ADMN 201 — Ch12: Understanding Marketing Principles and Developing Products
This chapter builds the full marketing framework — from the foundational philosophy (Marketing Concept) through strategy tools (segmentation, research, marketing mix) to product decisions (value package, PLC, branding, packaging).
mindmap root((Ch12: Marketing)) LO1 - Marketing Concept Value = Benefits / Costs Whole firm serves customers CRM - Data Warehousing + Mining 5 External Forces LO2 - Marketing Plan + Mix Mission → Objectives → Strategy → Mix 4 Ps: Product, Price, Place, Promotion LO3 - Segmentation 5 Variables: Dem/Geo/GeoDem/Psych/Behav Target Marketing Positioning LO4 - Marketing Research 4-Step Process 4 Methods: Obs/Survey/Focus/Exp LO5 - Consumer Buying Process 5 Steps - Need to Post-Purchase Rational + Emotional Motives Consideration Set LO6 - Organizational Markets Industrial - Reseller - Govt/Institutional B2B Rational Motives LO7 - Product as Value Package Features vs. Benefits Consumer vs. Industrial + Services Convenience/Shopping/Specialty LO8 - NPD + Branding + Packaging PLC → Innovation Imperative Brand Equity Packaging 3 Functions
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Learning Objectives Map
| LO | Topic | Key Concept Page |
|---|---|---|
| LO1 | Marketing concept + 5 external forces | MarketingConcept |
| LO2 | Marketing plan + 4 Ps | MarketingMix |
| LO3 | Market segmentation, targeting, positioning | MarketSegmentation |
| LO4 | Marketing research — purpose and methods | MarketingResearch |
| LO5 | Consumer buying process + influencing factors | ConsumerBuyingProcess |
| LO6 | Organizational markets + B2B behaviour | OrganizationalMarkets |
| LO7 | Product as value package; goods/services classification | ProductDevelopment |
| LO8 | NPD, PLC, branding, packaging | ProductDevelopment |
LO1 — Marketing Concept & External Environment
Marketing = organizational function for creating, communicating, and delivering value; managing customer relationships to benefit the firm and stakeholders.
Marketing is a Bridge between company and customer — it:
- Creates value (designing a product that helps someone)
- Communicates value (telling them it exists)
- Delivers value (getting it into their hands)
- Manages relationships (ensuring they come back)
Marketing Concept = the entire firm (not just the marketing department) is coordinated to serve present and potential customers at a profit. This includes production, finance, HR — all departments.
Research shows firms focused on customer satisfaction are more profitable because satisfied customers become repeat buyers.
Utility = the power of a product to satisfy a human want; something of value.
Relationship Marketing & CRM
Relationship Marketing: Building lasting bonds rather than one-off transactions.
CRM (Customer Relationship Management): Organized methods to build better information connections with clients so that stronger company-client relationships develop.
| CRM Component | What It Does |
|---|---|
| Data Warehousing | Collecting and storing customer data |
| Data Mining | Automating the analysis of stored data to find hidden patterns, undiscovered clues, and predict what clients will want |
Warehousing is the collection; mining is the analysis. These are commonly confused on exams.
Experience Choreography: The broader idea that CRM is used to manage every aspect of the client-firm relationship, not just transactions.
Five External Forces
| Force | What It Is | Example |
|---|---|---|
| Political/Legal | Laws/regulations governing marketing | Consumer Packaging and Labelling Act |
| Sociocultural | Shifting values, demographics, lifestyle trends | Demand for plant-based meat |
| Technological | New tech creating/destroying products and behaviours | IKEA + Pinterest Product Pins |
| Economic | Business cycle, inflation, interest rates — determine spending power | Recession reduces consumer purchases |
| Competitive | Competition from similar brands, substitutes, and foreign rivals | Google vs. Bing; fitness vs. medication |
Three Types of Competitive Pressure:
- Brand Competition — similar products competing (Coke vs. Pepsi)
- Substitute Products — different products that solve the same need (fitness program vs. cholesterol medication) — most commonly missed on exams
- International Competition — domestic vs. foreign rivals (intensified by trade agreements like CETA/USMCA)
graph TD A[External Forces] --> B[Political/Legal] A --> C[Sociocultural] A --> D[Technological] A --> E[Economic] A --> F[Competitive] F --> G[Brand Competition] F --> H[Substitute Products] F --> I[International Competition]
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LO2 — Marketing Plan & Marketing Mix
Planning hierarchy (order matters — common exam question):
Business Mission → Marketing Objectives → Marketing Strategy → Marketing Mix
| Step | Description |
|---|---|
| Business Mission | The firm’s overall purpose (e.g., “be the world’s leading coffee retailer”) |
| Marketing Objectives | Specific goals marketing intends to accomplish |
| Marketing Strategy | Programs and activities to achieve the objectives |
| Marketing Mix | The specific 4 Ps used to reach the target market |
Exam note: “Identify marketing objectives → develop marketing strategy” is the sequence within the plan itself.
