Basic Marketing Questions and Applications

1. 1.      Using the auto industry as an example, demonstrate the concept of derived demand. How might derived demand affect the industry in the following product categories:

(a)Steel (b) CD players (c) safety airbags (d) on-star road side assistance service and (e) customize chrome wheels? What consumer trends would affect these products and their demand by the auto industry?

Business demand is derived demand which ultimately derives from the demand for consumer goods. The businesses in the auto industry and similar fields are often dependent on one another. Business-to-business marketers transact for supply of raw materials to satisfy consumer market. An auto industry affects the following industry in different ways:

(a)   Steel industry – steel is a primary raw material used by car manufacturers. The auto industry is very much dependent on the supply provided by the steel industry. Operations cannot be processed without the materials. An increase in demand for cars also tends to increase of demand for the partner industry.

(b)    CD players – CD players are installed on manufactured cars. The auto industry partners with this industry to install CD players that best suits the different model of cars. This industry that supply CD players can also come up with speakers and other customize packages that best ensemble different auto models. The CD player industry can promote their products to final consumers to increase the business demand which will benefit both industries.

(c)     Safety airbags – the US government requires the installation of safety airbags to the auto industry. All auto industry is in a need for the supply of airbags. The safety airbags business marketers must stand out on other airbag competitors because the auto industry sticks to one supplier of airbags which offer best. This builds a lifetime business partnership with the auto industry unless dissatisfaction and complains from the consumer market regarding airbags arises.

(d)   On-star road side assistance service – this service industry is not directly used during the manufacturing process of cars instead they offer services to the consumer market for the finished products. They may partner with the popular auto brands to promote their products in which the consumer market may find interest in the need of this service.

(a)   Customized chrome wheels – this is very much in demand for the auto industry which manufacture trendy autos that markets different age groups. Some auto industries accept auto customized orders. From the paint colour, interiors and wheels. Goodyear is one of the biggest suppliers of auto wheels which also markets directly to the end consumers.

These industries are concentrated on the age and income brackets of the consumers. They offer a variety of models that fits with the different variables, thus also have a propensity for other industry to offer parallel products and services.

1. 2.      Which of the major types of buying situations is represented by each of the following:

(a)Chrysler’s purchase of computers that go into cars and adjust engine performance to changing driving conditions (b)Volkswagen’s purchase of sparks plugs for its line of minivans and (c)Honda’s purchase of light bulbs for a new Acura model?

            There are three major types of buying situations. The straight rebuy, modified rebuy and new task. Each of which is applied in the following situations:

(a)   The Chrysler’s purchase of computers that is to be installed for the car’s performance is classified as a modified rebuy situation. In this condition Chrysler purchase involves high cost and risk and more efforts to evaluate, modify and gather specifications about the preferred product. Chrysler is more inclined to have a larger number of participants to make the decision purchase. They must assess cautiously all suppliers, prices, delivery, service terms and payment terms. They must also be rational in evaluating such purchase.

The existing or “in” suppliers must be careful to maintain and bring the best product to protect their account on Chrysler. They must be responsive and adapt with the changing existing market offerings because “out” suppliers find modified rebuy situation as an opportunity to provide products and better offering than what is offered by the existing suppliers.

(b)   The Volkswagen’s purchase of sparkplugs for its minivans is considered a straight rebuy situation. In this buying situation Volkswagen routinely reorders sparkplugs without necessary modifications. The regular operation of Volkswagen in car manufacturing necessitates its need for a continuous supply of sparkplugs from its suppliers.

The “in” suppliers in the straight rebuy situation may propose an automatic reordering system for the convenience of Volkswagen. They may also watch the inventory supply to respond quickly for the smooth running operations of Volkswagen. Moreover, “out” suppliers may add value and exploit dissatisfaction for them to be considered.

