Marketing 101: An Overview of Consumer Buying Behavior

There are many mysteries in life.  Love, happiness, success, the meaning of life, teenagers, and for marketing professionals, consumers can be the biggest nut we try to crack and understand on a daily basis.  It's our job to understand how to convince our target market to buy what we have to offer.  How do we get them to see the value in our messaging so that we can get value from them in return?  It all revolves around the "mystery" of consumer buying behavior, and the factors that affect it.

What is Consumer Buyer Behavior?  Consumer Buyer Behavior refers to the behavior of the final consumers.  These consumers are the individuals and households who are buying goods and services in the marketplace for their own personal consumption.  It is important to note that I did not mention the word "business".  Consumer Buyer Behavior focuses on B2C transactions, not B2B transactions.

Consumer Buyer Behavior is a "mystery", because consumers vary greatly in their demographics and individual characteristics.  No one buyer is alike another.  However some groups of buyers do act similarly to each other.  In order to study buyer behavior, we have had to create a model to answer the central question of how consumers will respond to different marketing efforts and stimuli.  It's called...the "Model of Consumer Buyer Behavior".  Original, I know.  This stimulus response model is our guide.

The model looks like this:

[1] Consumers "ingest" marketing and other stimuli > [2] the stimuli enters their "buyer black box" > [3] the "black box" creates buyer responses.

It starts with marketing and other stimuli.  When we consider marketing stimuli, we usually focus on the "4 P's": Product, Price, Place and Promotion.  When we are examining other stimuli, we usually look at internal and outside economic, technological, political and cultural factors that influence the buyer.

All of that stimuli enters what we call the "buyer black box"... the brain.  This "black box" contains all of the characteristics of the buyer.  The buyer characteristics influence how he or she perceives the marketing stimuli, and creates a reaction.  The "black box" also contains the consumer's individual decision process, which is used to evaluate whether or not they will purchase a product.

Finally, this black box creates the "buyer response".  This buyer response influences the choice of product, their individual brand choice, the choice of dealer, the timing of the purchase, and the amount of money they will be spent on the goods and services.

Over the next few weeks we will be examining these characteristics as they affect buyer behavior, and discuss the decision process that the consumer follows.

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Marketing 101: Sampling Plan

In the last Marketing 101 post we examined common Contact Methods for acquiring Primary Data.  I listed three traditional methods: telephone, mail, and focus groups.  The fact of the matter is that online technologies have completely changed how we as marketing directors and CMO's do our jobs.  I truly believe this is for the better.  It so so much easier to collect the Primary Data we need via online methods, and it tends to be more cost effective than offline methods.  However there are also challenges to online methods, and some of the same issues exist when it comes to the reliability of the data we collect.

Whether it's online or offline, if we're not doing focus groups, we're usually using surveys to collect Primary Data.  Surveys give us the opportunity to draw conclusions about different groups of consumers by studying a small statistical sample of the total consumer population.  The "sample" is the key.  A sample is usually defined as a segment of the population selected for our research that will represent the larger population as a whole.  Whether or not a sample is good enough to make observations with, depends on how we've designed it.

Designing a sample is a three step process:
1) Decide who you are going to survey
2) Decide how many you are going to survey
3) Decide how you are selecting the participants in the sample

Let's examine each of these three steps a little more.

1) Decide who you are going to survey
First, you have to decide who you are actually going to survey.  In more statistical terms, we are asking "what is the sampling unit"?  Any group of people can be used as a sampling unit.  What I mean here is children, adult women, men, etc.  Your sampling unit should be determined by the target groups in your survey, and the data you have about your target customers. If you don't know who your target customer is, then you have some research to do first.  Choosing the wrong sampling unit will waste your time and your money.  It will give you data that you cannot use, because the results from that group will be irrelevant.

2) How many should be surveyed (what is the sample size)
When we are asking ourselves "how many should be surveyed", what we are saying here is "what is the sampling size?"  Sample sizes that contain more people usually give us increased accuracy. For you statistical junkies, there are certain facts of mathematical statistics that describe this, such as the law of large numbers and the central limit theorem.  To keep this simple for our discussion, larger samples will give you more statistically reliable results than smaller sample sizes.  However, larger sample sizes will cost you more money.  Do not assume that you need to attempt to sample an entire population segment (which would take forever, and be almost impossible).  Usually less than 1 percent of a population segment will provide statistically reliable results.  There is a down-side to Probability Samples: cost.  Depending on your Contact Method, larger samples will result in drastically higher costs.  When cost is a factor, then researchers turn to Non-Probability samples.

