounce rate: indicates issues with pages (e.g., slow load time).

🔍 Search trends

Search trends: data points indicating how frequently a term is searched.

• Tool: Google Trends (free).
• Benefits: insight into who customers are and what they're currently interested in; predictive value for product, advertising, and budgeting changes.
• Example: Semrush provides insights into customer search activity and the value of popular search terms.

👥 New versus returning visitors

• New visitors (new users): people visiting your website for the first time.
• Returning visitors: users who have been to your website before.
• Insight: analyzing this metric shows how effective the company is in attracting new customers versus retaining existing ones.

⏱️ Average session duration

Session: a collection of interactions that occur on a company's website.

• Example: A visitor searches for Nike soccer cleats on Google, clicks to the Nike website, browses styles/colors, watches a video, selects size, clicks "Add to Cart."
• Measurement: session duration measures engagement; short duration (e.g., shopping cart abandonment within seconds) may indicate page issues.

📄 Page views

Page views: how many total pages have been viewed on your website.

• Websites have multiple pages: home page, product pages, review pages, blog pages, customer support, terms and conditions, etc.
• Insight: gauge success of website pages; identify which pages are most visited and attribute views to traffic sources (social media, blog).

💬 Social engagement

Social engagement: the number of actions social media users take in direct relation to your company, brand, or product.

• Measured by: likes, shares, retweets, comments made by account followers.

🖱️ Click-through rate (CTR)

Impression: when users see an ad. Click-through rate (CTR): the percentage of people who click on your ad.

• Measurement: indicates how successful a search advertisement is in attracting users to click.
• Result: high CTR leads to more traffic and ultimately conversions.

💰 Cost per click (CPC)

Cost per click (CPC): the cost companies pay search engines for each click that a search advertisement receives, based on the keywords a company bids on.

• How it works: competitors bid in an auction; CPC fluctuates based on competition.
• Risk: bid too low → lose auction, don't get impressions; bid too high → overpay for search advertising.
• Example: Searching "Tampa Jersey in white" shows Fanatics and NFLshop.com at the top with "Ad" label; NFLshop.com won the auction over those keywords.

💵 Cost per acquisition (CPA)

Cost per acquisition (CPA) (also cost per action or cost per conversion): the aggregate or cumulative cost of acquiring a customer.

• Formula: Total campaign cost ÷ Number of conversions = CPA
• Example: Fanatics runs a one-month paid search campaign costing $20,000; drives 1 million visits and 32,000 conversions → CPA = $20,000 ÷ 32,000 = $0.63 per customer conversion.
• Limitation: doesn't account for resources spent creating the ad and managing the campaign.
• Why monitor: helps measure effectiveness of online marketing strategies; lower CPA = more effective campaign.

🛡️ Ethical Issues in Digital Marketing and Social Media

🛡️ Privacy, transparency, and awareness

• Data privacy concerns: 86% of consumers have growing concern about data privacy; 78% fear the amount of data being collected (KPMG survey).
• What companies collect: name, email, phone number, personal interests, social/political views, shopping behavior.
• Consumer demand: 75% want increased transparency about how data is used.
• Company responses: updated policies designed to be more transparent.

🔒 Apple's privacy features (2021)

• App Tracking Transparency: iPhone/iPad users can allow or disallow companies to track their activity across apps and linked websites via pop-ups.
• Impact: threatens business models of tech companies (Facebook, Google) that depend on tracking personal data to target advertising.
• iCloud Private Relay (2022): hides a user's IP address from websites they visit, masking their entire online footprint.
• Hide My Email: allows users to enter a unique, randomly generated email address on websites without sharing their actual email; emails are forwarded to the user's inbox.
• Mail app update: prevents marketers from tracking whether someone has opened an email.
• Result: Apple is equipping consumers with tools to protect personal information and navigate the web unseen.

📊 Tracking consumer data

• Reality: not just social media and search engines track data; most companies use tracking codes to follow consumers as they navigate the web.
• B2B issue: about 72% of businesses do not inform customers they are being tracked by third parties (Zoho report).
• Privacy settings: 71% of social media users check their privacy settings.

⭐ Client reviews

Client reviews: feedback that a customer or client posts directly to a platform, accessible by consumers during the buying process.

• Platforms: Amazon, Wayfair, Lands' End, Google, Tripadvisor, Zomato, G2.
• Format: customers rate experience (stars) and comment on satisfaction; may post pictures.
• Benefits: provide real-world glimpse into product favorability; consumers perceive reviews as more credible than company-created messages.
• Example: Wayfair invites customers to post pictures of furniture styled in their rooms, giving shoppers a real-life view of color and size.

⚖️ Why ethical issues exist

• Highly targeted capabilities: digital and social media give companies access to large amounts of personal data.
• Distrust: growing concern about how personal data is handled and used.
• Transparency gap: many businesses don't inform customers about third-party tracking.
• Balance: companies must respect user privacy by being transparent about data collection and use while still leveraging data for effective marketing.

🧭 Overview

🧠 One-sentence thesis

Marketing channels create and deliver customer value by coordinating people, organizations, and activities to move products efficiently from manufacturers to final consumers through intermediaries who specialize in transactional, logistical, and facilitating functions.

📌 Key points (3–5)

• Marketing channels are systems that make goods and services available to consumers by transferring ownership from manufacturers through intermediaries to final users.
• Intermediaries add value by reducing transactions, adjusting quantities (bulk-breaking and accumulating), matching assortments to demand, sharing information, and providing credit.
• Channel types include direct (manufacturer to consumer) and indirect (using wholesalers, distributors, retailers, or agents), with choices driven by target market coverage, buyer requirements, and product characteristics.
• Common confusion: Vertical vs. horizontal systems—vertical systems involve collaboration among different channel levels (manufacturer → wholesaler → retailer), while horizontal systems involve partnerships among companies at the same level.
• Supply chain management encompasses purchasing, operations, logistics, resource management, and information workflow to fulfill the company's value proposition to customers.

🔗 What Marketing Channels Are and How They Work

🔗 Marketing channel definition

Marketing channel: a system of people, organizations, and activities that work together to make goods and services available to consumers to purchase, transferring ownership from one channel member to the next.

• The goal is to create and deliver value to the final consumer (the end user—grocery shoppers, app users, etc.).
• Distribution describes how a company makes its market offering accessible for purchase.
• Think of a channel like a stream carrying a market offering to the consumer.

🎯 Direct vs. indirect channels

• Direct channel: manufacturer distributes directly to consumers without intermediaries (e.g., a local pizza shop selling to customers).
• Indirect channel: uses one or more intermediaries (agents, distributors, wholesalers, retailers) to reach consumers.
• Example: A local pizza shop selling frozen pizza through grocery stores adds an indirect channel.

🧩 Types of Intermediaries and Their Functions

🧩 Four major intermediary types

Intermediary	Role	Ownership	Example
Agent/Broker	Extension of manufacturer; facilitates transactions	Never takes possession	Auto insurance agents selling Geico policies
Distributor	Takes ownership; aligns closely with one manufacturer	Yes	Coca-Cola distributors (Coke only, not Pepsi)
Wholesaler	Buys variety of products in bulk; breaks bulk for retailers	Yes	Pharmaceutical wholesalers supplying CVS/Walgreens
Retailer	Sells directly to end users; offers wide variety in small quantities	Yes	Walmart, Target, Rite Aid

⚙️ Three intermediary functions

Transactional functions: buying, selling, and temporary risk-bearing.