(c)    The Honda’s purchase for light bulbs for a new Acura model is considered a new-task situation. Since Honda is manufacturing a new-line car, new kinds and models of parts are needed. These parts include the light bulbs which will be all bought for the first time. In this situation the Honda’s rationality is put to test. Detailed product specification is needed to be evaluated carefully. Collection of information and large number of decision participants are very much needed in this situation. Prices, terms, services and various supplier offerings must be considered.

Marketers have the greatest opportunity in this situation. They must provide their product information and offer necessary help and assistance for them to influence buying decision participants.

1. 3.      Using your university or college as an example, illustrate how the concept of systems buying might work if the university or college decided to purchase a new master computer system that would integrate all administrative, faculty and student information requirements into a single system. The system could be accessed by users on or off campus. What would be the component parts of such a system? How would you go about selling such a system to the university or college?

Purchasing a new master system that integrates information in a university should be a careful and rational activity. This concerns acquisition of a large, expensive and centralized capital item. The purchase of a new computer system demands a functionality that will best satisfy the challenging performance expected by the whole university. This deals with a large purchase decision participants that shall assess all pros and cons of various offered products. This computer system involves separate component parts such as computer units, large databases, expanded computer capacity, programs, applications and new operating system. Also services that are directly attributable to the purchase shall be considered, such as installation, training guides, regular maintenance, warranty, delivery and credit terms. The business buyer prefers to purchase the computer system from a single seller. The supplier must be able to provide a packaged solution to the problem and offer all component parts and the related services in one package. The supplier must be able to provide the most complete system package for them to win the account of the university and outdo other competitors.

The key marketing strategy of providing a packed solution to a problem from a single seller is called Systems Selling. Sellers must adapt systems selling as marketing tool; moreover, the seller must be capable to provide the group of interlocking products and some additional services such as system of production, inventory control and distribution that shall help in the smooth operation of the system.

1. 4.      Assume you are selling cars to a company for use as fleet cars by the company’s sales force. The sales people would like bigger, more comfortable cars, which would be more profitable to you. However the company’s fleet buyer prefers smaller, more economical cars. Who might be in the buyer’s centre for this purchase? How could you meet the varying needs for these participants?

In this situation the business marketers must identify the buying center and the different influences on the business buyers. Profitability in the seller’s part is important but marketers must also put their considerations on the buyer’s needs. They must find ways on how they can best serve the business buyers. They must be aware of the participants in the business buying process. In this condition all participants influences the buying the decision but the USERS are the ones that very much convince the purchase in this situation. They are the members of the buying organization who will actually use the purchased product. Of course, marketers must respond to their preferences.

Other participants also have their relative influences. They have different evaluation criteria. For example, the INFLUENCERS provide the various product specification needed and to evaluate the alternative offers of different organizations. They are usually the technical personnel who guarantee that the needs of the organization are met. Also, the BUYERS, who have the formal authority to choose the supplier and negotiate the terms of purchase, must be taken into consideration. They are ones that weigh the cost and the benefits they can acquire from the purchase. The DECIDERS, who have the formal or informal power to select or approve the final suppliers, determine the advantages and values that each supplier can provide and the GATEKEEPERS, who control the flow of information to others, keeps the confidentiality of the purchase decisions and the important participants to prevent biased influences.

The purchase of fleet cars involves high cost transaction, thus necessitating more participants for a more rational decision. The personal and economic factors also influence business buyers. Marketers must continue to serve and concentrate on provide strong economic benefits to buyers. They must try their best to offer the lowest possible price for the best product. Also, they have personal preferences, characteristics, personalities and attitudes. They react to both reason and emotion.

Understanding all these concepts presents a challenge to all suppliers and marketers. The complex interactions and the ever-changing buying center participants are the forceful setbacks encountered by marketers.

1. 5.      More and more business buyers are now purchasing products and services electronically, either through electronic data interchange (EDI) links or in the Internet. What are the benefits of such “cyber purchasing”? What are the negatives? What is the future of this growing field of commerce? Illustrate your view with an example.