3) How should the people in the sample be selected?
What we are asking here is, "What is the sampling procedure we are going to follow?"  There are two different types of samples we can choose from: Probability Samples, and Non-Probability Samples.  Probability Samples give each population member (a.k.a. a potential participant) a possible chance of being included in the sample.  Because you are not sampling the entire population, probability samples will always contain margin for error.  The larger the margin of error, the less trust you can place in the data you have that is supposed to represent your "population".  Larger samples give you less margin of error, and less margin of error lets you trust your data more.

There are three different types of Probability Samples:
Simple Random Sample
Every member of the population has a known and equal chance of selection.

Stratified Random Sample
The population is divided into mutually exclusive groups (such as age and race) and random samples are drawn from each group.  Basically, you are splitting your population into defined groups, and then sampling each of those groups.

Cluster (area) Samples
The population is divided into mutually exclusive groups (such as blocks, and they are relatively homogeneous) and the researcher draws a simple random sample of each group.

Non-probability sampling is much less expensive than doing Probability Sampling, but the results are of limited value, because the data is less reliable.  Non-probability samples should be used with caution. Non-probability sampling techniques cannot be used to deduce generalizations from the sample to the general population. Any generalizations created from a non-probability sample MUST be filtered through the researcher's knowledge (and yours) of the customer population being studied.

There are three different kind of Non-probability samples:

Convenience Sample
In a Convenience Sample, the researcher selects the "easiest", most convenient to locate member from the immediate population to obtain research data from.  I would consider this one of the most hap-hazard methods.  There is practically nothing you can generalize about the data you obtain, other than considering it a "snapshot" of a a particular group, at a particular time, at a particular place.

Judgment Sample
In a Judgment Sample, the researcher will use his/her judgement to select the the people sampled.  Immediately you have to ask...how good is their judgment in selecting a good candidate?  Again, the data that you obtain from this sort of sampling is just not reliable for generalized conclusions, but it may be interesting to use as a "snapshot".

Quota Sample
Probably the worst method I can think of, a Quota Sample is simply a researcher grabing enough people to meet a quota requirement for sampling participants.  Stay away from this sort of methodology.  Your data is practically useless.

Never select a sampling method without taking the time (as you always should) to weigh the needs you have when collecting Primary Data.  Always take into consideration your time-frame and your budget, and always try to be as objective as possible when you are evaluating the Primary Data you have obtained.



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Marketing 101: Primary Data - Contact Methods

In my last Marketing 101 piece, I spent some time introducing the Research Methods that we typically use in Primary Data collection.  Remember that Research Methods consist of surveys, experimentation and observation.  Surveys are the workhorse of Primary Data collection.  They tend to give us the bulk of our information related to customer trends and buying behaviors.  In order to conduct these surveys, information is collected in a variety of manners.  Typically these Contact Methods include mail, telephone, focus groups, and various other online technologies.

Mail
The mailed questionnaire is a classic primary data collection method.  It is very valuable, because it can be used to collect massive amounts of primary data for a very low cost per respondent.  We're talking the cost of paper and postage.  (Remember that you do need to calculate the labor costs of crafting the survey and processing the data once it comes back to you)  The data that you can collect from mail methods is usually considered very good for a few reasons.  First, there is little chance for "interviewer bias", because there is no live person there to ask the questions in a manner that could influence a person to respond in a manner different than they normally would.  Second, because they are not being interviewed in person, the respondents are usually more willing to give more honest responses.  And third, because you are not relying on the interviewer to record responses, no interviewer bias is introduced to the answers.  

However there are downsides to using mail as a contact method.  First, mail-based surveying is not very flexible, because all respondents are required to approach their surveys in the same way.  Second,  collecting primary data via mail is very slow.  It can take months before a reasonable amount of your sample sends the questionnaires back to you for processing.  Third, because written surveys usually take longer to complete, the response rate trends lower - simply because it takes more work.  The response rate is actually considred to be very fair.  It's harder to control the sample, beacuse you don't know which households will respond, let alone who at the residence will respond. 

