Social Responsibility and Marketing Ethics

1
Social Responsibility and Marketing Ethics

• Social responsibility concerns a firm's
  obligation to improve its positive effects on
  society and reduce its negative effects
  
• Marketing ethics are the moral standards that
  guide marketing decisions and actions

2
Excerpt from the Code of Ethics of the American
Marketing Association
...Participants in the marketing exchange
process should be able to expect that
1. Products and services offered are safe and fit
for their intended uses 2. Communications about
offered products and services are not deceptive
3. All parties intend to discharge their
obligations, financial and otherwise, in good
faith and 4. Appropriate internal methods exist
for equitable adjustment and/or redress of
grievances concerning purchases
3
Target Marketing vs. Mass Marketing

• TARGET MARKETING
• Marketing mix is tailored to fit specific target
  customer(s)
  
• MASS MARKETING
• Vaguely aims at "everyone" with the same
  marketing mix

4
The Four Ps and Marketing Mix Planning

• Why is the Four "Ps" idea helpful?
• Provides an organizing framework
• Helps to bring many, more detailed decisions
  together in a logical fashion
  
• Focuses thinking on the idea that all marketing
  decisions must work together as a whole
  
• Focuses on a managerial orientationand what a
  marketing manager/firm can do about needs of
  target customers

5
The Marketing Plan

• Marketing plan a written statement of a
  marketing strategy and the time related details
  for carrying out the strategy.
  
• Spells out, in detail
• What marketing mix is to be offered
• To what target market
• For how long
• What resources (costs) are needed at what rate
• What results are expected
• What control procedures will be used.

6
Marketing Program

• Marketing program blends all of the firm's
  marketing plans into one "big" planwhich is an
  integrated part of the whole-company strategic
  plan
• Program requires an effective "building up"
  process
  
• A good program must be based on good plans
• Each plan must be carefully developed
• Each plan is based on a marketing strategy
• Each strategy is based on a marketing mix and a
  target market
  
• Plans in overall program should work together to
  enhance a competitive advantage

7
Competitive Advantage

• Competitive advantage the firm has a marketing
  mix that the target market sees as better than a
  competitor's mix
  
• A better marketing mix offers target customers
  better customer value
  
• Note customers who are not in the target market
  may not see the marketing mix as offering better
  value
  
• Requires that the firm
• understand current competitors' offerings
• anticipate competitors' likely plans
• monitor effects of changes in competition
• REALLY understand the target customers' needs

8
Marketing Strategy Planning Process

• Narrowing down from broad market opportunities
  that a firm might pursue to a specific strategy
  
• Marketing strategy specifies a specific target
  market and a specific marketing mix
  
• Not just some strategy, but one that will offer
  target customers superior value
  
• Segmentation helps pinpoint a specific target
  market
  
• Differentiation helps pinpoint a marketing mix
  that is different from and better than what is
  available from a competitor
  
• Screening criteria make it clear why you select a
  specific strategy (and why others are screened
  out)
  
• S.W.O.T. analysis identifies and lists a firms
  strengths and weaknesses and its opportunities
  and threats
  
• S.W.O.T helps identify relevant screening
  criteria (what is needed to get a competitive
  advantage)

9
Examples of Different Types of Opportunities

• Market Penetration
• Arm Hammer promotes new uses of its baking
  soda
  
• Market Development
• Marriott Hotels target families for weekend
  "get-aways" to rent rooms filled by business
  travelers during the week
  
• Product Development
• Microsoft develops a new version of its Windows
  operating system to appeal to the people who
  bought an earlier version but now want more
  features
• Diversification
• RJR, the cigarette producer, adds baked goods to
  its product line to appeal to new customers

10
How Readings Relate to Market Segmentation

• Introduction to market segmentation concepts
  (Chapter 3)
  
• How changes in the external environments affect
  segmentation opportunities (Chapter 4)
  
• Why demographic variables are useful for
  segmentation and what they tell us about the size
  of segments (Chapter 5)
  
• How understanding customer behavior leads to
  better segmentation (Chapters 6 and 7)
  