Internet purchasing, also known as E-Procurement, has grown rapidly with the advances in the information technology. A lot of companies has already put up their company buying sites with convenient, well-designed and user friendly Web sites. Such cyber purchasing possess a package of benefits such as easy access to suppliers, low purchasing cost, it hastens order processing and delivery, more convenient purchasing, eliminates paper works and it is more time efficient and saving. Business to business marketers can also design a web site that also serve as an advertisement that is customized to meet various buyer’s needs moreover, marketers can focus more time on value added activities since it doesn’t have to constantly spend time and money to advertising, order processing and delivery. These businesses can also extend their customer services more efficiently through easy access detailed technical information, live chats with online representatives, customer suggestions and real time customer support. All of these can be performed in one internet program.

Although there are numerous benefits, there are also negatives on such cyber purchasing. It can erode decades-old customer-supplier relationships because it provides an easy Web search for other suppliers. Buyers are not contented to tie up with one supplier, they tend to frequently search for more benefit provided by other suppliers. Cyber purchasing can also create potential security disasters. This is the foremost problem of the businesses engaged in cyber purchasing, as we can see on the news, companies are having problems with hackers. These unauthorized personnel can access their main program and vandalize their sites, thus, companies are spending millions to maintain defensive strategies against these hackers. Also, secure business environment to carry out confidential transactions are lacking.

In my perception this “cyber purchasing” will continue grow with the developing markets since this easy to access business opportunity provides benefits for both buyers and suppliers. Unlike before when I bought my first PC, reaching customer support for technical problems are difficult to get in touch with. But nowadays there is much development. Recently when I bought my laptop, I first searched for the specifications and features that the product offers and now even minor problems encountered can be assisted easily through available information from the internet.

QUESTIONS RELATED TO PRODUCTS:

1. 1.      Because the various classes of consumer products differ in the ways the consumers buy them, they also differ in how they are marketed.

(a)   Select what might typically be considered an unsought product and suggest how a marketer might convert this product into a specialty, shopping or convenience product.

(b)   Explain how some personal computer manufacturers have been able to convert their specialty products into broader-based shopping products.

Consumer products are classified differently, these differ in the way consumers buy them and how they are marketed. Consumer products include convenience product, shopping product, specialty product and unsought product.

(a)   Unsought products are products that either the consumer does not know about or knows about but does not normally think of buying. An example of this is life insurance. Life insurance companies are quite multiplying but some consumers do not know about what this service provides. Some doesn’t even think of purchasing and doesn’t consider it as a necessity. Companies must apply various strategies and a lot of advertising, personal selling, and other marketing efforts. They must fully aware consumers about their innovations. They must also introduce their products that will persuade consumers in the need of buying it. Marketers must present full marketing effort to show consumers the advantages in investing in the life insurance, thus making buyers necessitate the need of purchasing it, making it a specialty, shopping or a convenience product.

(b)   Specialty products are products with strong characteristics or brand identification for which a significant group of buyers are willing to make a special purchase effort. These are the luxury products in which there are little comparisons among brands. Apple Mackintosh is a computer manufacturer that is considered to be offering a specialty product before but nowadays it is considered as a shopping product manufacturer. Shopping products are products that the consumer, in the process of selection and purchase, characteristically compares carefully. Apple Mackintosh which is known to provide high quality expensive computers has shifted to be a shopping product organization for the reason that they are trying to broaden their market, not only to the upper class sector. They are trying to respond to the growing competition and the low price offering of other competitors. By offering products with decreased cost, consumers now consider Mackintosh as a variety for comparison for selecting computers. Consumers now carefully compare the suitability, quality, price and style with the competing brands.

1. 2.      People can be thought of “products”.

(a)   Using the national election of 2010, indicate how the leading presidential candidate marketed themselves to the public. Think carefully of the tactics used, the advertising themes presented the image that was transmitted.

(b)   Construct a marketing profile of each of the major candidates.