• Channel members share ownership risk as products move along the channel.
• Example: A bakery sells cookies to a restaurant; the restaurant assumes risk once it buys them and must sell them to customers.

Logistical functions: handling, packing, inventorying, transporting, warehousing, and ensuring product security.

• Ensures products remain fresh, safe, and in good condition during movement.
• Example: Ice cream manufacturers need temperature-controlled transport to maintain product integrity.

Facilitating functions: financing and information sharing.

• Financing: allowing payment over time (e.g., a bakery lets a restaurant pay $1,000/month instead of $12,000 upfront).
• Information sharing: intermediaries share consumer feedback, shopping behavior, and purchase trends to improve decisions.

💡 How Intermediaries Add Value to Customers

💡 Reducing transactions

• Without intermediaries, every manufacturer would transact directly with every consumer—extremely inefficient.
• Intermediaries reduce the number of transactions needed.
• Example: Instead of buying bread, milk, cereal, fruit, and ice cream from five separate manufacturers, shoppers visit one grocery retailer.

📦 Bulk-breaking and accumulating

• Bulk-breaking: intermediaries buy large quantities from manufacturers and break them into smaller units for retailers based on consumer demand.
• Accumulating: intermediaries buy in bulk from different manufacturers to offer retailers an assortment.
• Example: Wholesalers buy millions of bushels of apples, oranges, and peaches from different states, then sell the right mix and quantity to retailers.

🛒 Adjusting for discrepancy of assortment

Discrepancy of assortment: the difference between the variety a manufacturer produces (large quantities of one or few products) and the variety consumers want (small quantities of many products).

• Intermediaries regroup products into assortments that match consumer demand.
• Example: Manufacturers produce large quantities of single items; consumers want a variety of products in small amounts at the grocery store.

💳 Providing credit and information

• Retailers extend credit to customers (e.g., store credit cards at Dick's Sporting Goods or Wayfair), enabling "buy now, pay later."
• Intermediaries gather and share information about products, helping consumers make informed decisions (e.g., in-store demonstrations at Whole Foods).

🏗️ Marketing Channel Structures

🏗️ Consumer product channels

• Direct: Producer → Consumer (local pizza shop).
• Producer → Retailer → Consumer: Local scout troop sells fishing lures to Ace Hardware, which sells to customers.
• Producer → Wholesaler → Retailer → Consumer: Procter & Gamble uses wholesalers and retailers worldwide.
• Producer → Agent → Wholesaler → Retailer → Consumer: Health insurance agents represent carriers like Aetna; agents don't take ownership but earn a fee.

🏭 Business/industrial (B2B) product channels

• B2B market: companies buy from and sell to other companies (not final consumers).
• Direct B2B: Boeing sells aircraft directly to Delta Air Lines (complex, expensive products).
• Indirect B2B: Parts producers (e.g., Lear, making car seats) use distributors to reach automobile manufacturers like Toyota and Honda.
• Agents in B2B represent producers and earn commissions; distributors move products to business users.

🔄 Marketing Systems

🔄 Vertical Marketing System (VMS)

Vertical Marketing System: companies in the marketing channel work together in a coordinated, collaborative, customer-centric way, focusing on delivering value rather than maximizing individual profit margins.

• Contrasts with conventional systems, where each intermediary works independently to maximize its own profit.
• VMS results in fewer channel conflicts and increased customer value.

Three types of VMS:

Type	Description	Example
Corporate VMS	One member owns the other members	Walmart manufactures and distributes its Equate brand
Administered VMS	No ownership; one large, powerful member coordinates activities	Procter & Gamble coordinates wholesalers and retailers
Contractual VMS	Independent companies join by contract for mutual benefit	Franchise organizations like Chipotle or McDonald's

↔️ Horizontal Marketing System

• Unrelated companies partner to offer products in a shared space.
• Example: J.Crew and New Balance partner to sell exclusive New Balance sneakers on J.Crew's website.

📡 Multichannel vs. Omnichannel Systems

• Multichannel: a single company sets up multiple distribution channels (e.g., Nike sells in physical stores, Nike.com, Amazon, Kohl's, Foot Locker).
• Omnichannel: multichannel approach offering seamless buying experiences—customers can buy online and pick up in-store, buy in-store kiosks and have items delivered, etc.
• Example: Dick's Sporting Goods offers buy-online-pick-up-in-store and in-store kiosk ordering with home delivery.

🎯 Factors Influencing Channel Choice

🎯 Target market coverage strategies

Strategy	Description	When to use	Example
Intensive	Distribute through all possible intermediaries	Competitive markets; consumers easily switch	Coca-Cola, Kraft
Selective	More than one, but fewer than all intermediaries	Need specific retail outlets, not expansive coverage	Whirlpool, GE (sold at Lowe's, Home Depot)
Exclusive	Limited number of intermediaries	Reinforce luxury/distinctive positioning	Rolex (limited authorized retailers)

🛍️ Fulfillment of buyer requirements

• Information: Buyers need product knowledge (e.g., in-store demonstrations at Whole Foods or Ace Hardware's "helpful place" reputation).
• Convenience: Buyers value proximity (e.g., chewing gum vs. skis).
• Variety: Buyers want choices (e.g., Petco/PetSmart offer many pet food brands).
• Pre-sale service: activities helping buyers decide (e.g., test-drives, financing applications at car dealerships).
• Post-sale service: activities helping buyers recognize value (e.g., free oil changes, appliance haul-away and installation at Lowe's).

Customer-perceived value: the overall perception a consumer has about a company, brand, or product, measured by what the consumer is willing to pay for the features and benefits.

📦 Product-related factors

Factor	Impact on channel	Example
Unit value	High unit value → shorter channel	Cars, boats, airplanes
Perishability	Perishable goods → shorter channel, specialized handling	Tropicana orange juice (must stay cold)
Bulk and weight	Heavy/bulky → shorter channel, fewer intermediaries	Hot tubs (prone to damage, high transport costs)
Standardization	Standardized → longer channel; customized → shorter	Grain/corn (standardized) vs. custom tech products
Technical nature	Complex products → shorter channel, direct support	Salesforce (requires onboarding, training, support)
Product life-cycle stage	Introduction → conservative; growth → expand; maturity/decline → adjust	Companies align distribution with changing demand

💰 Profitability

• Companies evaluate revenue generated minus expenses.
• Channel partners must operate profitably; those unable to manage distribution costs effectively are less attractive.

🔧 Managing the Distribution Channel

🔧 Selecting channel members

• Evaluate years in business, experience with similar product lines, reputation, and profitability.
• Example: PetVivo selected Vetcove to distribute biomedical devices because Vetcove serves 13,000+ veterinary hospitals/clinics across all 50 states.

🤝 Managing and motivating channel members

• Build relationships with collaboration, transparency, and cohesion.
• Provide incentives (bonuses, rewards) when members meet goals.
• Support members with sales materials, product samples, and messaging.
• Example: L'Oréal and Procter & Gamble work harmoniously with distribution networks to meet consumer needs.

⚠️ Handling channel conflict

Channel conflict: disagreements in the distribution channel due to competitive vs. collaborative mindsets.

• Vertical conflict: exists between different levels (manufacturer vs. wholesaler vs. retailer); occurs when goals aren't aligned.
• Horizontal conflict: disagreement among firms at the same level (e.g., one Holiday Inn location undercuts others on price).
• Disintermediation: removing an intermediary from the channel (e.g., Apple iTunes eliminated traditional music retailers; Netflix/HBOMax release films directly, bypassing theaters).