• How to improve the information on which
  segmentation decisions are based (Chapter 8)
  
• Estimating (forecasting) segment size and likely
  profitability (Chapter 21)

11
A Market Grid Diagram with Submarkets
Submarket 1 Exercisers
Submarket 3 Transportation Riders
Submarket 4 Socializers
Submarket 2 Off-Road Adventurers
Submarket 5 Environmentalists
Concept divide a broad product-market (or
generic market) into homogeneous submarkets
12
Criteria for Segmenting

• Customers within a segment should be homogeneous
• similar responses to marketing mix
• similar segmenting dimensions
• Customers in different segments are
  heterogeneous
  
• different responses to marketing mix
• different segmenting dimensions
• Segment is substantial
• segment is big enough to be profitable
• Segmenting dimensions are operational
• useful for identifying customers
• helpful in deciding on marketing mix

13
Three Ways to Develop Market-Oriented Strategies

• Single Target Market Approach
• select one homogeneous segment as the target
• Multiple Target Market Approach
• select two or more target segments
• develop a different marketing mix for each
  segment
  
• Combined Target Market Approach
• combine submarkets into a single target market
• develop one marketing mix for the combined target

14
Relation of Potential Target Market Dimensions to
Marketing Strategy Decision Areas

• Behavioral needs, attitudes, and how present and
  potential goods and services fit into customers'
  consumption patterns.
  
• Affects Product (features, packaging, product
  line assortment, branding) and Promotion (what
  potential customers need and want to know about
  the firm's offering, and what appeals should be
  used).
• Urgency to get need satisfied and desire and
  willingness to seek information, compare, and
  shop.
  
• Affects Place (how directly products are
  distributed from producer to customer, how
  extensively they are made available, and the
  level of service needed) and Price (how much
  potential customers are willing to pay).
• Geographic location and other demographic
  characteristics of potential customers.
  
• Affects size of Target Markets (economic
  potential), Place (where products should be made
  available), and Promotion (where and to whom to
  target advertising and personal selling).

15
Examples of Possible Segmenting Dimensions for
Consumer Markets

• CUSTOMER RELATED
• Customer needs (automobiles)
• Geographic location (tire chains)
• Age (insurance policies)
• Sex (clothing)
• Family size (child care services)
• Income (vacation services)
• Education (magazines)
• SITUATION RELATED
• Benefits offered (toothpaste)
• Consumption/use patterns (cameras)
• Brand familiarity (health care products)
• Buying situation (soft drinks)

16
Some Examples of Possible Segmenting Dimensions
and Typical Breakdowns for Consumer Markets

• Needs
• Economic, functional, physiological, social, and
  more detailed needs
  
• Attitudes
• Favorable or unfavorable attitudes, interests and
  opinions
  
• Purchase relationship
• Favorable and ongoing intermittent none bad
  relationship
  
• Brand familiarity
• Insistence, preference, recognition
  nonrecognition rejection
  
• Geographic
• By country, region, size of city
• Income
• Under 20,000, 20,000 to 39,999, 40,000 or over

17
Examples of Possible Segmenting Dimensions for
Business Markets

• Type of organization (computer software)
• Closeness of relationship with customer (travel
  services)
  
• Size (buildings)
• North American Industry Classification System
  (NAICS) codes (machinery)
  
• Geographic location (electronic parts)
• Type of product (X-ray film)
• Buying situation (automobile components)
• Source loyalty (office supplies)
• Reciprocity (transporting services)

18
Possible Segmenting Dimensions for
Business/Organizational Markets

• Kind of relationship
• Weak loyalty -------- strong loyalty to vendor
• Single source -------- multiple vendors
• "Arm's length" dealings-------- close
  partnership
  
• No reciprocity -------- complete reciprocity
• Type of customer
• Manufacturer, service producer, government
  agency, military, nonprofit, wholesaler or
  retailer (when end user), and so on
  
• Demographics
• Geographic location (region of world, country,
  region within country, urban -------- rural)
  
• Size (number of employees, sales volume)
• Primary business or industry (North American
  Industry Classification System)
  
• Number of facilities
• How customer will use product
• Installations, accessories, components, raw
  materials, supplies, professional services
  
• Type of buying situation
• Decentralized -------- centralized
• Buyer -------- multiple buying influence
• Straight rebuy -------- modified rebuy
  -------- new-task buying
  
• Purchasing methods

19
Segmenting Dimensions

• Qualifying Dimensions
• Segmenting dimensions relevant to the
  product-market
  
• Are there characteristics typical of customers
  who are at least potentially interested in the
  relevent product type?
  
