Online exercises per chapter

Chapter 1

  1. Exchange theory implies that individuals place different values on the products and services which are available. This means that one person who values a good at a low level is happy to exchange with someone who places a higher value on the same good. This being the case, both parties end up better off and can therefore feel happy about the exchange. Were this not the case, people would be unwill­ing to trade.
  2. The behavioural sciences which have contributed to marketing theory are sociology (the study of people’s behaviour in groups), psychology (the study of the minds of individuals), anthropology (the study of culture, or what it is that makes us human), and economics (the study of management of demand). Each illuminates a different aspect of trading behaviour, and therefore of marketing.
  3. Becoming truly customer-centred demands a great deal of empathy with potential customers and consumers. This is often hard to achieve in practice, and requires a commitment to market research. Another issue is balancing the needs of customers with those of the firm, and especially the agendas of colleagues, which may create conflicts within the management of the firm.
  4. A need is a perceived lack of something, a want is a specific satisfier for a need.
  5. Defining marketing as the management of exchange can result in the inclusion of some aspects of life which are clearly not commercial, for example exchanges between parents and children or between teachers and students.
  6. Product orientation refers to the view that a product can be made with all the features that anyone might want, the so-called ‘perfect’ product. Production orientation is the view that the route to busi­ness success lies in manufacturing in the most efficient manner possible, usually in order to reduce costs and compete on price.
  7. The 7P model suffers from the major drawback that it implies that marketing is about doing things to consumers rather than doing things for them. It also tends to imply that marketing activities can be placed in ‘silos’ and that they do not impact on each other much: there is, in fact, a great deal of overlap between the elements.
  8. In non-profit markets the customer might be the recipient of the service or product, or the organisa­tion funding the exercise: marketers would tend to define the customer as being the person or organisation doing the paying, but in practice the needs of both parties need to be addressed.
  9. Globalisation is regarded as a bad thing because it tends to erode cultural differences, which affects national and cultural identity. Some people object to this on the grounds that globalisation destroys cultural assets in the name of greater supply-side efficiency and greater profits (and lower prices).
  10. Price elasticity of demand is the degree to which demand is affected by changes in price. An inelastic demand curve means that demand is relatively unaffected by price changes, whereas an elastic demand curve implies that demand is affected greatly by changes in price. The curves are not neces­sarily straight lines – at the extremes, a product may become more or less elastic.

Chapter 2

  1. Rising inflation will affect pricing policy. Firms might raise prices in line with inflation, or (possibly) reduce content or alter quality in order to keep prices the same. For some firms, rising inflation might provide a competitive opportunity: others may find their costs rising and then also discover their mar­gins are being squeezed, so a firm with a low cost base might benefit greatly.
  2. A toy manufacture might seek markets elsewhere (i.e. in countries where the population shows a higher birthrate), choose to produce toys which are suitable for adults, or try to increase the number of toys owned by children within the home market. The most promising of these is likely to be the export market.
  3. An anti-ageing drug would affect undertakers, beauticians, and firms which provide mobility products such as mobility scooters and stairlifts. It would also affect firms providing orthopaedic beds, and many over-the-counter pharmaceuticals.
  4. Large companies would generally have access to lobbying organisations which would be able to influ­ence regulation and regulatory bodies. Small firms need to work through trade associations, but would more likely simply have to find ways to accommodate the regulators, either by complying or by find­ing loopholes in the rules.
  5. Governments would have to co-operate with each other in order to regulate cross-border mergers, although in some countries it may be possible under the law to impose a ban on such a merger. In general, most major industrial countries do co-operate in regulating major mergers and acquisitions, since it is in no-one’s interests to allow monopolies to emerge (except, of course, the monopolists themselves).

Chapter 3

  1. Service firms minimise risk in several ways: first, by explaining the service as fully as possible before starting to deliver it, second by checking with the customer throughout the service delivery to ensure that everything is as it should be, and thirdly by only asking for payment after the service has been delivered. Many service companies seek to establish a solid brand in order to reassure clients.
  2. Developing a hierarchy of goals enables the individual to plan the decision-making process. It also helps when interrupts happen, since it is easy to pick up where one left off after dealing with the interrupt.
  3. Drive is the basic urge which leads to goal setting, which in turn feeds motivation. The strength of the drive is likely to determine the strength of the motivation, but is not the only factor: motivation is also affected by the likelihood of achieving the desired outcome, and the belief that a given course of action will be successful.
  4. Someone would undertake an extensive external search if he or she lacked knowledge of the product under consideration, or if the purchase was to be a major one. Typically both conditions need to apply – a low-cost, regularly purchased item would not need an external search since it could simply be discarded if it proved unsuitable.
  5. Involvement is a complex topic since it goes strongly to self-concept, as well as to the functional aspects of the brand. People become involved because the brand itself is important, either for its reas­suring practical features or (more commonly) for its social connotations. People become involved as a way of saying who they are.
  6. Self-concept is basic to buying fashion wear since clothing is a clear way of projecting an image. Clothing relates to the concept of the human being as artwork: the brands, the design, and the col­ours all relate to the individual’s projection of self.
  7. Information searches will tend to be longer if information is hard to obtain, if the individual has little information already, if the product is complex or high value, or if the individual lacks suitable advice from friends or family.
  8. Conation is only intended behaviour: a great many factors may arise which prevent the individual from actually carrying out the intention. Blocked conations can lead to frustration, but behaviour cannot always follow on from intention.
  9. Families are important for two main reasons: first, they share consumption, so there is usually at least some shared decision making. Second, families are the means by which children are trained to be effective consumers, first by observing purchasing behaviour, then by helping with purchases, then by carrying out purchases under supervision, and finally by being allowed to make independ­ent purchases.
  10. Perception is analytic, in that stimuli are selected from the environment and unwanted stimuli are filtered out, and is synthetic in that gaps in the perceptual map are typically filled in by the individual. In other words, people invent things to complete their world view.