📊 Evaluating channel members with metrics

Metric	What it measures	Why it matters
Inventory turnover rate	How quickly inventory is sold	Helps adjust when demand spikes (e.g., Trader Joe's during COVID-19)
Order accuracy rate	% of orders processed/fulfilled/shipped without errors	Errors are costly (wrong size sneakers → reprocess/reship)
Time to ship	Order placement to delivery	Amazon has raised consumer expectations for fast delivery
Total units in storage	Real-time warehouse inventory	Provides insight into warehousing costs and SKU management
Total number of orders	Sum of orders in a given period	Tracks demand; helps forecast (e.g., seasonal products like winter coats)
Percentage of on-time shipments	% of deliveries meeting promised date	Critical for perishables (e.g., Chobani yogurt shelf life)
Average delivery days	Average days for shipping carriers to deliver	Important for consumers valuing timely delivery

🚚 Supply Chain Management (SCM)

🚚 SCM definition

Supply chain: the entire process from acquiring raw materials to delivering final goods to consumers.

Supply chain management (SCM): managing all members and activities from procurement and transformation of raw materials into finished goods through distribution to targeted consumers.

• Starts with a customer-centered mindset; all activities aim to create and deliver value.
• Example: Dave's Killer Bread promises "the best bread you've ever tasted, power-packed with organic whole grain nutrition"—fulfillment starts with selecting certified organic suppliers who deliver high-quality ingredients.

🔧 Five major SCM functions

Function	Description	Example
Purchasing	Buying materials from suppliers	Ben & Jerry's forecasts ingredient needs for Mint Chocolate Chance flavor
Operations	Day-to-day activities; forecasting demand; inventory management; production schedules	Forecasting units sold to align inventory and production
Logistics	Coordinating warehousing, inventory, transportation	McDonald's ensures fries taste consistent through supplier/intermediary coordination
Resource management	Planning, organizing, controlling labor, raw materials, technology	Allocating resources to optimize the system
Information workflow	How information moves between supply chain members	Systematic sharing ensures right data for right decisions at right time

📦 Logistics and Its Functions

📦 Logistics definition

Logistics: planning, organizing, and controlling the movement of raw materials and finished goods from manufacturers to final consumers.

• Includes all activities in the flow of products from manufacturers to consumers.
• Requires coordinated effort between all channel members.

🏭 Three major logistics functions

Warehousing: stocking, maintaining, and controlling products while they await the next step.

• Receiving/storing new stock, picking/packing orders, shipping to next destination.
• May involve temperature control for perishables.

Inventory management: identifying type and quantity of inventory on hand at any time.

• Ensures not too much or too little inventory.
• Example: Trader Joe's faced empty warehouses during COVID-19 as consumers stocked up on pasta and rice.

Transportation: physical movement by road, water, or air.

• Includes generating shipping documents, calculating delivery time, securing special equipment.
• Example: Ice cream manufacturers need temperature-controlled transport.

🚛 Transportation modes

Mode	Speed	Cost	Accessibility	Best for
Trucking	Moderate	Low	High	Land-connected destinations; low-cost needs
Rail	Slow	Low	Moderate	Non-urgent, low-cost transport
Water carriers	Very slow	Very low	Moderate	Moving consumer goods internationally (e.g., China to US)
Air carriers	Fast	Very high	Low	Urgent, high-value shipments
Multimodal	Varies	Varies	Varies	Combining modes (e.g., Apple: air to Europe, then trucks to warehouses)

Three factors in selecting transportation:

1. Product: hazardous, perishable, or difficult-to-handle products impact mode choice.
2. Location: shipping origin and destination (e.g., China to US requires water transport).
3. Time/urgency: how quickly products must move from origin to destination.

📊 Logistics information management

• Recording and reporting useful information for channel members to analyze and validate during product movement.
• Allows members to develop demand forecasts (predicting what and how much consumers will demand).
• Helps make decisions about raw materials and supplies needed to meet consumer demand.

🔗 Integrated logistics management

• Every element of logistics works cohesively to ensure efficient and effective product flow from manufacturer to consumer.
• Channel members set collective objectives (e.g., minimize costs, meet delivery times 95% of the time, communicate openly, manage inventory to reduce shortages/surpluses).
• Each member integrates its activities and information with others for cohesive, synergistic handling.

🏢 Third-Party Logistics (3PL) Providers

Third-party logistics provider: a company contracted by a channel member to handle one or more functional areas of logistics (warehouses, distribution centers, fulfillment centers).

Advantages:

• Logistics is their core competency.
• Less expensive to outsource than owning warehouses/trucks.
• Offers flexibility and strategic location.
• Example: Purina avoids costly capital commitment of owning warehouses and trucking.

Disadvantages:

• Loss of control over logistics responsibilities.
• Manufacturers must continuously analyze performance metrics and communicate with 3PL providers.

🌱 Ethical Issues in Supply Chain Management

🌱 Carbon footprint vs. speed of shipping

Sustainability: a company's effort to reduce its impact on the environment as products move from source procurement through production through distribution to final consumers.

• Companies balance speedy delivery with reducing their carbon footprint.
• Traditional channels focus on speed and cost; sustainable channels also factor in mitigating harm to humans and the environment.

♻️ Sourcing sustainably

Sustainable sourcing: the process of considering suppliers' social, ethical, and environmental performance.

Benefits:

• Improved reputation and brand protection.
• Opportunity to attract new consumers and reach new markets.

What it means:

• Transparency and ethics regarding raw materials.
• Environmental consciousness in manufacturing.
• Example: Allbirds uses natural instead of petroleum-based synthetic materials; aims for 75% of shoes to be sustainably sourced (natural + recycled materials) by 2025; uses SweetFoam (plant-based sole material) and recycled synthetics where needed; researches ways to double product lifetime and reduce carbon footprint by 25% in 2025.

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Don't confuse:

• Multichannel vs. omnichannel: Multichannel = multiple distribution channels; omnichannel = seamless buying experience across channels (buy online/pick up in-store, etc.).
• Vertical vs. horizontal conflict: Vertical = between different channel levels (manufacturer ↔ wholesaler ↔ retailer); horizontal = among firms at the same level (one Holiday Inn vs. another).
• Direct vs. indirect channels: Direct = no intermediaries; indirect = uses intermediaries (agents, wholesalers, retailers).

🧭 Overview

🧠 One-sentence thesis

Retailers and wholesalers serve as critical intermediaries in the distribution channel, adding value by ensuring products reach consumers efficiently while managing inventory, pricing, location, and communication to meet market demands.

📌 Key points (3–5)

• Retailing defined: The process of selling goods and services to consumers, acting as the final link between manufacturers and end users.
• Wholesaling defined: The business of buying goods in bulk at a discount and selling them to retailers at higher prices, serving as middlemen in the distribution channel.
• Key functions: Both add value through assortment, bulk purchasing, inventory storage, convenience, services, and feedback collection.
• Common confusion: Retailers vs. wholesalers—retailers sell directly to consumers and often have physical locations accessible to the public; wholesalers sell to retailers/businesses and typically operate behind the scenes without consumer-facing storefronts.
• Strategic decisions: Success depends on pricing (markup, markdown, gross margin), location (CBD, strip malls, freestanding), merchandise assortment, and omnichannel communication.