The 4 Ps
| P | What it covers | Key Points |
|---|---|---|
| Product | Good, service, or idea; the value package | Differentiation, product mix, product line |
| Price | Best price to sell; signals value and quality | Rolex: high price = luxury signal |
| Place | Distribution — getting the product to the customer | Rolex: sold only through exclusive retailers |
| Promotion | Communicating information about the product | Advertising, PR, buzz, viral, product placement |
Promotion tools:
- Advertising — paid mass communication
- Buzz Marketing — relies on word of mouth to spread “buzz” about a product
- Viral Marketing — buzz that spreads via social networks “like a virus”
- Product Placement — brand appears in TV, film, music, or video games with the product visible
Product Mix = everything the firm sells; Product Line = a related group of products (e.g., Starbucks’ coffee beverages are a product line within a larger product mix).
All 4 Ps must be internally consistent — a luxury product at a discount price in a mass retailer destroys positioning.
LO3 — Market Segmentation, Targeting & Positioning
Segmentation = dividing the market (analysis).
Targeting = choosing the segment (decision).
Positioning = fixing the product in the consumer’s mind relative to competitors (perception — not the store shelf).
Scatter Gun (mass marketing) → inefficient; most recipients have no need.
Sniper Gun (target marketing) → focuses resources on high-probability buyers; higher ROI.
5 Segmentation Variables
| Variable | Based on | Example |
|---|---|---|
| Demographic | Age, income, gender, ethnicity, marital status | Luxury cars → high-income individuals |
| Geographic | Region, climate, urban/rural | No snowboard ads in Florida |
| Geo-Demographic | Geographic + demographic combined | High-income professionals in downtown Toronto |
| Psychographic | Lifestyle, opinions, interests, attitudes | Eco-warrior buys electric car; thrill-seeker buys muscle car |
| Behavioural | Benefits sought, usage rate, loyalty, user status, occasion | Heavy coffee drinkers vs. occasional buyers |
Psychographics vs. Demographics: Two people with identical age and income can buy completely different products because of different values (psychographic). You cannot change a customer’s age, but you can change their opinion through marketing.
Behavioural Variables Breakdown
- Benefits Sought — dandruff control vs. shiny hair from the same shampoo
- User Status — ex-user, current user, non-user
- Usage Rate — heavy vs. light users
- Loyalty Status — brand-loyal vs. “promiscuous” switchers
- Occasion for Use — daily coffee vs. special-occasion champagne
LO4 — Marketing Research
Marketing Research = the study of what customers need and want and how best to meet those needs.
Purpose: Reduce the risk of bad decisions by clarifying interactions among stakeholders (customers, suppliers, employees).
4-Step Research Process
- Study the current situation — what is the need?
- Select a research method — how will we find out?
- Collect and analyze the data
- Prepare the report — recommendations
Four Research Methods
| Method | How It Works | Best For | Limitation |
|---|---|---|---|
| Observation | Watch/monitor consumer behaviour (in-store, cameras, loyalty card data) | Actual behaviour — no stated-intent bias | Doesn’t explain why |
| Survey | Question a representative sample about attitudes/practices | Specific, quantifiable answers | People may not answer honestly |
| Focus Group | 6–15 people + moderator in guided discussion | Qualitative depth — the “why” | Small sample; not statistically representative |
| Experimentation | A/B test reactions under different circumstances | Isolating causal variables; establishing cause-effect | More expensive to set up |
Only Experimentation can establish cause and effect. The others reveal patterns and opinions.
Representative Sample: A selected group that accurately reflects the larger population. A biased or unrepresentative sample produces useless data.
Modern methods: Crowdsourcing (gathering opinions via social media/apps), electronic observation, data mining.
Ethics note: “Video mining” (high-def camera monitoring of shoppers) raises privacy concerns. Cambridge Analytica built voter profiles from observation data — cited as an example of crossing ethical lines.
LO5 — Consumer Buying Process
Consumer Behaviour = the study of the decision process by which people buy and consume products. Buying is a structured process, not a random event.