Chapter 4

  1. Government departments would typically begin by drawing up a specification for the product. This specification would involve consultation with users of the product, with financial managers, and with other interested parties. This would then be given to the buyers, who would put the specification out to tender: in almost all cases, the government will accept the lowest bid.
  2. Buyers are subject to all the normal pressures of any employee. Internal politics might make a buyer look for a deal which will enhance his or her reputation, or might even look for an opportunity to make a colleague look bad: buyers who are worried about workplace issues might make bad decisions, or might make purchases on the basis of ensuring job security rather than the best deal for the firm.
  3. Clearly the effectiveness of the cleaning materials would be a factor, but the end use is also crucial. Will the materials be used by the firm, or sold on? Either way, the quantity and price negotiation is likely to be crucial, but in the case of buying for resale the buyer will be interested in the likelihood of making regular sales, in which case the supplier’s reputation in the end market and its support for the brand will be extremely important in making the decision.
  4. Suppliers take a large number of factors into account when assessing a customer. First, creditworthi­ness is important. Second, there is the size of the firm – the bigger the firm, the bigger the potential orders, but also the harder the bargain they are likely to strike. Third, the supplier might try to find out about the buyers themselves. Fourth, suppliers would need to know what the purchasing policy of the potential customer is likely to be.
  5. Evaluating suppliers means being confident that they can deliver what is needed at the right time, in the right quantities, and at the right price. If the directors of the firm lay down specific criteria these will guide buyers in evaluating suppliers before placing an order. Objective criteria might include credit checks, solvency checks, references from other customer firms (although these may be hard to obtain), and information about the probity of directors. Checks on manufacturing quality might include visiting the factory to observe processes, checking on quality control, and also checking on the returns policy.
  6. The main problem with evaluating suppliers is the difficulty of obtaining hard information. Suppliers will certainly not readily inform potential customers of any weaknesses or problems, and other customers are probably going to give positive reports, since they remain customers. Contacting former customers, that is to say customers who have experienced problems and have defected, is likely to be problematical, and in any case few companies would be prepared to provide helpful advice to a competitor.
  7. Government departments will almost always put contracts out to tender, so a seller should (if possi­ble) try to make contact before the specification is drawn up, and ensure that something goes into the specification that competitors are unable to offer. This will not always be possible, of course, so an alternative is to bid low but put in heavy penalties for any variations in the contract.
  8. Marketing to charities often means helping the charity to find ways of paying for the goods. This may be via fundraising assistance, or via easy payment (even barter) systems. There are legal limitations to what a charity is allowed to do, however, and any seller must take notice of restrictions which might affect any negotiations.
  9. Sellers might be able to identify influencers by asking contacts within the firm. In some cases former employees might be able to suggest names, but in general it is very difficult to identify influencers. In rare cases, salespeople have asked the decision makers themselves – asking if there is anyone the decison maker would normally consult can result in a positive response.
  10. Sellers can reduce buyer risk by offering a sale-or-return contract, but it is certainly very effective to provide honest information about the product and the firm so that buyers can feel confident that they know everything there is to know before making a decision. Reducing personal risk to the buyer might involve ensuring that senior management are in favour of the buying decision.

Chapter 5

  1. Secondary research has been carried already, often by someone else for some other purpose. It is secondhand research. Primary research is carried out as original research aimed at answering a spe­cific question.
  2. Preliminary research is intended to outline the problem in terms of its scale and dimensions. Conclusive research is intended to generate specific answers.
  3. Qualitative research is usually more suitable for preliminary research, since it tends to be more open-ended: if the researcher already knows enough about the problem to be able to design a survey questionnaire, the preliminary research would not be necessary.
  4. Research is worth carrying out if the answers will save the company more than the cost of the research. The timescale also needs to be considered – if the research is going to take too long, it may be that the decision to be based on it will be irrelevant because an opportunity has passed.
  5. Inaccuracy in research comes from [Q1]
  6. Questionnaires are extremely difficult to design: they often elicit false answers; they are prone to misin­terpretation; they can be difficult analyse effectively; they are generally unable to answer ‘why’ questions; they often lead the respondent into making answers of a specific type which are not the complete truth; and they are prone to interviewer bias (and even outright cheating by interviewers).
  7. Experiments raise problems because researchers should, for ethical reasons, explain exactly what is happening and what the research is about, but this may very well bias the results of the experiment. Other ethical issues might include the risk of injury or mental distress.
  8. Triangulation is the process of investigating a problem using several different methods. This increases the accuracy of the research because it helps avoid some sources of bias: if one method produces a biased result, it will stand out from the results of the other methods.
  9. Secondary research is very much cheaper and quicker than primary research, and may even be more accurate since in many cases it will have been carried out by large, professional research agencies.
  10. Marketing information systems aid decision making by providing up-to-date, relevant information in real time. A good system will feed in data about competitors, customers and market trends, all of which are necessary for good decision making.

