GEB1101:M4-C11: Building Customer Relationships Through Effective Marketing

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Understand the meaning of marketing and the importance of management of customer relationships.
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Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. Maintaining positive relationships with customers is crucial. Relationship marketing is establishing long-term, mutually satisfying buyer-seller relationships. Customer relationship management uses information about customers to create marketing strategies that develop and sustain desirable customer relationships. Managing customer relationships requires identifying patterns of buying behavior and focusing on the most profitable customers. Customer lifetime value (CLV) is a combination of purchase frequency, average value of purchases, and brand-switching patterns over the entire span of a customer’s relationship with the company.
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Explain how marketing adds value by creating several forms of utility.
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Marketing adds value in the form of utility, or the power of a product or service to satisfy a need. It creates place utility by making products available where customers want them, time utility by making products available when customers want them, and possession utility by transferring the ownership of products to buyers.
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Trace the development of the marketing concept and understand how it is implemented.
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From the Industrial Revolution until the early 20th century, business people focused on the production of goods. From the 1920s to the 1950s, the emphasis moved to the selling of goods. During the 1950s, business people recognized that their enterprises involved not only producing and selling products, but also satisfying customers’ needs. They began to implement the marketing concept, a business philosophy that involves the entire organization in the dual processes of meeting the customers’ needs and achieving the organization’s goals. Implementation of the marketing concept begins and ends with customers—first to determine what customers’ needs are and then to evaluate how well the firm is meeting these needs.
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Understand what markets are and how they are classified.
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A market consists of people with a need, the ability to buy, and the desire and authority to purchase. Markets are classified as consumer and business-to-business or industrial, which includes producer, reseller, governmental, and institutional markets.
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Understand the two major components of a marketing strategy—target market and marketing mix.
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A marketing strategy is a plan for the best use of an organization’s resources to meet its objectives. Developing a marketing strategy involves selecting and analyzing a target market and creating and maintaining a marketing mix that will satisfy the target market. A target market is chosen through the undifferentiated or the market segmentation approach. A market segment is a group of individuals or organizations within a market that have similar characteristics and needs. Businesses that use an undifferentiated approach design a single marketing mix and direct it at the entire market for a particular product. The market segmentation approach directs a marketing mix at a segment of a market. The four elements of a firm’s marketing mix are product, price, distribution, and promotion. The product ingredient includes decisions about the product’s design, brand name, packaging, and warranties. The pricing ingredient is concerned with base prices and various types of discounts. Distribution involves not only transportation and storage but also the selection of intermediaries. Promotion focuses on providing information to target markets. The elements of the marketing mix can be varied to suit broad organizational goals, marketing objectives, and target markets.
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Explain how the marketing environment affects strategic market planning.
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To achieve a firm’s marketing objectives, marketing-mix strategies must begin with an assessment of the marketing environment, which, in turn, influences decisions about marketing-mix ingredients. Marketing activities are affected by the external forces that make up the marketing environment. These forces include economic, socio-cultural, political, competitive, legal and regulatory, and technological forces. Economic forces affect customers’ ability and willingness to buy. Socio-cultural forces are societal and cultural factors, such as attitudes, beliefs, and lifestyles, that affect customers’ buying choices. Political forces and legal and regulatory forces influence marketing planning through laws that protect consumers and regulate competition. Competitive forces involve the actions of competitors. Technological forces can create new marketing opportunities or cause a product to become obsolete.
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Understand the major components of a marketing plan.
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A marketing plan is a written document that specifies an organization’s resources, objectives, strategy, and implementation and control efforts to be used in marketing a specific product or product group. The marketing plan describes a firm’s current position, establishes marketing objectives, and specifies the methods the organization will use to achieve these objectives. Marketing plans can be short-range for one year or less, medium-range for two to five years, or long-range for periods of more than five years.
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Describe how market measurement and sales forecasting are used.
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Market measurement and sales forecasting are used to estimate sales potential and predict product sales in specific market segments.
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Distinguish between a marketing information system and marketing research.
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Strategies are monitored and evaluated through marketing research and marketing information systems, which store and process internal and external data and produce reports in a form that aids marketing decision making. A marketing information system manages marketing information that is gathered continually from internal and external sources. Marketing research is the process of systematically gathering, recording, and analyzing data concerning a particular marketing problem. Technology is making information for marketing decisions more accessible. Electronic communication tools can be very useful for accumulating accurate and affordable information. Information technologies that are changing the way marketers obtain and use information are databases, online information services, and the Internet. Many companies are using social media to obtain research data and feedback from customers.