🏪 Retailing: The Final Link to Consumers

🏪 What retailing means

Retailing: the process of selling goods and services to consumers.

• Retailers do not typically manufacture goods; they buy from manufacturers or wholesalers and resell to consumers.
• They are the final stop in the distribution channel before products reach the end user.
• Retailing involves all activities in selling to consumers, including developing a marketing mix (product, price, place, promotion).
• Example: Target buys products from manufacturers and wholesalers, then sells them to shoppers in its stores.

🎯 Six core functions of retailers

Retailers perform multiple functions that create value for consumers and other channel members:

Function	What it means	Why it matters
Provide assortment	Offer variety of brands and products in one location	Consumers can compare options and buy multiple items conveniently (e.g., Target stocks many drink brands, not just Pepsi)
Buy in bulk	Purchase large quantities to serve many customers	Enables negotiation for lower prices, which can be passed to consumers
Store inventory	Hold stock to quickly restock shelves or fulfill orders	Consumers get products when they want them without delay
Provide convenience	Locate stores nearby, offer extended hours, allow product evaluation	Saves consumers time and effort; they can see/touch products before buying
Provide services	Offer additional services (banking, hair salons, postal services)	One-stop shopping increases consumer loyalty and retailer revenue
Collect feedback	Gather customer data (loyalty cards, purchase tracking) and share with suppliers	Informs strategy, promotions, and helps channel partners understand demand

Don't confuse: Retailers with manufacturers—retailers typically do not make the products they sell; they purchase and resell them.

🛤️ Distribution channels and omnichannel strategy

• A distribution channel is the set of businesses moving a product from manufacturer to end user.
• Channels can be direct (manufacturer → consumer) or indirect (manufacturer → intermediaries → consumer).
• Omnichannel strategy: Using multiple channels to distribute products (e.g., Marriott allows booking via website, phone, third-party sites, social media).
• Example: Amazon sells some products directly and others through independent retailers, using multiple channels.
• Why it matters: Longer channels with intermediaries (like retailers) reduce costs for manufacturers and consumers by enabling bulk purchasing and local access.

🏬 Types of Store Retailers

🏬 Store retailers overview

Store retailer: a traditional brick-and-mortar establishment where products are displayed for customers to purchase.

• Categorized by strategy mix: store hours, location, product assortment, prices.
• Despite declining numbers due to higher operating costs, some innovate (e.g., Amazon Go eliminates cashiers with automated tracking).

🛍️ Specialty stores

Specialty stores: focus on selling a single type of product or a single product line.

• Employees are highly knowledgeable and offer strong customer service.
• Example: AutoZone specializes in vehicle parts; associates help customers choose the right battery and may install it.

🏢 Department stores

Department stores: larger retailers with separate areas (departments) for similar product lines.

• Each department may mimic a specialty store but with less specialized staff.
• Example: Kohl's has separate departments for women's fashion, shoes, kitchenware, toys.

🥫 Supermarkets

Supermarket: a store that mostly focuses on grocery items but also carries household/personal items and offers limited services.

• Typically over 50% of shelves are groceries; the rest includes cleaning supplies, toiletries, pharmacy, deli, bakery.
• Example: Publix, an employee-owned chain with ~1,000 stores in the southeastern US, averages 32,000 square feet.

🏪 Convenience stores

Convenience store: a small retail business stocking a limited range of everyday items (groceries, snacks, drinks, tobacco, toiletries, lottery tickets).

• Named for convenient location, often linked to gas stations.
• Example: 7-Eleven, the first US convenience store (opened 1927 in Texas); ~150,000 convenience stores in the US as of 2020.

🏢 Superstores

Superstores: very large retailers combining characteristics of supermarkets and department stores.

• Sell wide range of groceries plus nonfood items (clothing, electronics, toys, sporting goods).
• Example: Target operates 1,927 stores; some are superstores offering groceries and general merchandise.

📦 Category killers

Category killers: large superstores (big-box retailers) that are bigger, cheaper, and more convenient than competitors.

• Buy in huge quantities, negotiate low prices, offer discounts to consumers.
• Called "category killers" because they often put nearby specialty stores out of business.
• Example: Home Depot and Lowe's dominate hardware with exhaustive inventory and low prices, making it hard for small hardware stores to compete.

💵 Discount stores

Discount store: retailer that sells a broad range of products at lower prices than competitors.

• Offer lower prices, less variety, fewer services, little customer service.
• Example: Dollar General and Dollar Tree saw growth during the 2008 recession and 2022 inflation as shoppers sought savings.

🏷️ Off-price retailers

Off-price retailers: retailers that provide high-quality, name-brand goods at deeply discounted prices.

• Purchase irregular, closeout, overstock, off-season items from manufacturers.
• Consumers cannot count on finding the same brand/item twice.
• Example: T.J.Maxx buys over-ordered products at deep discounts and sells them below department store prices.

🏭 Factory outlets

Factory outlets: retailers that offer over-manufactured goods sold at lower prices directly from the manufacturer.

• Similar to off-price retailers but goods come directly from the manufacturer, not a third party.
• Typically clustered in factory outlet malls.
• Example: Sawgrass Mills Factory Outlet in Florida has over 350 stores (Adidas, LEGO, Zales).

🏬 Warehouse clubs

Warehouse clubs: retailers that sell goods in bulk at discounted prices to members only.

• Shoppers must pay for membership before purchasing.
• Operate out of enormous, no-frills, low-cost warehouse-like facilities.
• Example: Costco and Sam's Club offer limited variety of perishable and nonperishable goods in bulk.

🌐 Types of Non-Store Retailers

🌐 Non-store retailers overview

Non-store retailers: retailers that operate outside of traditional brick-and-mortar locations.

• Six main types: automatic vending, direct mail/catalogs, television home shopping, online retailing, telemarketing, direct selling.

🤖 Automatic vending

Automatic vending: the use of an electronic device that dispenses a product with no direct human contact.

• Traditionally for snacks, candy, soft drinks; now includes cell phones, hot meals, automobiles.
• Example: Carvana allows consumers to purchase cars online and pick them up at a 12-story car vending machine (debuted 2012, 27 locations by 2020).

📬 Direct mail and catalogs

Direct mail: solicited or unsolicited advertising of products and services to prospective customers through the mail.

• Oldest form of non-store retailing; first US mail-order catalog was Tiffany & Co.'s Blue Book (1845).
• Less prevalent today due to the Internet but still works for some companies.
• Example: Tiffany & Co. still uses catalogs featuring rare diamonds and jewels.

📺 Television home shopping

Television home shopping: a business practice in which products or services are sold via television.

• Primarily targets women over 40; some cable networks dedicated to home shopping 24/7.
• Viewers see products demonstrated in real time and order via phone or Internet.
• Example: QVC (Quality, Value, Convenience), founded 1986, purchased rival HSN in 2017, generated $14.1 billion in 2018.

💻 Online retailing

Online retailing: allows consumers to search and purchase products remotely over the Internet.

• Started shortly after the Internet's public launch; Amazon (1995) prompted thousands to follow.
• US consumers spent $5.4 trillion at online stores in 2021; expected to reach 22% of global retail sales by 2023.
• Example: Amazon began as a book retailer and now sells a vast range of products online.

📞 Telemarketing

Telemarketing: the attempted sale or marketing of goods and services to potential customers via telephone.

• Used since shortly after the telephone's invention; call centers became economical in the 1970s.
• Consumer annoyance and scams led to FTC rules (1991) and the Do Not Call Registry (2003).
• More widely accepted in B2B settings than consumer markets today.