(c)    From this analysis, what can you conclude about person marketing?

People can be thought of as products. This concept is known as person marketing which consist of activities undertaken to create, maintain, or change the attitudes and behaviour or target consumers toward particular people.

(a)   For the recent Philippine national election much person marketing has been done. Presidential candidates have used different strategies and techniques to be easily recognized and remembered. They have made their own slogans, logos, soundtracks, flyers, posters and other paraphernalia that would surely make trademarks for their presidency. This is the highest investment paid by these candidates. They try their best on how to uniquely appear to the public. They also used well-known personalities to help influence voters. For Noynoy Aquino, he released various commercials with different famous and influential personalities. He’s well known for the color yellow which was bought up also by Cory Aquino. His parent’s contribution also had helped him make a mark on the minds of the voters.

(b)   Noynoy Aquino is known for the different advertisements of Kris Aquino and other popular ABS-CBN personalities. His team created an advertisement of celebrities that tells the people of his responsible outlook as well what his parents has contributed. This strategy made him win majority of the votes. Manny Villar has made the color orange his trademark. He has the most investment in the advertisement among all candidates. Commercials of him with known personalities are always shown on TV. His ability to reach out to the poor are always emphasized. Joseph Estrada has still able to get the hold of the vote of the masses. Being the experienced former president and all the projects he has done are the watchword in his advertisements.

(c)    Person Marketing is all about building reputation of the company from different personalities. When this strategy is used skilfully, a person’s name can be a powerful brand. Influence to the consumers can be achieved.

1. 3.      Brand name and symbol licensing has become a multi-billion dollar worldwide business. Using the information from the chapter and marketing highlight 82; devise a plan for licensing your school’s logo, mascot and other brand symbols. Your objective is to create toys, sportswear, gifts and logo items that will have national appeal. Could co-branding also be an option? Explain.

Building a strong brand involves a process that also presents marketing challenges. The major brand strategy decisions consist of brand positioning, brand name selection, brand sponsorship and brand development. A brand is a name, term, sign, symbol or design or a combination of these that identifies the products or services of one seller or group of sellers and differentiates them from those of competitors. Many companies and institutions spend much to build strong brands. Building strong brand for University of the East, it must try its best to outshine other universities. By offering exclusive products, they can apply this brand strategy.

Creating these customized toys, sportswear, gifts and logo items must be well differentiated to the other universities. Having this product must create a prestige on the minds of the students and shall influence others on buying such or even being part of the school’s community. UE must use their logo, mascot, and other brand symbol to be placed to its products. For example, students can purchase different UE customized items in the souvenir shop like mugs, shirts, lanyards, slippers, umbrella, pens, toys, etc. We can notice the logo of UE imprinted on the items. They continuously create new designs and items. The warrior logo is often times also used in such items. Majority of the products available for sale are in color red.

In my opinion co-branding can be an effective strategy. Co-branding is the practice of using the established brand names of two different companies on the same product. The sportswear offered can be a brand of Speedo or Nike. These brands are usually sponsors of the school which help each other market its products.  The shirts and jackets available for sale are created by popular clothing manufacturers with an imprinted UE design. Co-branding offers many advantages because each brand dominates in different categories. There must be a coordinated relationship between the other brands because this involves complex legal contracts and licences. Limitations must also be observed, because a negative image of one brand can affect drastically the other.

1. 4.      Assume that you are hired by General Motors to develop the alternative product concepts for a voice-activated, verbal internet link, it plans to make available in its luxury cars. This system would allow automobile’s occupants to access the Internet, e-mail and e-shopping sites while driving or riding around. In developing the three concepts, think carefully about who could use such a system, and when, where and how. Which of your three major concepts do you think has the greatest potential?