Telephone
Telephone has always been a fairly good method of collecting Primary Data.  First, it is possible to collect massive amounts of data very quickly by using multiple people at the same time to call and conduct phone interviews everyday.  Second, telephone interviews allow for more flexibility, because your interviewers have the opportunity to provide clarity about any questions that respondents don't understand.  Third, you have excellent control of the sample, because interviewers can screen out callers before an interview is conducted. Fourth, with the right incentives, typically the response rate is actually very good.  

There are problems with collecting Primary Data via telephone as well.  First, the quality of the data you collect can only be considered fair at times, because the interviewer can inadvertently introduce bias into the answers based on how the questions are asked.  Second, because the respondents are interacting with a live person, they may not want to provide completely honest answers to questions that they may consider too private.  Third, telephone surveys are more expensive, because they require more labor.

Focus Groups
Focus Groups are a Primary Data collection standard.  Focus Groups have become a leading method for gaining valuable insight into consumer thoughts and feelings and their buying behaviors.  Traditionally focus groups consist of a moderator leading six to ten people.  However technology has allowed focus groups to be conducted through video conferencing and webinars via the internet, which allows people from different locations to be connected together which can improve sampling. These groups will participate in discussions about products, advertisements, services, and even organizations.  The focus group attendees are usually paid a small sum for attending.  The moderator will attempt to lead an easy and free flowing discussion hoping that free honest responses will be given.  Data is usually recorded by the moderator, however sometimes focus groups are observed by staff members via cameras or through one-way windows.  

Focus groups also have their issues.  First, focus groups use much smaller sample sizes in order to control cost and keep their sizes manageable.  Second, because sample sizes are so small, it is hard to reliably statistically generalize the results.  Third, attendees of focus groups are not always candid and honest.  The phyiscal and sociological environment of the focus group can create peer pressure, which leads attendees to alter their results in order to "fit in" with the people surrounding them. This is being combated by using environments that are relevant to the products and services being studied in order to get more relevant and open responses.  Fourth, focus groups cost much much more to conduct due to the costs of time, labor, location, and data acquisition.  Only use focus groups when it is appropriate and you are looking for specific types of data that you cannot reliably acquire with other Contact Methods.

Online Methods
The internet has single-handedly changed the Primary Data landscape.  Researchers are no longer confined to using mail, telephone, or physically location-bound focus groups.  There are many electronic alternatives to all three primary contact methods.

Email surveys and survey research websites are very affordable alternatives to direct mail and telephone interviews.  Because they are electronic, they are much less expensive to conduct, and data is instantly stored into a database that can be manipulated and analyzed. It is also quicker to create a large sampling, because your contact list can be created by interfacing with your existing customer database, or by purchasing lists of consumers from secondary data companies.  As with mail, the quality of responses tends to be very good, because it is an impersonal process and respondents feel more open to share more "private" information.

Another alternative to the telephone or physical focus group collection methods is Skype, or any other video conferencing type of technology.  Because Skype and services such as Oovoo are available for free or very little cost, it is much less expensive to conduct focus group research when the researcher needs to observe the reactions of the attendees.  These services will usually have the ability to record online "meetings", which allows you to store and refer back to interviews easily.


No matter what contact method you choose to use in your Primary Data collection process, it is important to spend extensive time up front evaluating the type of data you need, and which methods fit your required data types, cost, and schedule.


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Marketing 101: Primary Data Collection - Research

In this edition of the Marketing 101 series we will take a quick look at Primary Data collection.  So far we have been discussing data that is considered secondary.  Secondary data was collected by someone else.  Whether it was your sales department, or a comScore research report that you purchased, it was created by someone else other than your department.  It did not involve any of your department interacting with existing and potential customers to collect data.  It was not collected with your marketing objectives in mind.

There is nothing wrong with secondary data.  You cannot perform any Market Intelligence without secondary data.  It is a great and necessary starting point for any of your research.  Secondary data is critical when you are defining the problems and objectives that are the focus of your Marketing Intelligence initiatives.  However in most cases, you will need to collect primary data of some kind in order to have the information you need to make real decisions.