Chapter 6

  1. People’s needs change according to circumstances, so an individual may appear in different segments according to the particular role he or she is adopting at the time. For example, a business executive may need a more upmarket hotel when trying to impress colleagues or clients, and perhaps require the office facilities a £500-a-night hotel would provide: on a private trip, paid for from his or her own money, a £50-a-night hotel might be perfectly adequate, and there would be no need to pay for facilities which won’t be used.
  2. Segmentation enables the firm to channel scarce resources towards the customers which will be most profitable or most effective in meeting the firm’s objectives. It also enables the firm to estab­lish a better competitive position, and have a clear brand with which its target customers can identify.
  3. Some customers are more trouble than they are worth. In some cases they may have a deleterious effect on the firm’s image, and (especially in service businesses such as restaurants) can have a direct effect on existing customers. Sometimes customers might be poor payers, or simply too expensive for the firm to service.
  4. Wealthy people are often targeted because, of course, they have enough money to buy most things. On the other hand, because they are often targeted they tend to develop a strong sales resistance, and also are very likely to be cautious spenders – this is probably how they got rich in the first place. They also have a great deal more choice than poorer people, and therefore anyone targeting the wealthy will meet with strong competition.
  5. Positioning is about placing the firm and its brands in a competitive place relative to competitors. It is a way of enabling potential customers to develop positive attitudes towards the brand.
  6. Markets are segmented according to demographics, behaviour, geography, and psychosocial factors. No single segmentation base is likely to be adequate, however.
  7. Entertainment segments partly by demography, since some entertainments are ‘mating game’ products such as restaurants, nightclubs, pubs and so forth. Another segment base would be behavioural – according to whether people are seeking active or passive entertainments.
  8. Repositioning can be attempted if a product is in the decline phase of the product life-cycle in its current market. This will only work if there is a clear segment in which to move the product, and a way to promote it effectively in the new market.
  9. Repositioning can be risky: if the product does not succeed in its new position, it is unlikely to be able to regain customers in its original position. Also, it is difficult to dislodge a product from its position in the minds of the target segment, who presumably do not currently buy the product: removing a negative image is harder than establishing a positive one.
  10. Restaurateurs should target by deciding what kind of customers would enjoy the overall ambience and cuisine of their restaurant, but this is not enough: a restaurant also needs to ensure that undesirable customers are kept away, since they will spoil the ambience for others. For an upmarket restaurant this might mean having door staff, requiring a dress code, or asking high prices. Equally, a more modest restaurant might decide to target people who simply want to eat and run – workers, people who are travelling on long journeys, and so forth.

Chapter 7

  1. Distortion can have a very strong effect on integration levels, because separate messages are being pro­cessed by the recipient. If one message comes through as the sender had expected, but the other message becomes distorted, this will set up a conflict in the mind of the recipient: this is, of course, the bugbear of integrated marketing communications and can be extremely difficult to avoid.
  2. The pool of reality model suggests that people are not passive recipients of messages (as the Schramm model implies) but instead are co-creators of meaning. For marketers, this has significant implications – people have to be treated very differently if they are seen as being analytical part­ners rather than passive recipients.
  3. Post-testing for advertising effectiveness means first that the expenditure on the campaign has already been made. Second, post-testing can often lead to distortion since people will not necessarily be able to remember when and where they saw the promotion.
  4. The Schramm model is usually criticised on the grounds that it implies that communication is some­thing that is done to people rather than something that comes about as a result of co-operation between individuals. It also tends to see communication as being somehow separate from reality – as if perception were not the only means we have of creating reality.
  5. Semantics is the study of meaning. It is a term usually applied to understanding the connotation of words, but in fact is about all forms of communication, whether verbal or not.
  6. Ethnocentrism is the view that one’s own culture is correct, and all others are at best poor copies. This affects people’s interpretation of communications campaigns, and will result in substantial mis-communication.
  7. Word-of-mouth communication can be stimulated by using controversial or newsworthy communi­cations. If a marketing communication is seen to be humorous or outrageous it is more likely to be commented upon. Another method is to include incentives to pass on information to a friend or friends, for example offering bring-a-friend deals.
  8. Push strategy involves promoting heavily to firms at the beginning of the supply chain, with the intention of ‘pushing’ product down the chain. Pull strategies involve promoting heavily to end users, with the intention of stimulating demand which will ‘pull’ product through the chain. Most promotional campaigns contain elements of both.
  9. The main advantage of integrating communications is the synergies that result from having the same message presented in several different ways. This also has the advantage of appealing to different groups. The main disadvantage is that it is extremely difficult to do – messages become distorted, the medium itself affects the message, and people have trouble integrating the different messages into their perceptual maps.
  10. Symbols are open to alternative interpretations, which means that miscommunication can easily occur. This is particularly true in multicultural contexts, where symbols may have entirely different meanings for different cultural groups.

Chapter 8

  1. This is a very big question, but the answer revolves around differences in culture and custom rather than in border restrictions. In domestic markets, the rules are known and familiar: the competition is also known, and competitive responses can be predicted. In overseas markets this is not the case, and hard information is also difficult to come by.
  2. Firms can enter markets in several ways: establish an overseas office, appoint an agent, ‘piggy-back’ with another firm in the same market but with a different product, carry out a turnkey operation with a local partner, or establish manufacturing and marketing facilities in the overseas market.
  3. It is difficult to assess overseas markets, but research can be carried out and there are several on-line information services available to provide basic information such as demographics, wealth concentra­tion and so forth. Alternatively, one can seek a partner which already trades in the target country (either a local one or another foreign firm) and tap into their expertise and local knowledge. This does require a high degree of trust, however.
  4. Cultural problems often arise from ethnocentrism, and this can arise from either side: while it is easy to assess someone from one’s own culture, assessing a foreigner is much harder because it is corre­spondingly harder to read the cues. Equally, it can be difficult for a foreign customer to trust someone entering the market. In consumer markets, marketing communications may have to be recreated from scratch – simply dubbing an advertisement into the local language is unlikely to be effective.
  5. Globalisation means sourcing raw materials, manufacturing, and marketing without regard for national boundaries.
  6. Marketing communications change dramatically when crossing cultural boundaries. Apart from lan­guage changes, cultural differences may render communications incomprehensible or at best humorous. Also, legal differences may mean that some communications would be against the law in the target countries. Finally, differences in competitive level and type may mean that products need to be positioned differently in the target market.
  7. There is no difference. This question is the result of a misprint! Sorry...
  8. Profit potential is a function of the number of people who have a need for the product, their spend­ing power, and the level of competitive pressure. The cost of capturing a market share needs to be offset against the number of people in the market, and the degree to which they will pay a premium price for the product.
  9. Expatriate managers need careful preparation to ensure that they are culturally sensitive. For some, it may seem like a negative career move, so they would certainly need to be reassured on that score: however, the most common reason why overseas postings fail is that the family cannot settle in the foreign country. Difficulties with schooling, and the interrupted careers of spouses, can prove insur­mountable for an expat manager.
  10. Countertrade has the advantage that it often makes trade possible in countries without convertible currencies, and it also can turn out to be much more profitable than conventional trade: the main disadvantage is that it requires a great deal of flexibility and negotiating skill from both parties if it is to prove profitable at all.