5 Steps
flowchart LR A[1. Problem/\nNeed Recognition] --> B[2. Information\nSeeking] B --> C[3. Evaluation of\nAlternatives] C --> D[4. Purchase\nDecision] D --> E[5. Post-Purchase\nEvaluation] B -->|leads to| F[Consideration Set] F --> C
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- Problem/Need Recognition — the trigger; without recognizing a need, the process never starts
- Information Seeking — internal (memory) + external (search, friends, online) → leads to a Consideration Set: the shortlist of brands the consumer will actually compare. If you’re not in it, you can’t be bought.
- Evaluation of Alternatives — comparison of price, quality, prestige; product differentiation works here
- Purchase Decision — driven by Rational motives and/or Emotional motives
- Post-Purchase Evaluation — satisfaction → loyalty and repurchase; dissatisfaction → public criticism and social media backlash
Purchase Motives
| Type | What It Is | Examples |
|---|---|---|
| Rational Motives | Logical evaluation of product attributes | Cost, quality, durability, usefulness |
| Emotional Motives | Non-objective, feeling-based reasons | Sociability, aesthetics, imitation of others |
Most purchase decisions involve both rational and emotional motives. Example: buying expensive jeans because they are durable (rational) and because friends wear them (emotional).
“Rational Alibi” Nuance: Marketing often provides rational justifications for what are actually emotional decisions. A luxury watch ad talks about “precision engineering” (rational) to justify a status purchase (emotional).
Brand Equity’s role: High brand equity can short-circuit the evaluation stage — a brand-loyal consumer may skip comparing alternatives entirely.
LO6 — Organizational Markets & B2B Behaviour
B2B does more than 2× the volume of consumer markets annually. Yet it gets far less visible attention.
Three Categories of Organizational Markets
| Market | Who | What They Do With the Product |
|---|---|---|
| Industrial | Manufacturers, farmers | Convert goods into other products or consume during production |
| Reseller | Wholesalers, retailers | Buy finished goods and resell them unchanged |
| Government/Institutional | Federal/provincial/municipal governments + hospitals, charities, museums | Serve clients or citizens |
Canadian federal government spent ~$303.6B in 2020 — a massive organizational buyer.
Dual Identity rule: The same product can be consumer or industrial depending on buyer intent. Coffee beans bought for home use = consumer goods. The same beans bought by a coffee shop to brew and sell = industrial goods.
B2B Buying Behaviour
- Professional, specialized, well-informed buyers — technical data and facts, not catchy jingles
- Decisions driven by rational motives: cost, efficiency, relative performance, maintenance costs
- Long-term buyer-seller relationships — large quantities → trust is essential; mistakes are costly
- Almost exclusively Sniper marketing; a scatter gun approach fails with specialized buyers
LO7 — Product as Value Package
Value Package = a bundle of tangible + intangible attributes that collectively satisfy a customer’s want or need.
| Concept | Definition | Example |
|---|---|---|
| Features | The qualities included with the product — the what | High-resolution camera on a phone |
| Benefits | The results those features allow the customer to achieve — the why | Capture professional-looking memories |
| Utility | The power of a product to satisfy a human want | The camera utility = memory capture |
Customers buy benefits, not features. A feature is useless unless it translates into a benefit that solves the customer’s problem.
Product Classification
Consumer Products (B2C) — purchased by individuals for personal use:
| Sub-Category | Description | Examples |
|---|---|---|
| Convenience Goods | Inexpensive, purchased/consumed rapidly and regularly | Groceries, gum, coffee |
| Shopping Goods | Moderately expensive, infrequently purchased | Clothing, appliances |
| Specialty Goods | Expensive, rarely purchased; consumer will seek out specific brand | Luxury car, designer suit |
Organizational Products (B2B):
- Production Items — directly used in making other products (raw materials, components)
- Expense Items — consumed during operations (office supplies, fuel)
- Capital Items — long-term assets used in production (machinery, buildings)
Services — products with non-physical features (consulting, insurance, medical checkup, travel arrangements). A major growth area in Canadian and global economies.
Ideas — marketers even promote concepts (anti-texting campaigns, political candidates, environmental causes).
Classification depends on buyer intent, not the product itself. Same laptop: consumer good for gaming at home; industrial good for managing business inventory.
graph TD A[Product] --> B[Consumer Goods - B2C] A --> C[Organizational Goods - B2B] A --> D[Services] A --> E[Ideas] B --> F[Convenience] B --> G[Shopping] B --> H[Specialty] C --> I[Industrial] C --> J[Reseller] C --> K[Government/Institutional]
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LO8 — NPD, Product Life Cycle, Branding & Packaging
The Innovation Imperative
Every product moves through a life cycle. Products must eventually be replaced or extended.
Product Life Cycle (PLC): Introduction → Growth → Maturity → Decline
Because products die, firms maintain R&D departments for continuous exploration. Most ideas fail — there is a “high mortality rate” in new product development.