🚪 Direct selling

Direct selling: selling products and services directly to the consumer in a non-retail setting.

• Typically involves a salesperson demonstrating a product at the consumer's home or workplace.
• Very popular in the 1950s-60s when many women were stay-at-home; less common today in consumer markets due to two-income families and the Internet.
• Still widely used in B2B.
• Example: Kirby still sends salespeople door-to-door to sell vacuums.

💰 Retailing Strategy: Pricing Decisions

💰 Retail pricing overview

• Retailers determine prices based on: cost to purchase, shipping, storage, overhead (rent, decoration, employees, shrinkage).
• Goal: make profit while offering prices consumers will pay.
• Store retailers typically have higher overhead than online retailers.

📈 Markup

Markup: the additional amount added to the price retailers purchase goods for.

• Formula: Markup % = [(Retail selling price - Purchase price) / Purchase price] × 100
• Example: Buy shoes for $50, sell for $75 → Markup = [($75 - $50) / $50] × 100 = 50%
• Keystone pricing: strategy that doubles the wholesale price (100% markup).
• Typical markups: ~50% overall, but vary by industry (grocers ~15%, clothing 100-300%).

📊 Original markup vs. maintained markup

Original markup: the markup decided upon at the onset of placing goods for sale, based on planned sales.

Maintained markup: the actual markup realized on products sold to consumers, based on actual sales.

• Original markup assumes all units sell at the planned price.
• Maintained markup accounts for actual sales and markdowns.
• Example: Plan to sell 100 pairs of shoes at $75 (50% markup), but only sell 75 pairs → maintained markup is lower than original.

📉 Markdown

Markdown: a price decrease for a product at the end of its life cycle or season.

• Helps retailers sell through inventory by temporarily increasing demand via lower prices.
• Lowers maintained markup and gross profit.
• Example: Mark down remaining 25 pairs of shoes from $75 to $60, then $50 to clear inventory.
• Ideally, markdowns at least cover wholesale cost.

💵 Gross margin

Gross margin: net sales minus the cost of goods sold, expressed as a percentage.

• Formula: Gross margin = Net sales - Cost of goods sold (COGS)
• Net sales = Units sold × Selling price
• COGS = Units purchased × Purchase price
• Example: Sell 75 shoes at $80 and 25 at $50 → Net sales = (75 × $80) + (25 × $50) = $6,000 + $1,250 = $7,250. COGS = 100 × $50 = $5,000. Gross margin = $7,250 - $5,000 = $2,250.
• Gross margin is profit before deducting selling, general, and administrative costs.

📍 Retailing Strategy: Location Decisions

📍 Location importance

• Old saying: the three most important variables are "location, location, and location."
• If consumers cannot find or easily access a store, they will shop elsewhere.
• Retailers consider: competitor distance, number of same-brand stores nearby, average consumer driving distance, ease of access.
• Example: Walmart knows the distance consumers will drive; if a Supercenter is already within that range, a smaller town may only get a regular Walmart.

🏙️ Central business district (CBD)

Central business district (CBD): the commercial and business center of a given city or town.

• Usually centrally located, characterized by proximity to the largest number of people.
• Example: Manhattan (New York City) is the world's largest CBD, with the highest retail rent globally.
• Many smaller cities are working to restore downtown areas and revitalize CBDs.

🛍️ Regional shopping centers (malls)

Regional shopping centers: commonly called "malls"; collections of stores offering general merchandise or fashion-oriented products and services.

• Enclosed buildings with access to retailers through a common walkway.
• Typically have 1-4 anchor stores (large, well-known department stores) plus numerous smaller specialty stores, restaurants, activities.
• Blend of shopping and entertainment is called retailtainment.
• Example: Mall of America (Minneapolis) has department stores, specialty stores, restaurants, cinema, aquarium, theme park.
• Service consumers 5-15 miles away.
• Becoming scarcer due to online shopping, strip malls, and COVID-19 pandemic; some malls are "zombie malls" or converted to office space.

🏬 Strip malls

Strip malls: an attached row of retail stores offering products and services.

• Consumers enter stores from outside; no internal walkway (unlike malls).
• Sidewalk runs in front of and connects stores.
• Service neighborhoods within one mile.
• Became more popular than regional malls in the late 1990s because consumers didn't have to walk through an entire mall to reach one store.
• Often include department stores, factory outlets, off-price retailers, specialty stores, service businesses, restaurants.

🏢 Freestanding retail locations

Freestanding retail locations: store retailers not attached to any other retailer or establishment.

• More prevalent in smaller, less-populated areas (due to space).
• Gas stations, convenience stores, superstores often occupy freestanding locations.
• Advantages: less expensive to buy/lease, fewer design restrictions.
• Disadvantages: lack foot traffic from other retailers.

🏪 Store layout and atmosphere

• Decisions about store layout and product placement are critical.
• Example: Grocery stores place customer service near the front for quick access; milk (a frequently purchased item) is often in the back to encourage consumers to grab other items along the way.
• Atmosphere considerations: smell, temperature, music, decoration—all play a role in retailing strategy based on the target market.

🔗 Omnichannel Marketing and Communication

🔗 Omnichannel marketing

Omnichannel marketing: an integrated approach and cooperation by various channels to ensure a consistent brand message to customers.

• Provides increased access to products, improved brand visibility, and personalization.
• Customers have a consistent experience with the brand regardless of where they interact with it.
• Example: Starbucks mobile rewards app offers a similar experience to walking into a store or visiting the website.
• COVID-19 lockdowns increased consumer expectations for online ordering; omnichannel approach maximizes shopping experience by integrating multiple delivery and engagement options.

📢 Retailer communication

• Retailers communicate to both consumers and other channel members.
• To consumers: Clear, concise messages about offerings (e.g., Target commercial featuring a sale on Kellogg's cereal—retailer and manufacturer collaborate on joint message).
• To channel partners: Upward flow of communication is important; retailers relay consumer feedback to manufacturers (e.g., product returns due to confusion can prompt manufacturer to improve instructions).
• Collaboration: Retailers and manufacturers work together on displays, signage, product storytelling (e.g., bookstore front display of a popular author's latest release).
• Every channel member is in business to make money and add value; communication and cooperation increase success for all.

🛒 Merchandise and Category Management

🛒 Merchandise

Merchandise: the goods being offered for sale by a retailer.

• Large superstores stock hundreds or thousands of items; smaller specialty stores stock narrow but deep product lines.

📦 Category management

Category management: grouping similar products into categories based on consumer usage.

• Decreases competition between similar products within the retailer.
• Allows buying similar product bundles at lower cost.
• Most retail chain stores use category management to lower costs.
• Example: A retailer with 20 stores uses a centralized group to negotiate prices and contracts for all locations, rather than having each store's buyer analyze prices and find suppliers individually—saves time and money.

📈 Recent Trends in Retailing

📈 Evolution of retailing

• Retailing has evolved continuously: department stores (late 1800s), supermarkets (1920s), door-to-door selling (1950s), infomercials (1980s), online shopping (1990s), traditional stores adding online sales (2000s), social media (2007), slight shift back to traditional stores (2017), reversal to online due to COVID-19 (2020).
• Retailers find new ways to create value as consumers get busier.

📱 Social commerce

Social commerce: the blend of e-commerce and social media.