Chapter 9 

  1. Companies would not bother with a strategic plan if the business environment is so volatile that plan­ning is impossible. If the business is expecting to carry out a very short-term project, planning may also be unnecessary.
  2. The marketing audit provides a snapshot of the company’s present position so that it is possible to know what changes to make, and also to have a starting-point for moving on to other strategic busi­ness positions.
  3. Laggard strategies enable a company to see where the problems are with a given course of action before committing corporate resources. Laggards may not have first-mover advantage, but they do have a higher survival rate: it is a low-risk, low-return strategy, in other words.
  4. Market leaders seek to be first into new markets, with the aim of capturing substantial shares before others enter. They typically act as innovators. Market followers pick up the segments of the market that the leaders have missed or don’t want: it is a much safer strategy, but one which is unlikely to yield very large returns.
  5. Combination strategies are failing strategies because it is not possible to obtain the advantages of each of Porter’s positions all at once, but it is possible to suffer from all the disadvantages. Trying to adopt a combination strategy is likely to lead to confusion as regards the strategic aim.
  6. Collaboration with competitors is dangerous if it leads to the disclosure of intellectual property. It can also result in losing key staff, or failing to achieve a clear strategic position. There is also a pos­sibility that monopoly regulators might take exception to a collaboration in some circumstances. However, in general collaboration is safer than competing.
  7. Putting customers at the centre of the firm’s activities should be the most effective way of persuading them to spend their money with the firm. This in turn leads to increased shareholder value. Shareholder value also derives from the security of the investment: loyal customers tend to make the business less susceptible to market shifts.
  8. Providing the ‘best service in the industry’ implies benchmarking. A firm should endeavour to gather evidence that what it is providing is, in fact, better than other firms’ offerings. Customer feedback and market research should help to provide answers.
  9. The deeper the commitment of the firm, the more important the strategy. This means that firms will reject some courses of action, even though these may in themselves be very attractive, because they have committed its resources elsewhere.
  10. Value-based marketing begins with the idea that the firm’s first responsibility is to maximise share­holder value. This is usually related to capital growth rather than maximising profitability, which means focusing on long-term issues rather than short-term gain, and on building customer loyalty rather than on cutting costs.

Chapter 10

  1. Apart from the moral issues which will affect employees’ views of their employer, corporate respon­sibility pays off in PR terms and also in terms of staying clear of legal action or regulation. It is easier to behave ethically than it is to deal with the wrath of activists or regulators.
  2. Firms can take a teleological approach to resolving ethical conflicts, but in general meeting the needs of customers is (for marketers at least) the best way of creating shareholder value, so in those circum­stances there will be few, if any, conflicts.
  3. Pharmaceutical companies are in a special position since their products are invasive, and can also have a major effect on life-or-death situations. Ethical policy for a pharma company can be devel­oped through discussions with staff, with medical bodies, and with government departments. Pharmaceutical companies would perhaps take a deontological approach, judging their actions against absolutes: the medical profession operates on the basis of ‘First do no harm’ and this should probably be the case for pharmaceutical companies.
  4. Bribery distorts markets, and creates costs for the end customers without creating any added value. Bribery also causes decisions to be made which are not in the best interests of the stakeholders who are most affected by them: a decision to buy a specific type of hospital equipment, for example, might be made on the basis of the biggest bribe to the buyer rather than the best equipment for the patients.
  5. Cause-related marketing is popular with companies because of its PR value. The company’s ethical credentials are fully-exposed every time the customer uses the product, and also such activities help create word of mouth.
  6. Provided the company has a clearly-defined ethical code, infringements by employees can be pun­ished by written warnings or, in extreme cases, by dismissal. It is, of course, better if social pressures are brought to bear and people are empowered to act ethically: rewards always work better than punishments.
  7. Charitable giving is an economic choice like any other: those who give need to feel some kind of payback. In most cases it is simply the feeling of having done the right thing, but in some cases a tangible reward will help people feel that their contribution has been appreciated.
  8. Charities can improve support from corporations by ensuring that there is a corporate pay-off in terms of PR or even in direct increases in business (as with cause-related marketing). This is because corporate employees, whether at director level or further down the ladder, are not spending their own money: they need to justify their decisions to more senior managers, or in the case of directors, to shareholders.
  9. The main driver for ethical behaviour is, in fact, the desire to be a decent human being. Further driv­ers might be the desire for a quiet life, the desire to avoid sanctions from regulators, or the need for positive PR.
  10. Volunteers for charity work are sometimes time-rich but cash-poor (e.g. retired people or unem­ployed people). They can therefore give their time, whereas it might be difficult to give money. Many are motivated by a need to feel useful, and to enjoy the social aspects of going to work.