Speed to Market = how fast a firm responds to market changes or introduces new products. This is a primary factor in profitability. Being first or fast often determines whether a product succeeds or fails against competitors.
Alternatives to Inventing New Products
| Strategy | Description | Example |
|---|---|---|
| Product Extension | Sell existing product globally without changing it | Coca-Cola sold identically worldwide |
| Product Adaptation | Modify the product for local tastes or requirements | McDonald’s serves beer in Germany; steering wheel on right in Japan |
| Reintroduction | Take an “obsolete” product to a new market where it is still novel | Manual cash registers in Latin America |
Branding
Branding = using names and symbols (logos) to communicate the qualities of a product made by a specific producer. The goal: distinguish the product and build consumer preference for that brand.
Brand Equity = the added value a brand name provides beyond basic functional benefits → allows premium pricing.
| Brand Type | Description | Example |
|---|---|---|
| National Brands | Distributed by and named after the manufacturer | Coca-Cola, Nike |
| Private Brands | Named after the retailer/wholesaler | President’s Choice (Loblaw’s), Kirkland (Costco) |
| Generic Brands | Category name only; no specific brand | ”Acetaminophen” instead of Tylenol |
Brand equity is fragile. Unethical corporate behaviour (environmental damage, child labour) destroys equity and eliminates pricing power.
Brand equity dollar values: Coca-Cola brand alone = 12.1B). In 2020, tech companies (Amazon, Apple, Microsoft, Google) became the world’s most valuable brands.
Packaging — Three Functions
| Function | Purpose | Examples |
|---|---|---|
| Marketing | Attract attention, display brand name, identify features/benefits — “the silent salesman” | Eye-catching design, logo placement |
| Logistical | Protect the product during transport and storage; prevent theft | Bulky packaging for small expensive items |
| Legal | Comply with the Consumer Packaging and Labelling Act — labels must be bilingual (French/English) in Canada and provide factual quantity/description information | Required on all prepackaged products |
Label = the part of packaging that identifies the product’s name, contents, and sometimes its benefits.
Key Terms Quick Reference
| Term | Definition |
|---|---|
| Marketing Concept | Entire firm serves present/potential customers at a profit |
| Value | Benefits / Costs (functional + emotional on both sides) |
| Utility | The power of a product to satisfy a human want |
| Data Warehousing | Collecting and storing customer data in CRM |
| Data Mining | Automated analysis of stored data to find hidden patterns |
| CRM | Organized methods to build information connections with clients |
| Marketing Mix | The 4 Ps: Product, Price, Place, Promotion |
| Buzz Marketing | Word-of-mouth marketing that spreads “buzz” |
| Viral Marketing | Buzz that spreads via social networks like a virus |
| Product Placement | Brand exposure through use in TV, film, or media |
| Market Segmentation | Dividing market into categories with similar needs |
| Target Market | Specific customer group chosen as marketing focus |
| Positioning | Product’s place in the consumer’s mind vs. competitors |
| Consideration Set | The shortlist of brands a consumer actually compares |
| Rational Motives | Cost, quality, usefulness — logical purchase reasons |
| Emotional Motives | Sociability, aesthetics, imitation — feeling-based reasons |
| Convenience Good | Inexpensive, rapidly/regularly purchased |
| Shopping Good | Moderately expensive, infrequently purchased |
| Specialty Good | Expensive, rarely purchased, brand-specific |
| Value Package | Bundle of features and benefits that satisfies a customer need |
| Speed to Market | How quickly a firm introduces new products; key success factor |
| Brand Equity | Added value a brand name provides beyond functional benefits |
| Product Adaptation | Modifying product for different markets/cultures |
| Packaging (legal) | Must be bilingual (French/English) in Canada |
Exam Mnemonics & Nuggets
- 5 Segmentation Variables (G-G-D-P-B): Geographic, Geo-Demographic, Demographic, Psychographic, Behavioural
- PLC stages (IGMD): Introduction → Growth → Maturity → Decline
- Planning hierarchy: Mission → Objectives → Strategy → Mix
- Research process: Study → Select → Collect → Prepare
- B2B vs B2C: B2B = rational, professional, long-term, bulk; B2C = emotional, individual, one-off
- Scatter Gun ≠ Sniper Gun: Scatter = everyone (inefficient); Sniper = targeted high-probability buyers (efficient)
- Data Warehousing vs. Data Mining: Warehousing = storing; Mining = analyzing
Related Pages
MarketingConcept, MarketingMix, MarketSegmentation, MarketingResearch, ConsumerBuyingProcess, OrganizationalMarkets, ProductDevelopment, ADMN201-Ch13