A new alternative product concept is a detailed version of the new product idea stated in meaningful customer terms. General Motors must develop an attractive idea that can be developed to the new product concept. General Motors must begin to commercialize its experimental computer-powered luxury cars. The efficiency of their system must be well communicated. Its advantages and suitability must be emphasized. Our task is to develop this product into a new alternative product concept, evaluate each concept and identify the most attractive one. We may create the following concepts:

Concept 1 – A luxury car with an ideal high-technology system with provides an easy access to the internet while on the road.

Concept 2 – A car suitable for working individuals who can receive quick information and transactions while driving.

Concept 3 – A car with an installed computer information system designed with a voice-activated feature for the safety and convenience of drivers.

Concept number 3 has the most potential. It explained well its functionality in a short statement. The concepts developed must undergo concept testing with a group of targer consumers to find out if the concepts have strong customer appeal. They must present a concrete and physical presentation of the concept to increase reliability of the concept testing. Before attempting to release a concept it must pass through a critical testing to assure the acceptance of the product to the public. Product’s ability to sell, even though it can provide a bundle of advantages and efficiency, may not be very appealing to target consumers because of its poor product concept.

1. 5.      Pick a soft drink, car, fashion, food product or electronic appliance and trace the product’s life cycle. Explain how you separated the stages of the product evolution. Project where this life cycle will go from here. Which product life cycle stage, if any, is the most important? Which is the riskiest? Which stage appears to hold the greatest profit potential? Which stage needs the greatest of “hands-on” management? Be certain to explain the thinking behind each of your answers.

New-product development is the development of original products, product improvements, product modifications and new brands through the firm’s own research and development efforts. I will take Coca-Cola as an example; years ago they created a twist on the traditional Coke. They created flavours on the usual offering; they introduced the Coke cherry and vanilla. Before introducing this to the market the company must pass through the stages to new-product development. Introducing a new unusual product is very much risky and assurance of success cannot be determined. The company must develop a strong new product planning and undergo the systematic product development process.

The first stage is the IDEA GENERATION. This is the systematic search for new product ideas. Coca-Cola must consider both internal and external sources. Through the internal sources, the company can perform researches and brainstorming of qualified marketing individuals. They may also encourage employees to contribute their own ideas and perceptions.  Through the external sources, they can perform various surveys from the customers.

Second is the IDEA SCREENING. This stage is the evaluating of new-product idea to spot the good ones and drop the poor ones as soon as possible. The company must analyze all factors that will affect the new product development and determine its pros and cons.

Third is the CONCEPT DEVELOPMENT and TESTING. The company must present the idea in meaningful customer terms and further testing to assure the efficiency of the new product. This statement must be attractive to customers for it to be differentiated to other market offering. The idea of Coke in releasing its new flavours is very much new to consumers. It has a unique characteristic that can outshine others.

Forth is the MARKETING STRATEGY DEVELOPMENT. It is designing an initial marketing strategy for a new product based on the product concept.

Fifth is the BUSINESS ANALYSIS. This is the review of the sales, cost and profit projections for a new product to find out whether these factors satisfy the company’s objectives.

Sixth is the PRODUCT DEVELOPMENT. This is developing the product concept into a physical product in the order to ensure that the product idea can be turned into a workable product.

Seventh is the TEST MARKETING. This is the stage in which the product or marketing program are tested in more realistic marketing setting

Eighth and last step is COMMERCIALIZATION. This is introducing the new product to the market.

Though this product is well studied market demand and other uncontrollable factors contributed to the decline of the Coke cherry and vanilla.  This product has undergone all the product life-cycle stage. PRODUCT DEVELOPMENT where the Coca-Cola invested for the new product. It underwent the INTRODUCTION stage where the company encountered heavy expenses for the advertisements and commercialisations. The GROWTH stage, where the product’s sales started to climb quickly, is when customers are delighted in the new offering. The MATURITY STAGE, when the growth of sales levels off, is when such offering is turned down by consumers and the DECLINE stage, when the product sales decline. This product was permanently eliminated from the offering of Coca-Cola Philippines. This product is still available in other countries where it is very much accepted.

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