What is Primary Data?
Primary Data is research that has been conducted by your organization, first hand. It is also known as Field Research.  It is usually more reliable than secondary data, because it is usually more accurate since you collected it yourself.  Primary data is specific and relevant to your products and services. However, Primary Data is often very time consuming to collect, and usually costs more to create than purchasing secondary data reports. You must take special care when collecting primary data.  It needs to be relevant, current, and as unbiased as possible.

Primary Data is relevant when it directly applies to your company's products and services.  It is relevant when it relates to the problems you are trying to solve, and the marketing goals of your organization.  Primary Data is current when it is recent, and directly corresponds to the profile of your customers TODAY.  Primary Data is unbiased when your subjects have been honest and open during data collection.  When constructing your Primary Data collection plan, you must consider research methods, contact methods, the sampling plan, and your research instruments.

Research Methods consist of observation, surveys, and experimentation.  Contact Methods typically consist of mail, phone, personal interaction, and various online methods.  Sampling Plans take into account units, size, and procedures.  Research Instruments typically consist of questionnaires and other mechanical instruments.  Let's start with a quick discussion of Research Methods.  There are three typical ways that Primary Data is collected in marketing: observation, surveys, and experiments.

Observation
Observation is the collection of Primary Data through observing people, their actions and the situations they are in.  Observation may be the easiest research to do.  Typically, observation is also the most cost effective method.  Observation can also give you data that people aren't usually willing to tell you themselves, such as their feelings, emotions, attitudes or the motives behind their buying decisions.

How does observation work?  It's extremely simple.  Take a restaurant franchise owner.  He may be planning on opening another location.  He may also have little or no money to pay for marketing research.  However a lot of the data he needs he can collect himself.  He can get into his car and drive around town, observing the traffic patterns.  He can see where his clientele goes to shop.  He can see what time the traffic appears.  He can call real estate agents and ask them for lease prices for different properties.  He can drive around and look for areas that don't have his type of restaurant, looking for areas of little competition.  He can do all of this for just the cost of the gas in his car.  You can do this yourself.

Surveys
Surveys are the most common method of collecting Primary Data.  Surveys are the best way to get the descriptive information that you need for your marketing intelligence.  Simply put, surveys collect data by asking other people a series of questions about their personal knowledge, emotions, attitudes, preferences, and buying behaviors.  Surveys can provide you a wealth of data.  There is always a golden nugget, a piece of data that can give you the insight you need to figure out the direction of your next campaign.

However, there are drawbacks to the data you collect via surveys.  Often people just don't recall some of the information that you are asking for, and as a result, they are unable to answer the questions.  Therefore the response that they give will not be the complete truth, it may be something that they feel you want to hear.  Sometimes people are unwilling to provide information that they might deem "private".  This prevents completely truthful responses, and it skews the data that you are analyzing.  If the responses seem too good to be true...they just may be.  

Experimentation
Primary Data can also be collected via experimentation.  Experimentation is the practice of gathering data by selecting matched groups of people, giving them different treatments or scenarios, controlling related factors in their environments, and checking for differences in their responses.  Experimentation gives us what we call "causal" data.  Causal data helps us explain cause and effect relationships.  Experimenting helps us try to answer "why" someone is doing something, and what influences their buying behavior.

A common example of experimentation is price testing.  To the buyer, price will be the final emotional factor that determines whether or not they will give us their hard earned money.  Depending on the product and market segment, price may be the most important factor.  How do you know what price is the right price?  You have to test it.  Many companies will test certain prices when collecting primary data on a new menu item that is being developed.  How do you think McDonalds knows how much to charge for a Big Mac?  They tested how much they can charge for that Big Mac, looking for that magic number that will provide the most sales and the most profit.

In my next post we will continue this exploration of Primary Data by examining different contact methods.



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Marketing 101: Marketing Intelligence: External Data Sources

When conducting Marketing Intelligence you will need to explore External Data sources.  Here is a list of popular paid and free external data sources.

ACNielsen Corporation
www.nielsen.com/us/
In 100 countries around the world, Nielsen provides clients the most complete understanding of what consumers watch and buy.  Provides television audience data along with supermarket scanner data on sales, market share, retail prices, and household purchases.

Ad Age Datacenter
http://adage.com/datacenter/
AdAge.com's DataCenter features premium content, including profiles of top advertisers, media, agencies and more.

American Demographics
American Demographics creates reports on demographic trends and their significance.