• Brands use social media to engage and create lasting relationships with consumers.
• Methods: shoppable posts, influencer videos, affiliate links.
• Example: Macy's opened its ambassador program to influencers in 2020, paying 5% commission on sales; consumers trust influencers over company-created marketing.
• Social commerce grew 30% from 2019 to 2020.
• Instagram's Shop and Checkout feature allows in-app purchases without leaving the app.

🏪 Online stores in offline spaces

• Practice of purchasing online and picking up at the store.
• Accelerated drastically during COVID-19 pandemic.
• Example: Walgreens began allowing online orders for drive-through pickup in 2019; already-established drive-through windows gave them a unique advantage to transition quickly.

🚚 Same-day delivery

• Concept has been around for decades (legal/financial services, restaurants, florists) but less prevalent in retail.
• Kozmo.com pioneered one-hour delivery in 1998 (videos, games, DVDs, music, food, basics, Starbucks coffee) but closed in 2001.
• Amazon Prime made same-day delivery widespread; US Postal Service Metro Post allowed Amazon to offer same-day delivery in San Francisco in 2012.
• Today, many retailers (Amazon, Walmart) offer same-day delivery in larger, well-populated areas.

💳 Digital wallets

Digital wallets: software-based systems that allow for secure transactions.

• First used in the late 1990s; today offer more security and allow users to save numerous passwords and payment methods.
• Enable quick online purchases without remembering passwords or digging through physical wallets.
• Allow touchless in-store payments directly from phones.
• Example: Apple Store and Google Play Store auto-fill log-in and payment information after initial save.
• Benefit retailers by capturing sales that might be lost due to inconvenience.

🏭 Wholesaling: The Middlemen

🏭 Wholesaling defined

Wholesaling: the business of buying goods in bulk at a discount from a manufacturer or other distribution channel member and selling them to retailers for a higher price.

• Wholesalers are often called middlemen because they link the producer to the retailer.
• Unlike retailers, wholesalers generally do not interact with customers or have physical locations for them to visit.
• Engage in buying, storing, selling, and marketing.
• Create additional value for customers and other channel members by getting the right product to the right place at the right time.
• Make final prices lower for consumers because they purchase in bulk (smaller retailers could not afford to do so).

🏭 Importance of wholesalers

• Integral marketing intermediaries responsible for efficient distribution.
• The type of wholesaler a retailer uses depends on the type of product, additional services needed, and industry norms.

🏢 Types of Merchant Wholesalers

🏢 Merchant wholesalers overview

Merchant wholesalers: engage in buying, storing, and physically handling products in large quantities and selling those products in smaller quantities to retailers.

• Most common form of wholesaling.
• Take on many responsibilities to assist retailers.
• Classified by level of service: full-service wholesalers, limited-service wholesalers, manufacturer's agents.
• Wholesalers are businesses in business to make money, but they also take on risk.

🛠️ Full-service wholesalers

Full-service wholesalers: offer retailers the most complete range of services (buying, selling, storage, transportation, sorting, financing).

• Take on the most risk.
• Often have their own salespeople to assist retailers; some help stock products on retailers' shelves.
• Provide lines of credit (buy now, pay later).
• Focus on either general or specialty merchandise.

General-merchandise (full-line) wholesalers:

General-merchandise (full-line) wholesalers: offer an extensive list of merchandise for sale.

• Retailers can purchase most or all inventory from one wholesaler.
• Advantages: convenience, greater availability, flexibility with product quantities.
• Disadvantages: retailers may face higher prices or lack contractual protection.

Specialty wholesalers:

Specialty wholesalers: focus on a limited line of products.

• Example: Sysco, one of the largest food-service wholesalers, focuses on food and food-service supplies for hospitals, nursing homes, schools, colleges.
• Offers services: financing, consultation, menu assistance, food production.

🛒 Limited-service wholesalers

Limited-service wholesalers: offer a limited range of services to retailers.

• Compensate for lack of services by offering lower prices than full-service wholesalers.
• May purchase excess inventory at deeply discounted rates and pass savings to retailers.

Rack jobbers:

Rack jobbers: companies that work with retailers to display and sell a product in-store.

• Items are often not products the retailer would ordinarily stock (e.g., cell phone chargers at a gas station).
• Rack jobber stocks and maintains the display; retailer receives a portion of sales.
• Advantages to retailer: no responsibility for ordering or maintaining displays (passive income).
• Disadvantages: rack jobbers may over/under-order or fail to maintain displays.

Cash-and-carry wholesalers:

Cash-and-carry wholesalers: offer a limited line of fast-moving goods sold to retailers for cash.

• No massive storage space or delivery services, so lower overhead and lower prices.
• Advantages to retailer: lower prices.
• Disadvantages: no guarantee of product, expense of transportation, demand for cash payment.

Drop shippers:

Drop shippers: retailers that use suppliers to ship products directly to the end consumer.

• Retailers sell the product but never take possession (no inventory, no stocking).
• Retailer only pays for the product after the consumer pays and receives the order.
• Advantages to retailer: low risk (no possession of product).
• Disadvantages: lower profit margins because wholesaler assumes all risk.

Truck jobbers:

Truck jobbers: wholesalers that make calls to retailers carrying goods on a truck.

• Carry small inventory of the same product or small product lines (e.g., milk, bread).
• Can take the order and deliver within the same call.
• Most often used for perishable foods that cannot sit in a warehouse.

🤝 Manufacturer's agents or representatives

Manufacturer's agents: independent contractors who act as salespersons for multiple manufacturers to sell similar (but not competing) products to retailers.

• Unlike other wholesalers, agents do not take possession of any product at any time.
• Advantages to manufacturer: no expense or management of a sales force (especially for smaller manufacturers).
• Advantages to retailer: access to multiple manufacturers' products through one agent.

🌍 Recent Trends in Wholesaling

🌍 Growing competition

• Prior to 2019, most consumers did not think much about the supply chain or channel members.
• COVID-19 pandemic disrupted the supply chain; wholesalers were affected.
• Wholesalers face tough competition from new and nontraditional wholesalers entering the market.
• Consumers demand more convenient shopping and increased value; retailers demand the same from intermediaries.
• Wholesalers must find innovative and competitive business models to compete.

🌐 Impact of global dynamics on the supply chain

• Globalization has been integrating global markets for decades; supply chains have had to adjust.
• Products available from around the world at lower costs; retailers demand faster deliveries.
• Many wholesalers have expanded operations in response to the global economy.
• Challenges: expanded sales force, understanding other economies, cultures, languages.
• COVID-19 pandemic revealed supply chain participants were not prepared for disruptions (shortages of workers, products, containers, long-haul truck drivers).

📜 Regulatory requirements and complexity

• Advancements in technology and the growing global economy increase regulatory requirements and complexity.
• Wholesalers must understand requirements to conduct business legally.
• Special licenses needed for restricted goods (alcohol, controlled drugs, firearms, pesticides).
• Special licensing may be needed for transportation modes (tractor-trailers hauling containers).
• Wholesalers have responsibility for disposing of waste.
• Sale of Goods Act: requires goods sold to be safe and include clear directions.
• Government rules protect consumers and enable product tracing.

🛡️ Consumer protection

• Caveat emptor (Latin for "let the buyer beware") was a long-standing motto, implying buyers purchase at their own risk.
• Consumer protection laws are now woven into the economy to prevent unethical or dangerous business practices (false advertising, predatory lending, scams, frauds).