Chapter 11

  1. The value chain follows a linear path from raw materials to finished product, whereas the value net­work may go sideways. Value networks include other organisations which contribute, but are not in the direct line of supply.
  2. Service quality is often the only differentiator between firms which produce substantially homogene­ous products (such as building materials or raw materials for manufacture). Service quality might also be the key factor in choosing a specific supplier.
  3. For a bank, the customers who are worth keeping are those who maintain substantial balances in their current accounts and who repay loans promptly, according to the terms of their loan agree­ments. Customers who should be discarded (demarketed) are those who continually go overdrawn or fail to keep to their agreements.
  4. The onus for making the relationship work tends to be on the seller because of competition from other sellers. It is rare for a buyer to have no choice of supplier – normally buyers have several options, and can play one off against the other to secure the most favourable deal.
  5. Building trust means keeping promises, putting things right promptly when they go wrong, getting the interface with the customer right (empowering staff), keeping the brand relevant, having fair procedures and treatment in the event of problems, and providing all the relevant information.
  6. In the mid-KAM stage companies (or rather their key-account managers) would be dealing with building partnerships, consolidating the preferred-supplier status, and establishing the key account in-house.
  7. In the pre-KAM stage the firm and its managers would be focusing on defining and identifying key-account potential, and securing an initial contact within the target firm so as to commence the relationship-building process which will lead to a first sale.
  8. A more expensive car may be regarded as value for money because of the prestige it provides, because of the greater reliability and service quality that might be expected, and because of the greater comfort and utility that might be expected.
  9. Management are not always aware of customer expectations because managers will naturally try to impose their own expectations on those of others. In other words, most of us will understand our own opinions much better than we will understand those of others, and will therefore tend to assume that other people (or at least any sensible people) will agree with our own views.
  10. The leaky bucket theory postulates that most managers concentrate on attracting new customers rather than on plugging holes through which existing customers are escaping. The theory illustrates the stupidity of failing to retain existing customers while spending large sums on attracting new ones.

Chapter 12

  1. The main drawback of the PLC is that there are no timescales. It is impossible to use it as a predictive tool. The basic PLC also takes no account of marketing activities – these might affect the rate of growth, or the rate of decline, of a product. Such considerations render the PLC useless for practical purposes.
  2. The BCG matrix is arbitrary in that the boundaries cannot be set accurately. There is no accurate definition of a high-growth market, nor of a large market share: some markets have a great many competing products, and a 10% share might be considered very high, while others may have few competitors and even a 30% share might be a minority share.
  3. The GE matrix includes market attractiveness and competitive strength. Although it is still arbitrary, and requires executive judgement to decide what is an attractive market and how strong the compe­tition is, the model is better for predicting possible outcomes and making strategic decisions. It takes account of more factors than does the BCG matrix.
  4. From a customer’s viewpoint, a string brand provides reassurance about the quality of the product and the reliability of the company supplying it. It also provides a risk reduction effect in the area of social risk: one is unlikely to be mocked for owning a prestigious brand.
  5. A brand name should, if possible, relate to the features and benefits of the product. It should also be memorable, and if possible be a name which people find easy to pronounce when recommending the brand to friends.
  6. Products often get dropped shortly after introduction when it becomes clear that they are unlikely to return their development costs. In the Growth phase, products usually lose money, so if (for exam­ple) a string competitor appears, it may be better to withdraw the product before any further losses are incurred.
  7. Firms sometimes retain loss-making products either because they have a historical or sentimental value, or because they encourage sales of other products. It may also be the case that the product has future potential, perhaps in another market.
  8. Physical evidence can be important in restaurants. Chain restaurants often have give-aways (toys for children, gifts for adults) which promote the restaurant further and act as reminders for later visits. Branding is clearly vital in this process.
  9. Companies move towards services orientation because it is often easier to differentiate a service than it is to differentiate a physical product.
  10. Take-away food packaging can be made to make the food easier to eat, or can contain games for people to play. The packaging should certainly allow the food to arrive in good condition, hot and fresh – not always easy, when it may have to be transported some distance.

Chapter 13

  1. Establishing an innovative culture means allowing people to make mistakes, which is not always easy and for many firms seems to be near-impossible. There must also be time for people to think, and discuss different ideas with each other. There should not be a culture of nay-saying: people’s ideas should be respected even if they may not be practical in their original form.
  2. Innovators can be difficult to find, but it is sometimes possible to locate people via social net­working sites or through their previous purchasing behaviour. Many online retailers are able to identify potential innovators in this way.
  3. Product champions exist to guide a product through the innovation process. A product champion will discuss the project with colleagues, will act to solve problems, and will be an advocate for the product in the face of scepticism. Product champions will seek to anticipate problems and will nego­tiate the way forward.
  4. Project teams exist to generate and refine ideas for new products. In many cases they will be drawn from several disciplines so that they can have a reasonable insight into the difficulties the product might encounter on its way from initial idea to product launch.
  5. Project teams exist to refine ideas, whereas brainstorming groups exist to generate new ideas (how­ever impractical). The two groups might comprise the same set of individuals, of course.
  6. An imitative strategy involves identifying competing products which can be copied. It is essentially a follower strategy. A defensive strategy, on the other hand, seeks to innovate as a response to an attack by a competitor. It may well be that the competitor is following an imitative approach and the defender is forced to adapt the product in order to stay ahead.
  7. Newness is only one factor in adoption, and may only serve to draw attention to the product. A product may be very innovative and interesting, but if there is no relative advantage few people would actually go ahead and buy it.
  8. Involvement is about falling in love with products. Clearly someone who regards themselves as inno­vative will be more likely to fall in love with new products, and will want (for self-image reasons) to be seen to be buying the latest gadget, car or fashion item.
  9. Hastening the adoption of products is difficult, but certainly once a product is in the growth stage of the product life-cycle a push strategy is indicated. In the introduction stage, when innovators will be the only buyers, a pull strategy is more likely to be effective.
  10. A technophone is someone who understands and enjoys new technology. A technophobe is someone who is somewhat afraid of newness and prefers to avoid it if possible.