Arbitron
www.arbitron.com
Arbitron provides local radio market and internet radio audience data, along with advertising expenditure information data.

ClickZ Stats/CyberAtlas
www.clickz.com
Provides information about internet use by consumers, such as e-commerce statistics.

comScore Networks
www.comscore.com
comScore provides consumer behavior information and geo-demographic analysis of internet use.  They also have large amounts of data about digital media use around the world.

Dun & Bradstreet
www.dnb.com
D&B maintains a massive database with information on over 50 million individual companies around the globe.

Factiva
global.factiva.com
Factiva offers business and knowledge management solutions, and competitive intelligence data. They specialize in in-depth financial, historical, and operational data on public and private companies.

Federal Trade Commission
www.ftc.gov
The FTC website provides information on regulations and decisions related to consumer protection and antitrust laws in the United States.

Forrester Reasearch (Acquired Jupiter Research)
www.forrester.com/home
Forrester Research monitors internet traffic and provides rankings on the most popular sites.

Hoovers, Inc.
www.hoovers.com
Hoovers provides business descriptions, financial overviews, and news about major companies around the world.

IMS Health
www.imshealth.com
IMS Health specializes in tracking drug sales, monitoring performance of pharmaceutical sales representatives, and offers pharmaceutical market forecasting data.

Interactive Advertising Bureau
www.iab.net
iab creates statistics about advertising on the internet.

J.D. Power and Associates
www.jdpower.com
J.D. Power and Associates provides information via independent consumer surveys of product and service quality, customer satisfaction, and buyer behavior.

LexisNexis
www.lexisnexis.com
LexisNexis features articles from business, consumer, and marketing publications, and tracks firms, industries, trends, and promotion techniques.

NetBase
www.netbase.com
Offers social media analysis tools that help marketing and sales professionals analyze consumer insights, opinion, emotion, and behavior online.

Securities and Exchange Commission Edgar Database
www.sec.gov/edgar.shtml
This SEC database provides financial data on U.S. public corporations.

Simmons Market Research Bureau
www.simmonssurvey.com
Provides detailed analysis of consumer patterns in 400 product categories in selected markets.

SocialBakers
http://analytics.socialbakers.com/
SocialBakers is a premiere provider of social media metrics and analytics tools.

Stat-USA
This popular Department of Commerce site, highlighting statistics on U.S. business and international trade was closed in 2010.  Various websites provide links to all of the data that was hosted there.
http://library.apsu.edu/inform/21STAT-USAtransition.htm (Felix G Woodard Library)

SymphonyIRI (formerly Information Resources, Inc.)
www.symphonyiri.com
Provides supermarket scanner data for tracking grocery product movement and new product purchasing data.

Thomson Dialogwww.dialog.com
Thomson Dialog offers access to more than 900 database containing publications reports newsletters and directories covering dozens of industries.

U.S. Census
www.census.gov
The U.S. Census provides detailed statistics and trends about the U.S. population

U.S. Patent and Trademark Office
www.uspto.gov
This U.S. government agency allows searches to find out who has filed for trademarks and patents across the United States.

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Marketing 101: Developing Marketing Information

Next in our discussion of Marketing Information Systems, we're going to explore Developing Marketing Information.  Marketing Information Systems rely on multiple types of marketing data.  As a Marketing Manager, you need to stay on top of creating and maintaining these data sources that are vital to your ability to make strategic marketing decisions.  You can obtain the data you need from internal databases, marketing intelligence, and marketing research.

Internal Data Sources
Internal Data is usually your first stop when doing marketing research.  Internal data consists of your collections of electronic data.  This data contains consumer and marketing information, and it is usually created from existing data sources inside your own business.  This data comes from numerous sources.  Your accounting department keeps records of sales, costs and cash flows.  Your operations department will have data on production schedules, logistics, and staffing.  Your own marketing department will have information on your customers, their transactions, their demographics, psychographics, and buying behaviors.  Your customer service representatives will have data on customer satisfaction, and any service issues that they deal with.  (Side note: if you do not have anyone devoted to customer service in your business, seriously think about hiring someone)  Your sales department has tons of valuable information. They will have reports on your resellers, activity of your competitors, and your channel partners will have data on point-of-sale transactions.  All of this data can be found inside of your Marketing Micro-environment.