🔍 Product traceability

Product traceability: the ability to track all processes for a product from the procurement of raw materials to production, consumption, and disposal.

• Increasing numbers of consumers want to know where products come from and whether they are ethically sourced.
• Crucial for product recalls.
• Example: USDA recalled over 25,000 pounds of ground beef (January 6, 2022); traceability allowed specific ground beef to be traced to a specific location, production date, and lot—without it, consumers might have discarded safe product.
• Helps combat counterfeit products by finding the originating source.

💻 Challenges of technology evolution

• Advancement and increased use of technology brings both challenges and opportunities.
• Product traceability has become easier; orders are easier to make and track.
• However, technology is expensive and comes with a learning curve.
• Increased consumer and retail customer demand requires wholesalers to keep up with technological advancements to stay competitive.

⚖️ Ethical Issues in Retailing and Wholesaling

⚖️ Ethical issues in retailing

• Ethical issues arise in any business entity; retailers and wholesalers face dilemmas while trying to meet consumer demands and stay competitive.
• Because retailers are the final link between manufacturer and consumer, ethical issues often arise in practices toward consumers.

Common issues:

• Deceptive or misleading marketing: Giving consumers false or misleading information about a product or service.
  • Example: Truly Organic (Miami Beach, FL) was cited by the FTC in 2019 for misleading consumers into believing products were 100% organic when they were not.
• Misleading sales tactics: Misleading consumers with untrue information.
  • Example: Subscription services offering free trials but not disclosing monthly charges after the trial; regulations now require disclosure.
• Poor treatment of consumers: Unethical practices that harm or exploit consumers.

⚖️ Ethical issues in wholesaling

• Wholesalers may face ethical dilemmas with their retail customers.
• Two common issues: fairness and pricing.

Fairness and billing:

• Fairness can be subjective; government regulations maintain fairness in business practices.
• Monopolies are considered unfair and are largely against FTC regulations in the US.
  • If one or a few businesses control all of an industry, supply and demand cease to exist because one company controls both.
  • In wholesaling, if a wholesaler requires a retailer to sign contracts to use no other wholesaler, the retailer is at the mercy of the wholesaler.
• Wholesalers must pay close attention to billing practices.
  • Unethical to bill retailers for: product never shipped or received, damaged product without recourse, product not ordered.

Example of ethical retailing: Trader Joe's (founded 1967, 505 stores in 42+ states) is committed to sustainability:

• Donates 100% of unsold products.
• Does not allow certain controversial products in manufacturing of private-label goods.
• Makes organic products more accessible.
• Removed over 6 million pounds of plastic from packaging.
• High employee satisfaction.
• Builds relationships throughout the supply chain to ensure high ethical standards.

🧭 Overview

🧠 One-sentence thesis

Sustainable marketing integrates environmental, social, and governance considerations into business strategy to meet present consumer needs while preserving resources and opportunities for future generations, creating shared value for planet, people, and profits.

📌 Key points (3–5)

• Core definition: Sustainable marketing infuses purpose into brands by meeting today's needs without compromising future generations' ability to meet their own needs.
• Three pillars framework: Environmental sustainability (reducing impact), social good (inclusive community), and economic return (profitability with ethics) must work together—called "planet, people, and profits."
• Strategic shift: Traditional marketing focuses on customers and the 4Ps; sustainable marketing takes a "stakeholder approach" considering customers, employees, vendors, interest groups, media, and the public.
• Business benefits: Enhanced brand recognition, reduced costs, improved effectiveness, easier regulatory compliance, waste minimization, and enhanced ROI demonstrate that doing good and doing well are mutually dependent.
• Common confusion: Sustainability is not just environmental—it encompasses social responsibility (diversity, equity, inclusion, fair labor) and governance (ethics, transparency, compliance) through ESG frameworks.

🌍 The Three Pillars of Sustainable Marketing

🌱 Environmental pillar

The environmental pillar focuses on reducing a company's impact on the environment through recycling, reusing, minimizing waste, and increasing energy efficiency.

What it means in practice:

• Companies design operations to reduce carbon emissions, conserve energy, reduce waste, and use sustainable packaging and logistics.
• Example: Stonyfield Organic committed to cutting carbon emissions by 30% by 2030 through energy conservation, waste reduction, and sustainable packaging.
• Example: Subaru of Indiana Automotive operates a "zero landfill" facility—recycling or composting 98% of manufacturing waste, incinerating the remaining 2% as waste-to-fuel.

Why it matters:

• Environmental measures create a healthier planet while often reducing production costs over time.
• Single-use plastics and packaging waste are major concerns—companies like McDonald's aim for 100% guest packaging from renewable, recycled, or certified sources by 2025.

🤝 Social pillar

The social pillar considers a company's consumers and employees and creates a more inclusive environment for its community.

What it includes:

• Responsive programs for employees that increase well-being.
• Community impact beyond company walls through partnerships and support.
• Diversity, equity, and inclusion initiatives within the organization.

Examples:

• State Bags donates a bag filled with school supplies for each bag purchased and partners with nonprofits supporting women and children from underserved communities.
• Adobe partners with local nonprofits, has a rich diversity/equity/inclusion initiative, and provides software access to underserved communities through programs like Gen Create.

Measurement approach:

• Fortune and Refinitiv's "Measure Up" initiative evaluates companies on policies, employee resource groups, percentage of minorities in leadership, and salary parity.
• Companies like Microsoft, Target, and Gap rated highly; Amazon publishes representation statistics by job level.

💼 Economic pillar (governance pillar)

The economic pillar concerns profitability and business ethics—businesses cannot be sustainable if they are not profitable.

Key components:

• Proper governance structures, risk management, and compliance.
• Business ethics, anticompetitive practices, and tax transparency.
• Diversity of leadership aligned with stakeholders.

Why profitability matters:

• Sustainability is a clear key performance indicator—companies must be profitable to continue sustainability work.
• Governance includes voting, legal compliance, accounting standards, and "doing the right thing" for investors and all interested parties.

Don't confuse: Economic pillar with pure profit maximization—it requires ethical profitability with transparency and accountability to all stakeholders, not just shareholders.

🔄 Traditional vs. Sustainable Marketing

👥 Stakeholder approach vs. customer approach

Aspect	Traditional Marketing	Sustainable Marketing
Focus	Customer approach: product, price, place, promotion for target audience	Stakeholder approach: customers, shareholders, employees, vendors, interest groups, media, general public
Primary obligation	Shareholder return	Corporate social responsibility (CSR) to use platforms to improve the world and not cause harm
Strategy	Beat competition; customer satisfaction	ESG strategy: environmental, social, governance accountability with metrics
Innovation timing	Now	Now while ensuring future viability

🎯 Corporate social responsibility (CSR)

Corporate social responsibility is a sustainable business strategy suggesting that companies have an obligation to use their platforms to improve the world and not cause harm.

ESG strategy evolution:

• Goes beyond legal compliance with environmental laws.
• Puts the environment at the center, designing for environmental benefit.
• Develops metrics to show how purpose is measured.

Example: New Belgium Brewery

• Committed to becoming carbon neutral by 2030 with three principles:
  1. Reduce emissions (create electricity from wastewater, collect heat while brewing, earn LEED certification)
  2. Work with interest groups to advocate for improved climate policies
  3. Improve recycling through cofounded glass recycling coalition

Example: Costco's sustainability principles

• "For Costco to thrive, the world needs to thrive."
• "We focus on issues related to our business and where we can contribute to real, results-driven positive impact."
• "We do not have all the answers, are learning as we go and seek continuous improvement."
• Pays employees above market rates to honor commitment to employees and communities.