Chapter 14

  1. Set pricing objectives, develop pricing strategy, determine demand, estimate costs, review competi­tive offerings, select pricing method, establish pricing policies, determine prices.
  2. The three types are profit-orientated, sales-orientated, or status-quo orientated.
  3. In developing a pricing strategy, a manager needs consider the needs of the customer: value in use, perceptions of the company and its products, and ability to pay. Second, the needs of the firm should be considered: corporate objectives, costs, marketing programme and product assortment. Third, competitors’ offerings, pricing and costs need to be considered. Fourth, distribution channels’ costs, capabilities and potential grey market. Finally, the business environment should be considered – government regulations, inflation, currency issues, and the overall health of the economy.
  4. Customers have no real awareness of the firm’s costs when considering price, so will only really be aware of his or her own costs, many of which will have nothing to do with price. Benefits will be weighed against those costs.
  5. Switching costs are the non-price factors which militate against changing from an existing product to a new one. These include learning how to use the new product, the risk of it not working as well as the old one, and the costs of disposing of the old product.
  6. The experience curve is especially relevant to investment and operating costs. It has limited relevance to dealing with customers, and it tends to introduce too much rigidity leading to an inability to respond to changing customer needs. It should therefore not be used in volatile markets.
  7. The commonest methods used are rigid cost-plus pricing (which ignores customer needs and percep­tions entirely), flexible cost-plus pricing (which allows for some discounting, but still ignores consumers), and dynamically incremental pricing (in which the exporter seeks only to recover the costs of dealing internationally, which still ignores consumers).
  8. Firms dealing internationally should still consider consumer needs and perceptions – but many don’t do this. They also need to be very aware of currency fluctuations, and differing inflation rates in target countries.
  9. Transfer pricing can affect local partners because they may become demotivated as a result of showing lower profits than colleagues in other countries. This is an artificial distinction, of course, but may still affect the people concerned.
  10. Firms may find that competitive bidding is unattractive because it tends to cut profits. This means that firms need to scrutinise the exact terms of the bid to see whether there are loopholes in the terms which might allow a profit to be made.

Chapter 15

  1. The strong theory suggests that advertising exerts a persuasive force on people, encouraging them to consider buying a product: the weak theory suggests that advertising only has the power to nudge someone towards a specific brand at a time when they are already considering a purchase.
  2. Companies often switch to all-you-can-afford when budgets are cut. Financial directors will often set a budget for marketing, and managers will have to stay within that budget: objective-and-task requires the marketers to make a case for the expenditure, which is not always easy, and certainly when times are hard the case would be well nigh impossible to make.
  3. The proportion of sales budgeting method suffers from the misconception that sales create advertis­ing. If sales fall, marketing effort and expenditure should increase, but the proportion of sales method means that marketing budgets will be cut if sales fall. This way lies disaster.
  4. Small businesses would probably use sought advertising such as classified ads or directories. This is because display advertising is expensive, and in any case people will only call a plumber when they need one: this is not an impulse purchase.
  5. TV advertising is very susceptible to zipping and zapping, so advertisers need to make the ads them­selves interesting in order to encourage viewers to watch them. If the ads are interesting or humorous enough, they may even go viral, being posted on YouTube or Facebook.
  6. Radio advertising has a greater intimacy than billboards, since radio is listened to while driving or in the home. It also has the advantage of being active – it is more interesting to listen to an ad, perhaps with music, than it is to look at a billboard.
  7. Advertisements use questions because this triggers people to think. It also means that people come up with the answer themselves rather than being told by the advertiser, which makes the message more credible.
  8. Inside transport advertising is likely to be read by passengers, who are of course members of a differ­ent target audience from people who see outside transport advertising. The latter has the advantage of being seen at a number of different locations, sometimes in specific parts of the city, and by groups such as motorists.
  9. All advertising works better when it is close to the problem, but ambient advertising has the benefit of being able to indicate part of the solution, as in the case of the Right Guard promotion on the London Underground.
  10. Firms use pop-ups because they often get right to the target audience. Someone who is looking at a specific web page might be expected to be interested in products connected with that page. Not all pop-ups are blocked, of course, so they may well prove very powerful: they are a relatively cheap way of reaching a large number of people within the target audience.

Chapter 16

  1. In-house PR has the advantage that the PR people are closer to colleagues and can presumably obtain much more accurate, up-to-date information. In-house PR also allows firms to maintain confidential­ity, which may be important in the case of crisis management.
  2. Crisis teams need to be composed of senior people from within the firm, and should have proper training in dealing with the media. They should also meet regularly to discuss possible crisis scenarios and the responses to them.
  3. Stock market valuations are affected by many factors, PR being only one of them. Without something solid to back it up, PR has no chance of retaining credibility, and will therefore eventually become ineffective.
  4. Sponsoring an event should only be considered if there is a clear link between the event and the sponsoring organisation or brand, and there should also be a clear payoff for the sponsor. Sponsorship should not be undertaken simply because it supports a worthy cause.
  5. PR disasters are difficult to avoid, because crises can strike at any time, but a good crisis team will be able to minimise the fallout. Obviously firms should do everything possible to ensure that the crisis doesn’t happen in the first place, and better plant maintenance and security probably would have helped a lot in the case of Bhopal, but after the event the company needs to be quick to respond at a senior management level.
  6. In-house newsletters help to mould the corporate culture, and as such play an important role in cre­ating a team spirit. This helps ensure that everyone in the firm works together effectively. Newsletters also help in ensuring that people talk about their employer in a positive way when they go home at night.
  7. Having an effective induction programme for new staff is essential for internal PR. Creating a social contract between the new staff members and the rest of the organisation is important: a welcome event to introduce new people to their colleagues would be helpful in this.
  8. Resolving conflicts between stakeholders is largely a matter of having effective communication. Stakeholders need to understand that other people’s needs have to be considered by the organisation, and conflicts may arise as a result.
  9. Sponsorship links the firm to an organisation or event in a positive way, so that the image of the sponsee is transferred to some extent to the sponsor. There is also evidence that people do feel grate­ful to sponsors for making events possible.
  10. PR works in part on cognition (through press releases and similar) and partly on affect (through sponsorship). Conation would only be affected by concatenation, in other words conation is affected indirectly, as cognition and affect are changed.