Internal data is usually faster to get ahold of, and much cheaper to use, but there are potential issues to be aware of.  First, your own internal data may be incomplete, and it might not contain the data you really need.  Second, often that data is not in the right form you need to use it.  For example, sales data usually will need to be converted from existing financial reports into a format that can be used for evaluating your customer segments, your sales force, or your channel performance.  Third, data ages quickly.  In fact, it ages immediately.  It is always old.  Data is only as fresh as that date it was collected.  Keeping data current takes a lot of man power and time to update.  There must be a staff person dedicated to this task at all times.  Fourth, managing your data requires data backup, higher end PC's for transforming data, and more advance reporting techniques depending on how you want to look at your data.

External Data Sources
Eventually you will run out of usable data inside your own walls. Inevitably you will have to do some additional research, depending on the data requirements you have, and the reports you are looking to create.  It's time to do some Marketing Intelligence.  Marketing Intelligence is the systematic collection and analysis of publically available information about your competitors and other developments in the marketplace.  Marketing Intelligence aims to improve your strategic decision making, helps you assess and track your competitors actions, and can give you an early alert of new opportunities and potential threats coming from outside your own walls.

The practice of, and the "art" of Marketing Intelligence, has grown exponentially as more businesses are "spying" on their competitors.  Common Marketing Intelligence practice has grown to include interviewing competitors staff, benchmarking competitor's products, doing research online, attending trade shows, and even some occassional dumpster diving.  There is also a wealth of publically available information online.  You can monitor publically published information - such as product reviews, SEC filings, pubically available financial records, annual reports, business publications (corporate magazines that go to partners), press releases, advertisements, and competitor's websites.  It is also possible to acquire information from competitor's suppliers, your own resellers, and competitor's major customers.  All of this information provides a wealth of information about your competitor's strategies, markets, new products, and other company happenings.

In my next post I will cover a number of free and paid database services that you can use in your marketing intelligence endevors.

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Marketing 101: Managing Marketing Information: An Overview

Now that we have finished our overview of the Marketing Micro-environment, it's time to begin looking at Managing Marketing Information.

Why do we care about marketing information?  Marketing Information allows the Marketing Manager to do their job; it allows them to make real strategic decisions involving a business's brand, it's products, and the messages communicated to it's Publics.  Marketing Information provides a business with data about it's customers needs, the marketing environment, and it's competition.  A Marketing Information System provides data to key partners and suppliers in the Marketing Micro-environment.  Marketing managers usually need more information, they need the right information.

Over the next few weeks during out discussion of Managing Marketing Information we are going to cover:

- Assessing Marketing Needs
- Developing Marketing Information
- Marketing Research
- Analyzing Marketing Information

Assessing Marketing Needs
A good Marketing Information System balances the information you would LIKE to have with the information you NEED to have.  Remember, you don't need more information, just the RIGHT information.  Your responsibility as a marketing manager is to interview your staff to find out these needs.  Sometimes they may ask for more than they need, and they may not ask for what they really need because they don't know they need it.  Some managers won't ask for certain types of information because they feel they should already know it.

Sometimes it's not possible for your business to provide the information you need, because it is not available, or it is not capable because of your current Marketing Information System's limitations.  Always consider that the costs of obtaining, processing, storing and delivering marketing information can quickly become prohibitive for many business's.  You must decide if the benefits of having more information are worth the costs of providing it to your staff.  However, this can be hard to assess.  Remember that information doesn't itself have value.  What gives data value is how you are using it and the results it is providing your business.

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Marketing 101: The Microenvironment - Competitors

I want to start this week's post with a bit of caution: even though there may not be a lot to write, this part of the Micro-environment is by no means small or light.  In fact, it is complex, requires a lot of thought and study, and must be properly evaluated.  It's your Competitors.

The marketing concept states that in order for your marketing to be successful, your business must provide greater customer value and satisfaction that your competitors.  In other words, you must do more than simply adapt to the needs of your target customers.  Let me state this again:  You must do more than just give your customers what you think they need, or they say they need.  You must gain a strategic advantage by positioning your products and services against your competitors in the minds of your customers.

This is all about positioning.  You have to differentiate yourself from your competitors.

You can't do this unless you study your competition.  You have to study them, their products, their marketing messages, and figure out how to stand out above them.