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Identify the major steps in the consumer buying decision process and the sets of factors that may influence this process.
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Buying behavior consists of the decisions and actions of people involved in buying and using products. Consumer buying behavior refers to the purchase of products for personal or household use. Organizational buying behavior is the purchase of products by producers, re sellers, governments, and institutions. Understanding buying behavior helps marketers predict how buyers will respond to marketing strategies. The consumer buying decision process consists of five steps: recognizing the problem, searching for information, evaluating alternatives, purchasing, and post-purchase evaluation. Factors affecting the consumer buying decision process fall into three categories: situation influences, psychological influences, and social influences.
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marketing
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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
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relationship marketing
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establishing long-term, mutually satisfying buyer-seller relationships
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customer relationship management (CRM)
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using information about customers to create marketing strategies that develop and sustain desirable customer relationships
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customer lifetime value
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a measure of a customer’s worth (sales minus costs) to a business over one’s lifetime
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utility
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the ability of a good or service to satisfy a human need
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form utility
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utility created by converting production inputs into finished products
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place utility
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utility created by making a product available at a location where customers wish to purchase it
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time utility
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utility created by making a product available when customers wish to purchase it
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possession utility
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utility created by transferring title (or ownership) of a product to a buyer
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marketing concept
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a business philosophy that a firm should provide goods and services that satisfy customers’ needs through a coordinated set of activities that allow the firm to achieve its objectives
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market
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a group of individuals or organizations, or both, that need products in a given category and that have the ability, willingness, and authority to purchases them
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marketing strategy
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a plan that will enable an organization to make the best use of its resources and advantages to meet its objectives
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marketing mix
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a combination of product, price, distribution, and promotion developed to satisfy a particular target market
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target market
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a group of individuals or organizations, or both, for which a firm develops and maintains a marketing mix suitable for the specific needs and preferences of that group
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undifferentiated approach
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directing a single marketing mix at the entire market for a particular product
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market segment
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a group of individuals or organizations within a market that share one or more common characteristics
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market segmentation
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the process of dividing a market into segments and directing a marketing mix at a particular segment or segments rather than at the total market
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marketing plan
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a written document that specifies an organization’s resources, objectives, strategy, and implementation and control efforts to be used in marketing a specific product or product group
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sales forecast
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an estimate of the amount of a product that an organization expects to sell during a certain period of time based on a specified level of marketing effort
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marketing information system
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a system for managing marketing information that is gathered continually from internal and external sources
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marketing research
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the process of systematically gathering, recording, and analyzing data concerning a particular marketing problem
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buying behavior
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the decisions and actions of people involved in buying and using products
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consumer buying behavior
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the purchasing of products for personal or household use, not for business purposes
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business buying behavior
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the purchasing of products by producers, resellers, governmental units, and institutions
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personal income
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the income an individual receives from all sources less the Social Security taxes the individual must pay
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Disposable Income
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personal income less all additional personal taxes
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discretionary income
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disposable income less savings and expenditures on food, clothing, and housing
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Marketing
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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
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Major Marketing Functions
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Exchange functions: All companies (manufacturers, wholesalers, retailers) buy and sell to market their merchandise. 1- Buying includes obtaining raw materials to make products, knowing how much merchandise to keep on hand, and selecting suppliers. 2- Selling creates possession utility by transferring the title of a product from seller to customer Physical distribution functions: These functions involve the flow of goods from producers to customers. Transportation and storage provide time utility and place utility and require careful management of inventory. 3- Transporting involves selecting a mode of transport that provides an acceptable delivery schedule at an acceptable price. 4- Storing goods is often necessary to sell them at the best selling time. Facilitating functions: These functions help the other functions to take place 5- Financing helps all stages of marketing. To buy raw materials, manufacturers often borrow from banks or receive credit from suppliers. Wholesalers may be financed by manufacturers, and retailers may receive financing from the wholesaler or manufacturer. Finally, retailers often provide financing to customers. 6- Standardization sets uniform specifications for products and services. Grading classifies products by size and quality, usually through a sorting process. Together, standardization and grading facilitate production, transportation, storage and selling. 7-Risk Taking-even though competent management and insurance can minimize risks-is a constant reality of marketing because of such losses as bad-debt expense, obsolescence of products, theft by employees, and product-liability lawsuits. 8-Gathering market information is necessary for making all marketing decisions.
