Chapter 1

Marketing and Choice

A Personal Note

I came to marketing in a roundabout way. I was working in survey research. Superficially, surveys are a commonsense matter. One asks questions. One gets answers. One analyzes and reports the results. But my ambition went beyond that. I had an intuition that what happens in a survey, or what could be made to happen if one approached it in the right way, is of greater significance than meets the eye. If one thinks of every question as a stimulus, if one thinks of every answer as a response, if one focuses not on what is said, attributing literal meaning to it, but on the fact that it is said, then the response constitutes a special kind of behavior which should be psychologically meaningful.

My ambition was to open a path to those aspects of human nature that become most peculiarly accessible by examining what happens when questions are asked and answers are given. I was not concerned with how people felt about any particular subject, be it toilet paper or nuclear energy, an inquiry I held to be equally trivial in both cases, but with the universal pattern hidden in the responses, which would, at the appropriate level of generality, lead to principles and laws, not laws about toilet paper or nuclear energy, but laws about patterns of responses and hence about some aspects of human nature itself.

In 1951, I was contacted by the head of a prestigious graduate school and invited to join the faculty to attempt to develop a theory of marketing. I had hardly ever heard the word and thought of it more as having to do with getting my groceries home than as a serious field of study. After some soul-searching, I declined. Marketing, or what I thought it was, seemed frivolous to me. I wanted to continue to think about the embryonic science of questions and answers. Several years later, I went to work at Kenyon & Eckhardt, then one of the ten largest advertising agencies in the country. The understanding was that I would continue to think about questions and answers but, in the new environment of the advertising agency, would channel these efforts into measuring the effectiveness of advertising and helping the agency's clients sell their products.

In 1960 I left Kenyon & Eckhardt to found Eric Marder Associates, Inc. (called "EMA" throughout this book). By then I was submerged in marketing research. To be sure, the central tool was still the survey. I was still asking questions and collecting answers. I was still thinking about the structure of these questions and about the general principles that might be extracted from them. But the emphasis had shifted entirely to looking for better ways of helping clients market products. To do this effectively, it became imperative to understand the client's problem, not in the vague terms he was prone to use in articulating it, not even in the way he actually thought about it, but in the way he should have thought about it. This became dramatically clear to me when I met a high-ranking marketing executive who said expansively, "We want to do a study to find out why Mercury isn't selling this year."

"No," I replied.

He was half startled, half shocked.

"I damn well know what I want to do," he said.

"I believe you want to do a study to find out what you can do to sell more Mercurys this year."

"But that's the same thing."

"It's not quite the same thing," I replied. "If I took the assignment at face value, I would do a study among people who have just bought some other car. I might find out that they considered a Mercury but decided against it because they didn't like the look of the front end. This would give you the right answer to your question, but it wouldn't do you any good. If I want to give you a useful answer, I must study people who haven't bought a car and find out what, if anything, I could promise them or do for them to induce them to buy a Mercury in spite of the fact that they don't like the look of the front end."

It became clear to me that assignments could not be taken at face value. The important thing was not to listen to what the client said he wanted, but to what he really wanted, or to what he should have wanted, or to what he could be made to see he wanted if the issues were properly dissected for him. I also realized that much marketing research was doomed from the outset. For how could it hope to generate the right answer if it had not addressed the right question?

This led me to ponder what the right questions were, and so I began to think about marketing. Before long, a theory began to emerge, an orderly way of looking at the problems every marketer must face and solve one way or another. Given my temperament, I made every effort to think in general terms, so the theory would apply with equal force to the marketing of a paper towel, a computer, a presidential candidate, a religion, or anything else someone might attempt to induce people to choose. Ironically, I had come full circle. In the end, I was thinking about marketing after all and was thus carrying out the very assignment I had arrogantly rejected as a young man. Arrogantly indeed, though perhaps not foolishly. Because even though the theory I offer now is so elementary that I should have been able to articulate it after a little thought, I confess that it has taken many years before I was able to strip it of involutions and complications, of big words and technical jargon, and reduce it to the commonsense form in which it is presented below.

Nomenclature

What is marketing? There is, of course, no right answer. Definitions can be neither right nor wrong. But definitions do matter, for they are the tools we use in thinking about things. And some definitions can be more useful than others in helping us think clearly and arrive at answers we might have missed otherwise. In that spirit, I believe it is useful to think of marketing as a game played by N players (the marketers), each equipped with chips (their respective budgets). The players make moves on a board (the principles governing choice behavior) by adjusting eight dials (the eight tools of marketing). To understand the game, we need to understand the board on which it is played. So I begin by describing that board, using the terms marketer, brand, customer, and choice.