Chapter 17

  1. Key-account selling takes a lot longer and involves many more decision makers. Key account selling also involves asking questions which build up the importance of the problem in the customer’s mind. In general, small-account selling seeks a decision during a single sales meeting, from a single indi­vidual.
  2. In general, a straight salary system tends to put more pressure on the salesperson to perform, because there is a social obligation attached, whereas a commission-only system can become demotivating if the individual does not sell for a while. A combined system is usually best, however.
  3. Ice-breaking is a way of putting the conversation onto a human level, rather than being impersonal: it can also provide the salesperson with clues as to the attitude and personality of the prospective buyer.
  4. Salespeople tend to identify with the customer rather than with the company because they spend more time with the customers and have to make a great deal of effort to put them at their ease and establish a rapport. This rapport works both ways, of course.
  5. Salespeople tend to be a little afraid of after-sales activities because there may be a customer com­plaint attached, which would certainly affect the salesperson’s morale. Also, such calls are often wrongly seen as a waste of time which could be better spent in finding new customers.
  6. An objection is a request for more information framed as a negative comment, whereas a condition is a circumstance which makes the sale impossible.
  7. If an exhibitor wants to relate to existing customers the stand should have some staff who normally do not meet the customers – administrators, engineers, designers, senior management and so forth. This will help to weld relationships.
  8. A firm entering a new market needs to become recognised very quickly, so a piggyback promotion with a firm already established in the market would probably be most appropriate. If this is not pos­sible, a firm might need to have a very creative promotion which will seize the public imagination and create word of mouth.
  9. Salespeople might use a discount or a special offer to close a sale by telling customers there is a time limit on it. This is fine provided there really is a time limit – the danger is that a buyer might decide to wait until the last minute and thus place the order later (or not at all). A further risk is that the customer might expect a similar concession on all future sales, which may not be possible or desirable.
  10. Sales promotions are frequently linked to exhibitions. The exhibitor might offer a special ‘exhibition discount’ to anyone placing an order on the stand, or might offer free entry to the exhibition to any­one placing an order beforehand. Other promotions might include free gifts before or during the exhibition, and certainly most exhibitors would give away promotional gifts from their stands in order to remind people about the firm in future.

Chapter 18

  1. Digital marketing is very much controlled by the customer, whereas traditional marketing is con­trolled by the marketer (albeit with customer needs in mind). Digital marketing can be very much cheaper to run, since overheads are often lower, and it is by its nature global. Traditional marketing can offer a much more localised service, but may suffer from difficulty in identifying and reaching its target market. Digital marketing can take a ‘scattergun’ approach to segmenting, with the segments emerging for themselves.
  2. Sending out messages indiscriminately on Facebook is likely to alienate some people and cause them to ‘unfriend’ you. This means losing not just the friend, but also their entire network.
  3. A flying school would probably want all students, past and present, to be Friends on Facebook. They could then be sent photographs of aircraft or aerial photos, they could be invited to events at the airfield, they could be invited to post their own comments and experiences, and could even be asked to become Friends of other students so as to increase the size of the network.
  4. Orders could be taken via SMS and regular customers could be informed about special offers. Knowing the telephone number of the person ordering a pizza would mean that the address could be found (provided it is a regular customer) and therefore the delivery would be speeded up, as well as the ordering process.
  5. Many websites are able to accept direct bank transfers via debit cards or even online transfers. Such transfers are often extremely quick – within minutes in some cases. Paypal is another obvious way to accept payments direct from someone’s bank account. Otherwise it may be possible to accept payment on delivery.
  6. Simplifiers would be attracted to a website that is easy to navigate, and which provides all necessary information concisely. They might be attracted via traditional communications media, or possibly by social media sites: they spend little time on-line, though, so are more likely to respond to an off-line communication.
  7. Reducing negative connotations is difficult given the global nature of the Internet. It is not under anyone’s control, and there will always be unsavoury characters and fraudsters out there: however, by having a well-designed website, and by ensuring that visitors to it feel in control of what is hap­pening, it is possible to reassure visitors.
  8. Social media often carry complaints from disgruntled customers, so it is advisable to monitor the sites and respond appropriately to negatives. This means meeting the complaint head-on and taking the customer seriously, not merely glossing over the problem but instead asking the complainant to con­tact you directly in order to find a solution. This not only mollifies the customer, it also gives you an opportunity to look good to the customer’s friends – a good response might even be shared, thus putting your firm in a good light with a large number of people.
  9. Success in social media is measured in terms of Likes, Shares and Recommends.
  10. SMS has the advantage of being cheap and easily targeted, provided the sender has permission from the recipients: opt-in marketing is much more effective than spam, in all digital marketing scenarios.