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Managing Customer Relationships
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Relationship marketing: Establishing long-term, mutually satisfying buyer-seller relationships Customer relationship management (CRM): Using information about customers to create marketing strategies that develop and sustain desirable customer relationships Customer lifetime value: a combination of purchase frequency, average value of purchases, and brand-switching patterns over the entire span of a customer’s relationship with a company
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Utility: The Value Added by Marketing
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The ability of a good or service to satisfy a human need Form utility: Created by converting production inputs into finished products Place utility: Created by making a product available at a location where customers wish to purchase it Time utility: Created by making a product available when customers wish to purchase it Possession utility: Created by transferring title (OR ownership) of a product to a buyer
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Types of Utility
Types of Utility
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Form Utility is created by the production process, but marketing creates place, time, and possession utility.
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The Marketing Concept: To achieve success, a business must
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1- Communicate with potential customers to assess their needs 2- Develop a good or service to satisfy those needs 3- Continue to seek ways to provide customer satisfaction
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The Marketing Concept: Evolution of the Marketing Concept
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1- Industrial revolution through the early twentieth century – Business effort directed toward production to meet great demand 2- 1920s – Production began to exceed demand – Business efforts included selling goods by advertising, hiring larger sales people 3- 1950s Business efforts also focused on satisfying customers’ needs
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The Marketing Concept: Implementing the Marketing Concept
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1- Obtain information about present and potential customers – Their needs; how well those needs are being satisfied; how products might be improved; customer opinions about the firm 2- Pinpoint specific needs and potential customers toward which to direct marketing activities and resources 3- Mobilize marketing resources to – Provide a product that will satisfy customers – Price the product at an acceptable and profitable level – Promote the product to potential customers – Ensure distribution for product availability when and where wanted 4- Obtain information on the effectiveness of the marketing effort and modify efforts as necessary
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Markets and Their Classification
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1- Market A group of individuals or organizations, or both, that need products in a given category and that have the ability, willingness, and authority to purchase such products 2- Consumer markets Purchasers and/or households members who intend to consume or benefit from the purchased products and who do not buy products to make a profit 3- Business-to-business (industrial) markets Producer, reseller, governmental, and institutional customers that purchase specific kinds of products for use in making other products for resale or for day-to-day operations 4- Producer markets Individuals and business organizations that buy products to use in the manufacture of other products 5- Reseller markets Intermediaries such as wholesalers and retailers that buy finished products and sell them for a profit 6- Governmental markets Buy goods and services to maintain operations and provide citizens with products such as highways, education, utilities, defense 7- Institutional markets Churches, not-for-profit private schools and hospitals, civic clubs, charitable organizations.
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Developing Marketing Strategies: Consists of….
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-The selection and analysis of a target market -The creation and maintenance of an appropriate marketing mix (a combination of product, price, distribution, and promotion developed to satisfy a particular target market)
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Developing Marketing Strategies: Target market selection and evaluation
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1- Target market A group of individuals, organizations, or both, for which a firm develops and maintains a marketing mix suitable for the specific needs and preferences of that group 2- Market segment A group of individuals or organizations within a market that share one or more common characteristics 3- Market segmentation The process of dividing a market into segments and directing a marketing mix at a particular segment or segments rather than at the total market
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General Approaches for Selecting Target Markets: Undifferentiated Approach
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1. Organization 2. Single Marketing Mix (Product, Distribution, Promotion, Price) 3. Target Market (one target)
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General Approaches for Selecting Target Markets: Concentrated Market Segmentation Approach
General Approaches for Selecting Target Markets: Concentrated Market Segmentation Approach
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1. Organization 2. Single Marketing Mix (Product, Distribution, Promotion, Price) 3. Target Market (multiple targets)
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General Approaches for Selecting Target Markets: Differentiated Market Segmentation Approach
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1. Organization 2. Single Marketing Mix I & II (Product, Distribution, Promotion, Price) 3. Target Market (multiple targets)
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Common Bases of Market Segmentation
Common Bases of Market Segmentation
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Demographic Age, Gender, Race, Ethnicity, Income, Education, Occupation, Family Size, Family Life Cycle, Religion, Social Class Psychographic Personality attributes, motives, lifestyles Geographic Region, Urban/Suburban/Rural, Market Density, Climate, Terrain, City Size, County Size, State Size Behavioristic Volume usage, End Use, Benefit Expectations, Brand Loyalty, Price Sensitivity.