• Determining Dimensions
• Segmenting dimensions that affect the purchase of
  a specific product or brand
  
• Why does a potential customer select one brand
  over another?

20
Applying Segmentation Concepts A Seven-Step
Approach to Segmenting Product-Markets

• 1. Name broad product-market
• 2. List potential customers' needs
• 3. Form homogeneous submarkets
• 4. Identify determining dimensions
• 5. Name possible product-markets
• 6. Evaluate why segments behave as they do
• 7. Estimate size of each product-market segment

21
Toothpaste Market Segment Description
22
Positioning and Differentiation

• Positioning analysis is based on how (potential)
  customers think about a firm's current or
  potential offering
  
• Positioning considers how customers think about
  competitors' offerings as well as the firms own
  offering
  
• Positioning analysis identifies what kind of
  offering different segments see as ideal
  
• Differentiation focuses on developing a marketing
  mix that target customers will see as distinct
  from competing mixes
  
• Positioning and differentiation help with
  combining and segmenting, by revealing which
  segments view the market in similar (or
  dissimilar) ways

23
Mission Statement Provides Guidance

• Mission statement helps set the course of a firm
  by explicitly stating the organizations basic
  purpose for being
  
• May make it clear that some opportunities (target
  market or marketing mix alternatives) are not
  related to the mission
  
• Some opportunities may be a good fit with
  mission, but not as good a fit or as high a
  priority as others
  
• Mission statement works in combination with
  specific objectives and should relate to
  screening criteria used to evaluate strategy
  alternatives

24
Examples of Company Resources

• Financial strength (ATT)
• Producing flexibility (Chrysler)
• Patents (IBM)
• Channel relationships (Kraft)
• Loyal customer base (Coke)
• Technical capability (3M)

25
Competitor Analysis (summary) Disposable Diaper
Competition in Japan
26
Examples of Effect of Technological Environment

• Rapid changes in the Internet and World Wide Web
• Robotics (better quality control, lower
  production costs)
  
• Computer scanners at retail check-out counters
• Worldwide satellites for data communication
• Automated inventory control
• Electronic fuel injection on automobiles
• Cellular phones and fax machines for communication

27
Examples of Changes in the Political/Legal
Environment

• Deregulation of energy industries
• Less emphasis on antitrust laws by federal
  government
  
• Maturing of consumerism
• More attention to laws governing international
  trade
  
• Changes in labeling requirements

28
Focus (mostly prohibitions) of Federal
Antimonopoly Laws on the Four Ps
29
Major Focus of Some Important Laws that Affect
Marketing

• Sherman Act (1890)
• prohibits conspiracy to reduce competition
• example price "fixing" agreements among
  competing firms
  
• Federal Trade Commission Act (1914)
• prohibits unfair methods of competition
• example use of deceptive advertising
• Robinson-Patman Act (1936)
• prohibits most types of price-related
  discrimination
  
• example offering "advertising allowances" to
  some middlemen but not others (without cost
  justification)

30
Outline of Federal Legislation Now Affecting
Competition in Marketing
31
Some Important U.S. Federal Regulatory Agencies
32
Examples of Trends in the Cultural Environment

• More women in the work force
• "Aging" of America, but accompanied by new growth
  in the teen group
  
• More single-person households
• More health consciousness
• More concern about the environment

33
An Example of Product-Market Screening Criteria
for a Small Retail and Wholesale Distributor (5
million annual sales)

• Quantitative criteria
• Increase sales by 750,000 per year for the next
  five years.
  