This takes time and a lot of studying.

Remember, no single competitive marketing strategy is best for all companies and situations.  You need to take into account your size and position compared to your competitors.  Large firms with dominant positions in an industry can use certain strategies that smaller firms don't have the ability to from a resource standpoint (money and manpower).  But being large is not enough.  There are winning and losing strategies for all sized businesses.  Small businesses must find the strategies that give them larger rates of return. 

When is the last time you took a hard look at your competition?

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Marketing 101: Microenvironment - Marketing Intermediaries

It's time for Marketing 101.  We're still discussing the Marketing Microenvironment.  This week let's discuss Marketing Intermediaries.

Marketing Intermediaries are businesses that help your company to promote, sell, and distribute your products and services to your customers. They can include resellers, physical distribution firms, marketing service agencies, and financial intermediaries.

Resellers
Resellers, such as Target or Best Buy, are distribution channel businesses that help your company find customers or make sales to them.  There are now numerous large reseller organizations (think big box such as Target and Amazon) that have enough power to dictate terms, or even shut out other manufacturers (or even you) from larger markets and groups of customers.  It is absolutely important to have great relationships with resellers.  It is a give and take situation.  Often times, especially with larger organizations such as Walmart, you must be willing to follow their pricing or selling guidelines in order to gain access to their customers.  It may cost you money to get your product on their shelves, or be featured in their advertisements.  Unless you have a long, successful relationship with these resellers, you will typically have to supply them product and services on their terms.  In these situations, successful sales of your product in their stores will be what builds leverage for you in the relationship.

Physical Distribution Firms
Physical Distribution Firms help your business stock and move goods to their points of origin and to their destinations, ie: from the factory to a warehouse and then to the stores.  It is often much more economical to rely on these companies, because logistics is their specialty.  To build a logistics team and infrastructure is often very expensive to do from scratch, and is only really necessary when you are moving massive amounts of goods in highly specialized and time critical ways.  If you are manufacturing internationally, make sure you develop a good relationship with a firm that knows the in's and out's and politics of getting product in and out of ports and dealing with customs. 

Marketing Services Agencies
Marketing Services Agencies usually consist of marketing research firms, ad agencies, consultants, and media firms.  These companies exist to help you find and target your customers.  These businesses typically help to fill in the holes in your marketing staff.  Research firms provide you with qualitative and quantitative data on markets and customers.  Ad agencies help provide fresh, outside creative ideas for your campaigns and strategic marketing efforts.  Agencies can bring multiple types of marketing experts to your business without you having to staff people for each discipline.  Consultants can service the role of internal marketing staff on a temporary, campaign or project basis.

The key to using Marketing Services Agencies is to partner with them to help you with your weaknesses.  Whomever you use, make sure they are filling a hole that you haven't filled yourself on staff.  Make sure that they are invested in bringing you results.  You must keep constant tabs on them: are they doing the right work?  Are they investing your dollars properly?  Are they performing at a level that meets your expectations?  Are they truly concerned with achieving success for you?  Do you have a good working relationship with your account executives?

Financial Intermediaries
Financial Intermediaries help you use money.  They typically include banks, credit companies, insurance companies, other businesses that help you conduct financial transactions or insure against the risks associated with the buying and selling of goods and services.

Marketing Intermediaries are a crucial part of the marketing microenvironment.  You must have effective partnerships with these key elements of the microenvironment if you are going to successfully give value to your customers and get value from them.  Now is as good a time as any to evaluate the relationships you have with your marketing intermediaries.

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Media Consumption In A Digital Age: It's One Big Experiment

In the past, there was a silver screen, a few broadcasters, and a lot of paper.  If you wanted to watch something, you sat in front of someone's television or a theater screen.  If you wanted to listen to music, it was on a stereo - home or portable.  If you wanted to read something, or take something with you, it was most likely printed on paper.  You were in your home, in a movie theater, picked up the mail, or you went to a store to purchase your entertainment.

A few large companies controlled the publishing and availability of the media you chose to consume.  Prices were pretty much the same everywhere you went.  Competition was non-existent.  That's the way it was.  Then this "thing" called the personal computer appeared.  Then the internet appeared.  Everything changed, and it still is.