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The Marketing Mix and the Marketing Environment
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The Marketing Mix consists of elements that the firm controls (product, price, distribution, and promotion). The firm generally has no control over forces in the marketing environment.
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Marketing Strategy and the Marketing Environment – Forces that make up the marketing environment:
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1- Economic forces 2- Socio-cultural forces 3- Political forces 4- Competitive forces 5- Legal and regulatory forces 6- Technological forces
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Developing a Marketing Plan – Elements of a marketing plan
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1- Executive summary 2- Environmental analysis 3- Strengths and weaknesses 4- Opportunities and threats 5- Marketing objectives 6- Marketing strategies 7- Marketing implementation 8- Evaluation and control
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Market Measurement and Sales Forecasting
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1-Sales forecast An estimate of the amount of a product that an organization expects to sell during a certain period of time based on a specified level of marketing effort 2-Importance of measuring sales potential • Evaluate feasibility of enter new segments • Decide how best to allocate marketing resources and activities 3 -Estimates should do several things • Identify the relevant time frame covered by the forecast • Define the geographic boundaries of the forecast • Indicate for which products the forecasts are relevant
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Marketing Information
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1- Marketing information system A system for managing marketing information that is gathered continually from internal and external sources 2- Internal data sources Sales figures, product and marketing costs, inventory, sales force activities 3- External data sources Suppliers, intermediaries, customers, competitors, economic conditions 4- Outputs Sales reports, sales forecasts, buying trends, market share
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Marketing Information — The six steps of marketing research
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1- Define the problem 2- Make a preliminary investigation 3- Plan the research 4- Gather factual information 5- Interpret the information 6- Reach a conclusion
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Marketing Information – Using technology to gather and analyze marketing information
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Databases such as LEXIS-NEXIS, Reader’s Digest Online information services offer subscribers access to e-mail, websites, mailing lists The internet to access useful Web pages such as Nielsen and Advertising Age
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Types of Buying Behavior
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The decisions and actions of people involved in buying and using products Consumer buying behavior The purchasing of products for personal or household use, not for business purposes Business buying behavior The purchasing of products by producers, resellers, governmental units, and institutions
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Consumer Buying Decision Process and
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A buyer goes through some or all of these steps when making a purchase 1. Recognize Problem 2. Search for information 3. Evaluate Alternatives 4. Purchase 5. Evaluate after purchase.
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Possible Influences on the Process
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A buyer goes through some or all of these steps when making a purchase SITUATION INFLUENCES 1- Physical surroundings 2- Social surroundings 3- Time 4- Purchase reason 5- Buyer’s mood and condition PSYCHOLOGICAL INFLUENCES 1- Perception 2- Motives 3- Learning 4- Attitudes 5- Personality 6- Lifestyles SOCIAL INFLUENCES 1- Family 2- Roles 3- Peer Groups 4- Social Class 5- Culture and Subcultures
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Types of Buying Behavior: Consumer Income
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1- Personal income The income an individual receives from all sources less the Social Security taxes the individual must pay 2- Disposable income Personal income less all additional personal taxes 3- Discretionary income Disposable income less savings and expenditures on food, clothing, and housing Of particular interest to marketers due to choice of how to spend it
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Marketing is a process that adds value to products True False
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True
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Financing and risk taking are physical distribution functions of marketing True False
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False
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The first step in implementing the marketing concept is to provide a product that satisfies customers. True False
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False
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Markets are classified as consumer markets or business-to-business markets. True False
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True
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The marketing mix is composed of product, price, distribution, and promotion. True False
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True
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When Toyota focuses its advertising for the Corolla on the population between the ages of 20 and 34, it is targeting a specific market. True False
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True
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The four common bases of market segmentation are demographic, strategic, geographic, and discretionary. True False
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False
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Pricing is an uncontrollable element of the marketing environment. True False
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False
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Government reports, trade shows, and annual reports can all be good resources for marketing research. True False
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True
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Understanding factors that affect buying behavior helps marketing managers to predict consumer responses to marketing strategies and helps to develop a marketing mix. True False
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True
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Which major function of marketing is riddled with thefts, obsolescence, and lawsuits? Risk taking Standardizing Financing Information gathering Selling
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Risk taking
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When fresh vegetables are shipped to Oklahoma from Mexico, which utility is added? Form Place Price Possession Time
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Place
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The sales orientation was predominant during the late 1800s. 1920s. 1940s. late 1950s. 1970s.