Chapter 19

  1. Logistics is concerned with the whole process of moving goods through the system, and at least in theory includes the distribution of services: physical distribution is only concerned with the actual movement of physical products.
  2. International agreements need to specify the jurisdiction for the contract because commercial law differs greatly between countries. Specifying a particular country removes this doubt.
  3. Firms may limit the outlets in order to create an exclusive brand value. This is especially common in the case of upmarket products, where the brand image of the retailer reflects on the brand image of the products.
  4. Refusal to deal is an example of coercive power. It may be illegal, if it can be shown that it is a restric­tion of trade.
  5. Culture affects nearly everything in overseas markets: in the case of distribution, it is essential to use a distributor with local knowledge of business practices. For example, in Japan formal written con­tracts are of little importance: firms have agreements based on friendship and a social contract, since commercial law is difficult to enforce through the courts.
  6. Factors which help are a history of fair dealing, a strong commercial need to continue the relation­ship, clear definitions of the tasks each channel member is supposed to carry out, and clear agreements about target markets.
  7. Single channel systems can be created by developing good information systems, by standardising packaging and handling, by providing services which improve efficiency for everyone, and by pool­ing shipments to avoid the ‘empty truck’ scenario.
  8. Channel power comes from size of firm, size of market share, control of scarce resources, legal power, the power to influence another major player, the power to reward other members, and the possession of expertise which other members do not have. The willingness to lead may also be a factor.
  9. Service levels will depend on the needs of end customers. In some cases, service level can be low provided prices are also low, whereas in other cases service levels have to be extremely high, and price is not an issue.
  10. Effective logistics systems allow a company to maintain much higher efficiency in terms of costs and service levels. Both these factors are likely to be of importance to the end consumer, so such firms are also likely to provide a better product at a lower price than their less efficient competitors.

Chapter 20

  1. A licensee has the right to use a specific set of intellectual property, whereas a franchisee is obliged to follow a set business model in order to benefit from a strong brand.
  2. An Internet retailer could have a bricks-and-mortar outlet in the traditional way, by simply buying or renting premises, or could piggyback with an existing retailer who has complementary products. Promotion of the new outlet could be handled online, and the new outlet could offer facilities for ordering goods, using in-store computers.
  3. Service levels should be decided on the basis of customer need, and especially on price. Higher ser­vice levels cost more, whether in terms of input from staff or in terms of carrying a larger inventory. Upmarket stores will be expected to offer high levels of service: cheap stores will not.
  4. Wholesalers might provide a support service for end consumers as a pull strategy, helping retailers to sell more. A wholesaler may be in a better position to do this, perhaps due to handling a specialist product: a retailer might be carrying several thousand different products and be unable to be an expert in all of them.
  5. Location of discount grocery stores (such as Lidl) might be determined by looking at ACORN clas­sifications. Location of such stores in poorer areas makes sense, but stores should have car parks in order to target customers from outside the area.
  6. An electronics retailer is likely to use a classification dominance display. This makes it relatively easy for people to find the appropriate goods, whether it is a CD player or a radio alarm clock. It also enables the store to position staff with expertise in those products near to the displays.
  7. Retailers can encourage lower-income shoppers by offering credit, by promoting heavily in low-income areas, and by designing the store layout so that it is clear that it is low-cost. For example, leaving the goods in the packing cases gives the impression that the store is cutting every possible cost.
  8. Becoming a full-service wholesaler may be more effort, but it does mean that retailers are much more likely to be locked into the system and will therefore be more loyal. It also allows the wholesaler to charge premium prices, since the service level will be much higher.
  9. Telesales operations tend to be relatively cheap to run, and can result in a very high number of con­tacts with potential customers. The major drawback is that people frequently become annoyed at being telephoned, which is hard on the telesales operators and also may hurt sales – it doesn’t pay to annoy the customers.
  10. Internet-based retailing can be limited by computer ownership and computer literacy: not everyone, even in the 21st century, owns a computer and certainly many people are not fully at ease with using them. Another limiting factor is security fears: many people are worried about buying online due to the publicity given to online scams. Finally, the consumer behaviour factor which limits the Internet is that it only allows fairly limited examination of products. People like to handle products, examine them, and ask questions about them, most of which is difficult or impossible online.

Chapter 21

  1. Restaurant chains can use loyalty cards, feedback forms, vouchers for discounts against future meals, free gifts such as toys for children or pens, recipe sheets for some (preferably not all) of their prod­ucts, and so forth. Physical evidence is important for restaurants.
  2. For customers, the main risk factors are the variability of services, the uncertainty about whether a service failure will be seen as such by the provider, the intangibility of the service, and the social risk attached to some personal services such as hairdressing.
  3. Services are intangible, variable, perishable, cannot be tried in advance, and production and con­sumption occur at the same time.
  4. Contactors have direct, regular contact with customers: modifiers have some contact but it may be irregular: influencers influence the service outcome but do not have contact with customers: and isolateds have no contact and little influence on outcomes.
  5. Physical evidence can be crucial in increasing loyalty because it can act as a reminder of the service. It can be used both to help customers make recommendations and as a sales promotion device to encourage repeat business.
  6. Improved service provision adds value to physical products, and may in fact be the only differentia­tor between different companies’ products.
  7. Staff empowerment means that complaints can be handled swiftly, before they escalate in the cus­tomer’s mind. Empowerment also means that the service can be tailored to suit the individual customer, a major consideration in services marketing.
  8. Decision making shifts when buying services. Typically, customers will seek more information, espe­cially personal recommendations, and will have to be a great deal more careful in judging the service as it is delivered. Risk reduction means they will prefer to pay for the service after it is delivered, although providers may feel this is not always acceptable.
  9. Firms can minimise variability by de-skilling processes and by automating as much as possible. If this is not enough, regular checking with the customer that the service is being delivered adequately will also help.
  10. Sales processes fall into three categories: before sales, during sales, and after sales. All three need to be developed according to customer need, and should take account of the service level/cost dichot­omy. Clearly some people are prepared to pay more for a food service, but equally there is a market for the no-frills approach.