💡 Benefits of Sustainable Marketing

🏆 Enhanced brand recognition

What it means:

• Brands that incorporate purpose earn recognition for sustainability work, creating competitive advantage and higher profitability.

Example: Patagonia

• Founder Yvon Chouinard envisioned the company as a pillar of sustainability.
• Sells durable outdoor wear designed around sustainability.
• Repairs goods to avoid customers purchasing new ones.
• Donates 1% of annual sales to good causes worldwide.
• Facilitates Action Works website connecting people with local environmental protection groups.

💰 Reduced costs

How it works:

• Sustainability practices carry up-front investment but typically return cost reduction over time.
• Reduced materials, recycling programs, and lower use of natural resources benefit both planet and production costs.

Evidence:

• Bain & Company survey: five times revenue growth among brands scoring highest on sustainability.

Example: Ben & Jerry's

• Stopped using plastic straws and spoons in stores.
• Good for planet while decreasing business expenses.
• "Triple bottom line" mission aligns profit, planet, and people.

⚡ Improved effectiveness

People investment:

• Potential employees consider purpose, well-being, culture, diversity, equity, and inclusion when deciding where to work.

Example: Mastercard

• Prioritizes its people.
• Saw average annual profit growth of nearly 19% in the 10 years it connected purpose to profits.

Campaign example: Anya Hindmarch

• "I Am Not a Plastic Bag" campaign (2007) replaced plastic bags with eco-friendly alternatives using existing materials.
• Gained press coverage contributing to U.K. decision to charge for plastic bags.
• Demonstrates how sustainability campaigns can drive policy change.

📋 Easier compliance with regulators

Beyond legal obligations:

• Sustainability agenda goes above and beyond legal requirements.
• Serves the world better while easing compliance.
• US EPA provides regulatory information by sector for clear compliance criteria.

♻️ Waste minimization

Environmental impact:

• Reduces waste, creating a healthier planet.
• Many organizations focus on waste minimization to demonstrate Earth commitment.

Example: McDonald's goal

• 100% guest packaging from renewable, recycled, or certified sources by 2025.
• Addresses single-use plastics problem (plastic outnumbers fish in some ocean regions).

📊 Enhanced return on investment (ROI)

Evaluation factors:

Financial Measures	Non-Financial Measures
Increased investor interest	Employee well-being
Changes in brand value	Impact on the planet
Revenue growth	Efforts to improve the world

Why it matters:

• Organizations expect return when resources are committed to sustainability.
• Success measured through multiple lenses, not just financial.

🎯 Sustainable Marketing Principles

🛍️ Consumer-oriented marketing

Consumer-oriented marketing is a solution focused on a customer's need—the product is designed to solve a problem, distributed for convenience, and promoted as a solution.

Requirements:

• Extensive marketing research to understand consumer needs.
• Design the 4Ps around those needs.
• Customer service and feedback to ensure needs are met.

Example: Zappos

• Known for customer-oriented strategy.
• Focuses heavily on customer service.
• Assembled extensive team to solve any customer issue.

💎 Customer-value marketing

Customer-value marketing seeks to provide the customer with maximum utility compared to competitors.

How it works:

• Customers make value exchange when purchasing—they ask if cost is worth the value.
• Does not mean all products are inexpensive—high price might intentionally attract specific target audience.

Example: Tiffany & Co.

• Created luxury brand around jewelry's value to customers.
• Price reflects positioning and target market.

🚀 Innovative marketing

Innovative marketing uses media as a method for capturing shoppers' attention and converting them into customers.

Approach:

• Ever-changing digital landscape offers many possibilities to engage audience.

Example: Shedd Aquarium

• Took penguins on field trip to meet aquatic roommates (2020).
• Broadcasted on social media during virtual event.
• Delighted animal lovers worldwide while promoting the aquarium.

🎯 Mission-driven marketing

Mission-driven marketing aligns purpose and brand—a company uses its core mission and purpose as the focus of its marketing strategies.

Who uses it:

• For-profit or nonprofit, governmental or nongovernmental, public or private, or religious entities.

Example: Charity: Water

• Mission: bring clean water to communities facing clean water crisis.
• Founder Scott Harrison's personal story inspires the mission.
• Storytelling is integral to marketing strategy.
• Raised more than $640 million and funded more than 91,000 water projects in 29 countries.

🌐 Societal marketing

Societal marketing fulfills social responsibility obligations while satisfying customer needs—most akin to sustainability strategies.

Example: Athleta (Gap company)

• Sells premium-priced performance apparel to female athletes.
• Launched "Power of She" campaign celebrating diversity of women.
• Approximately 70% of apparel manufactured from recycled and sustainable materials.
• Combines product design, target audience focus, and societal marketing effort.

🎨 Purpose-Driven Marketing

🎭 Brand purpose fundamentals

What stakeholders want:

• Accenture global survey of 30,000 consumers: 62% want companies to take a stand on issues like sustainability, transparency, or fair working conditions.
• Brand purpose should align closely with consumer values to create optimal purchase choice.
• Consumers willing to switch brands if values don't align.

The authenticity challenge:

• People expect brands to connect to deep purpose but are intolerant of inauthentic efforts.

Example of inauthenticity: Walmart Juneteenth ice cream (May 2022)

• Launched ice cream flavor for upcoming Juneteenth holiday.
• Consumers felt Walmart was trying to sell a product rather than honor an important day in history.
• Demonstrates importance of holding purpose at center of brand instead of using it as sales tool.

Example of authentic purpose: Bombas

• Built business on donating socks and underwear to homeless shelters with each purchase.
• Donated over 5 million items with help of 3,500 impact partners in every state.
• Simple message: "you buy socks, they give socks."
• Purpose at heart of organizational mission.

🌟 Brands that put purpose first

Creating customer experiences:

• Brands that put purpose at center create ways for customers to experience purpose.

Example: Dove Campaign for Real Beauty

• Marketing research uncovered that young girls were impacted by media's standards of beauty.
• Decided to tackle systemic societal problem.
• Multi-decade campaign celebrated all types of beauty, redefining how we think of women and impacting self-esteem.
• Customers could experience purpose because campaign was about them.
• More than just advertising—reflected who Dove wanted to be in the world.

Why it succeeded:

• Addressed real problem affecting target audience.
• Authentic commitment to change, not just selling product.
• Long-term campaign demonstrating sustained commitment.

💪 Best practices for purpose-driven brands

Standing up for what's right:

• Purpose-driven brands speak up, even when difficult or costly.

Example: Russia-Ukraine war (2022)

• Several American companies ceased operations in Russia.
• Costly to cease operations in country as large and populous as Russia.
• Companies like Starbucks and McDonald's decided purpose was more important than profits in this case.

Prioritizing inclusion:

• While exclusivity can be effective for luxury brands, purpose-driven brands know inclusivity is paramount.

Example: Procter & Gamble

• Known for weaving inclusion into fabric of organization.
• From hiring practices to use of paid media.
• "Explore Our Stories" web page showcases how company prioritizes inclusion and creates opportunities for all people.
• Collaborates with partners to create change in communities.

Don't confuse: Purpose-driven marketing with simply having good advertising or telling everyone about your purpose—it requires authentic integration into business DNA, standing up for values even when costly, and demonstrating commitment through actions, not just words.