Last year Time, Inc. hoped to take advantage of it's multiple consumption and distribution publishing model. Time Inc. was attempting to bundle "digital" media with a traditional print subscription under an "All Access" strategy - which would have eliminated print-only subscriptions in the process - and would have allowed Sports Illustrated to raise its price to $48 from $39. Sports Illustrated reversed course in January.  Said Steve Sachs, Executive VP of Consumer Marketing and Sales, "That price, we found, was higher than the market commanded.  Monica Ray, the Executive Vice President of Conde Nast, commented, "The whole industry has the opportunity to redefine what a subscription is."

What kind of subscriptions do consumers want?  Is a "subscription" model appropriate anymore?  How do I find out?  The only way you can find out is by collecting data.  Without data, you're making decisions in the dark, you are walking around blind.  Since the way consumers consume media is changing, we need to be collecting data and study how our customers are using our media products.  If we don't adapt, if we aren't willing to constantly evolve our model of media delivery, we will forever be stuck in our traditions, and more media institutions will perish.

There are no longer a few ways to consume media.  Now there are many publishers, many screens, and the vast majority of them are portable.  Oh ... there still is some paper too.  Because traditional publishing methods have changed drastically from decades of old, traditional media publishers are walking around blindfolded, feeling their way around a media consumption environment that they no longer control.  Today publishing in a digitally dominated ecosystem has become one big experiment, and understanding what will work for you is all about knowing your customer ... and that requires data.

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Is Anyone Aware?

One of the items I mentioned last week was Brand Awareness.  What is Brand Awareness?  It is the measure of a consumer's knowledge of your very existence.  The "aggregate" level is the proportion of consumers that "know" your brand.  Why is this "level" even important?  It's important, because the creation of brand awareness is the PRIMARY goal of advertising, and it influences the behavior of the buyers of your product.  However, remember that all of your measurements of brand awareness are, at best, approximations.  They are not exact. The more measures used, the more complete your understanding of brand awareness will be.

Brand awareness is measured "simply" by showing a consumer the "brand and asking whether or not they knew of it beforehand.  Many textbooks have conceptualized brand awareness simply as the knowledge that the brand is a member of a particular product category, such as fast-food.  However, common practice says there is more than one recognition and recall measure, all of which test the brand name's association to a product category cue.

However, "knowledge" doesn't give us much data to do anything with.  So, we use three common metrics that can be measured:

• Brand Recall - Either the brand name or both the brand name and category name are presented to survey participants.
• Brand Recognition - The product category name is given to participants, and are then asked to recall as many brands as possible that are members of the category.
• Top of Mind Awareness - Brand Recognition, but more specifically only the first brand recalled is recorded (called "spontaneous brand recall" by some).

These measurements can be used for creating an understanding of Brand Equity.  Brand Equity is the positive effect of the brand on the difference between the prices that the consumer is willing to pay compared to the perceived value of the benefit received by your product.  The more value, the more a consumer will pay for your product.  Brand Equity is built by brand awareness activities such as advertising, PR, and promotion.  Simply put, the more Brand Equity, the more you might be able to charge for your product.  Higher prices can lead to higher profits.  You're in the business to make money right?

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Brand Assessment

Last week I discussed the details of Brand Architecture.  Before I talk about further evaluating a Brand Architecture, I wanted to explore the Brand Assessment.  The data gained from researching and evaluating your brand in an assessment is a key requirement before considering any future change in your Brand Architecture.  If you don't know anything about your brand in the marketplace, you cannot make any intelligent decisions about it's direction in the future.

There are two key parts to a Brand Assessment: the Brand Essence and the Brand Communication.  

When reviewing your Brand Essence it is important to determine:

• Awareness: Are you known in the marketplace?
• Favorability: How do people feel about you?
• Function: What benefits do you provide your customers?
• Key Driver: What prompts consumers to engage with you?
• Support: What "backs up" your key function in the marketplace?
• Differentiation: What distinguishes you in the marketplace from everyone else?
• Personality: What compelling attributes define you?
• Quality: What is the quality of your brand in the marketplace?

When reviewing your Brand Communication, you should review:

• Messaging: What messages are the most compelling to your current and potential customers?
• Name: How effective is your current name in the marketplace?
• Logo: How effective is your current logo in the marketplace?

The amount of detailed, reliable data you can collect on each of these areas will help you determine the direction your brand should go in the future.

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