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1920s.
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To implement the marketing concept, the firm must mobilize its marketing resources to a- price the product at a level that is acceptable to buyers. b- provide a product that will not satisfy the firm’s objectives. c- minimize promotion. d- reduce the number of distribution sites. e- obtain incorrect marketing information.
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price the product at a level that is acceptable to buyers.
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Women in the market can be classified as market segmentation. a marketing mix. a market segment. an independent market. a producer market.
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a market segment.
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What element of the marketing mix provides information to consumers? Product Price Promotion Distribution Quality
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Promotion
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Which element of the marketing mix focuses on transportation, storage, and intermediaries? Product Price Distribution Promotion Buying
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Distribution
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Which environmental force influences change in consumers’ attitudes, beliefs, norms, customs, and lifestyles? Legal, political, and regulatory Competitive Technological Economic Sociocultural
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Sociocultural
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What situation influence can affect the consumer buying process? They have uses for the products. They like the convenience that products provide. They take pride in ownership of products. They believe that products will enhance their wealth. All of the above.
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All of the above.
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What type of income is Ramona’s monthly take-home amount after taxes? Ordinary Personal Disposable Gross Discretionary
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Personal
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Which of the following is not part of the external marketing environment? a. Political forces (incorrect) b. Technological forces c. Economic forces d. Corporate culture forces e. Competitive forces
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Situational factors that pertain to the buying process include physical surroundings, time, and buyer’s mood. a. True b. False
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a. True
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From the start of the Industrial Revolution until the early twentieth century, marketing a. was limited to taking orders and distributing finished goods. b. research was of prime concern for most expanding businesses. c. was growing and expanding rapidly. d. was the first concern of nearly all U.S. businesses. e. research was just beginning.
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a. was limited to taking orders and distributing finished goods.
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Buying, in terms of a marketing function, includes obtaining raw materials to make products. a. True b. False
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a. True
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Which of the following is not a common base for market segmentation? a. Psychographic b. Behavioristic c. Geographic d. Physical e. Demographic
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d. Physical
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________ is personal income less all additional personal taxes that an individual pays. a. Personal income b. Sales forecast c. Discretionary income d. Disposable income e. Business buying behavior
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d. Disposable income
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Long-range plans in a marketing plan cover periods of more than ________ years. a. fifteen b. eight c. ten d. two e. five
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e. five
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All except ________ is a step of marketing research. a. interpreting the information b. making a preliminary investigation c. planning the research d. gathering factual information e. brainstorming the issue
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e. brainstorming the issue
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Social media can be used as a means of marketing research. a. True b. False
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a. True
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Utility is the ability of a purchased good or service to satisfy a human need (whatever that need may be). a. True b. False
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a. True
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Rebates offered by an automobile manufacturer are part of the product ingredient of the marketing mix. a. True b. False
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b. False
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A transfer of title is an example of ________ utility. a. place b. value c. possession d. form e. time
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c. possession
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________ markets consist of purchasers and/or household members who intend to consume or benefit directly from their purchases. a. Governmental b. Reseller c. Consumer d. Producer e. Industrial
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c. Consumer
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Which of the following is only indirectly influenced by marketing efforts? a. Time utility b. Possession utility c. Form utility d. Place utility e. Value utility
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c. Form utility
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It is not important for companies to understand consumer buying behavior; they just need to make the products. a. True b. False
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b. False
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Information provided by a single firm on household demographics, purchases, television viewing behavior, and responses to promotions such as coupons and free samples is called triple-source data. a. True b. False
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b. False
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Which of the following is not part of the marketing mix? a. Place b. Promotion c. Distribution d. Utility e. Product
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d. Utility
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Products such as Rolls Royce automobiles can be successfully marketed with the undifferentiated approach. a. True b. False
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b. False
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Storing is considered a facilitating function. a. True b. False
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b. False
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External data sources of marketing information may include an organization’s suppliers and intermediaries. a. True b. False
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a. True
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Consumers have the most choice in spending their personal income. True False
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False

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