• Earn ROI of at least 25 percent before taxes on
  new ventures.
  
• Break even within one year on new ventures.
• Opportunity must be large enough to justify
  interest (to help meet objectives) but small
  enough so company can handle with the resources
  available.
• Several opportunities should be pursued to reach
  the objectives--to spread the risks.
  
• Qualitative criteria
• Nature of business preferred.
• Should take advantage of our on-line Internet
  order system.
  
• New goods and services for present customers to
  strengthen relationships.
  
• "Quality" products that do not cannibalize sales
  of current products.
  
• Competition should be weak and opportunity should
  be hard to copy for several years.
  
• There should be strongly felt (even unsatisfied)
  needs--to reduce promotion costs and permit
  "high" prices.
  
• Constraints
• Nature of businesses to exclude
• Manufacturing.
• Any requiring large fixed capital investments.
• Any requiring many support people who must be
  "good" all the time and would require much
  supervision.
  
• Geographic

34
GE's Strategic Planning Grid

• A way of organizing business judgments about
  existing and/or proposed product-market plans
  
• Business Strengths Dimension
• Company size, market share
• Profit margins
• Technology position
• Limiting factors (personnel, capital needed,
  etc.)
  
• Industry Attractiveness Dimension
• Size of market and growth trends
• Competitive situation
• Social impact
• Industry profitability

35
Demographic Dimensions for Select Countries
36
Demographic Dimensions

• Important operational dimensions for
  understanding market segments and developing
  marketing mixes
  
• Much good data is available
• Important for determining size of consumer target
  markets
  
• Is the market substantial?
• Seeing demographic trends helps identify
  opportunities
  
• Shifts in age distribution
• Geographic growth/decline

37
Age Distribution

• Average age is increasing
• But there is a big teen cycle on the way
• Post World War II "Baby Boomers" still a big,
  influential group
  
• 50 and older group to grow dramatically in next
  decade

38
Median Family Income, 1960-1996 (in 1996 dollars)
39
Percent of Total Income Going to Different Income
Groups in 1996
Note the 20 percent of all families who have the
lowest incomes account for only 4.2 of total inc
ome the 20 with the highest incomes have 46.8 p
ercent-- a 10-fold difference between the haves
and have-nots
40
Income Distribution

• Growth in real income has slowed down
• Middle income groups in U.S. enjoy real choices
• U.S. distribution like Canada, Western Europe,
  Japan, Australia, New Zealand
  
• Higher income groups still have much of the
  spending power
  
• Top 20 income group has 47 percent of total
  income!
  
• Bottom 20 income group has only about 4 percent!

41
Types of Income

• DISPOSABLE INCOME
• Income that is left after taxes
• DISCRETIONARY INCOME
• What is left of disposable income after paying
  for "necessities"

42
Family Spending for Several Family Income Levels
(in 1995 dollars)
43
Stages in the Family Life Cycle
44
Examples of Economic Needs

• Economy of purchase or use
• Convenience
• Efficiency in operation or use
• Dependability in use
• Improvement in earnings

45
Psychological (intra-personal) Variables

• Motivation
• Perception
• Learning
• Attitudes and beliefs
• Personality
• Lifestyle (psychographics)

46
Possible Needs Motivating a Person to Some Action
47
Lifestyle Dimensions (and some related
demographic dimensions)
48
Social (inter-personal) Influences on Consumers

• Family
• Reference groups
• Social class
• Culture and subculture

49
Characteristics and Relative Size of Different
Social Class Groups in the United States
Successful professionals and managers community
minded and ambitious for their children...
50
Characteristics and Attitudes of Middle and Lower
Classes

• Middle classes
• Plan and save for the future
• Analyze alternatives
• Understand how the world works
• Feel they have opportunities
• Willing to take risks
• Confident about decision making
• Want long-run quality or value

• Lower classes
• Live for the present
• "Feel" what is "best"
• Have simplistic ideas about how things work
• Feel controlled by the world
• "Play it safe"
• Want help with decision making
• Want short-run satisfaction