The initial meaning of these terms is self-evident. The marketer is the provider of goods or services, such as automobiles, soap, paging, coffee, or computers. The brand is whatever the marketer is trying to sell. The choice is the selection of one brand from a set of brands. And the customer is the person who makes the choice. The marketer may also be a campaign manager, the brand a political candidate, the choice an election, and the customer a voter. In general, these terms, as well as the principles and methods dealt with in this book, are intended to apply to any situation in which:

Someone, anyone, (the marketer) is trying to induce someone, anyone (the customer) to make some selection, any selection (the choice) in favor of something, anything (the marketer's brand), often aided and abetted by a researcher whose job it is to subject the process to scientific scrutiny and to support it with empirical evidence.

Given the intrinsic limitations of the English language, which does not have gender-free pronouns, and being unwilling to use the awkward he or she, I am arbitrarily assigning genders to the cast of characters. The marketer shall be a she; the customer shall be a she; the researcher shall be a he. With some limited partiality, I am thus reserving my own gender for the actor with whom I identify most closely. I trust no one will take offense if the brand remains an it, even though it may on occasion be a political candidate.

A word of warning. This chapter consists of definitions, distinctions, and descriptions of commonplace events. I have taken pains to present these in the simplest terms possible. In doing so, I run the risk of losing you before we have gotten to the subject of the book. You are liable to say: "Why are you bothering to tell me things everybody knows?" If you bear with me, you will find that what I have to say may begin with definitions but will not end there. The basic variables will not only be described and defined. They will also be measured and used. And they will enable us to solve problems we didn't know how to solve until the obvious was articulated explicitly

Desires and Beliefs

How does the customer choose among brands? She begins by assessing her options. Each brand promises her benefits. She evaluates these. In effect, she examines each offer and asks: What does this brand give me? And what does it require me to give up? The more she believes she gets, the more likely she is to choose the brand. The more she believes she must give up, the less likely she is to choose the brand. Her judgment of what she gets and what she must give up depends on her desires, on the value she places on the attributes of the brand. These desires are highly individual. One customer may consider the spiciness of a spaghetti sauce an asset; another may consider it a liability One may consider an in-flight movie an asset; another may consider it: a liability It is less obvious that beliefs are individual. The commonsense expectation is that beliefs will not lag permanently behind objective facts. But this is not necessarily so. We therefore set aside objective facts. For our purposes, there are only desires and beliefs, and both are inside the head of the customer. If we measure them properly, they will help us predict what she will buy

Desires and beliefs refer to the attributes of brands. These attributes can be organized into groups called topics. For a computer notebook, for example, the attributes "It weighs 1.5 pounds," "It weighs 2 pounds," and so on, can be grouped under a topic called "weight." Obviously such topics differ from product category to product category. A coffee has different topics than an airline or a fax machine or a life insurance policy Nevertheless, these different topics can be grouped under some very broad headings that cut across product categories, that constitute common denominators. These are called the primary topics. They will help us understand how the customer chooses. Don't expect startling revelations. In one context or another, combined and rearranged in various ways, some or all of these factors have been mentioned by just about everyone who has thought about the subject. In this particular incarnation, they are product, branding, price, and familiarity.

The Primary Topics

Product attributes include attributes the customer can observe directly, as well as those she accepts on trust based on statements made to her. For example, the product attributes of an orange juice include the color and the sweetness, as well as the number of calories and the potassium content, which she may not be able to observe directly but which she accepts as factual, relying on government labeling regulations. The product attributes of a political candidate include his party and his voting record, as well as his marital status and the color of his eyes. In general, the product attributes comprise descriptions of the product and of the way it performs its principal functions.

By branding is meant collateral information that has been attached to the brand by external symbols: words, pictures, and music. This collateral information usually has two components: label and fable. The term label refers to the brand name together with the package graphics. The brand name is always part of the label, indeed its principal component by definition. Conversely, objective facts, such as 8 1/2 ounces or 320 mg of sodium per 100 grams, remain product attributes even if they appear on the label. But package graphics can belong either to the label or to the product. The graphics of a decorative facial tissue dispenser, for example, may be the very thing the customer is buying to decorate her bathroom, and hence an integral part of the product.

The following burlesque illustrates the role of label. A blue can with the name Nature-C and a red can with the name Vita-Life are filled from the same container of orange juice in the presence of a customer. We ask the customer to choose one of these "brands." She replies, "It makes absolutely no difference to me. Give me either one." But if we insist that she choose, her choice will not be random. One configuration of color and words will attract her more than the other, and that is the one she will choose. This is label at work in its purest form.

If labels are the intrinsic aspect of branding, because they consist of words and pictures that are permanently attached to the brand, fables are the extrinsic aspect of branding, because they are attached to the brand from the outside, most often by advertising. Typically, a brand is shown in close proximity to dogs, babies, boats, or undressed women, in the hope that the warm feelings customers have toward these objects will rub off on the brand and endow it with goodwill. Customers are also told overtly, ostensibly humorously, that if they buy this or that coffee, aftershave, or sailboat, they will become irresistible to the opposite sex. One particular type of fable has to do with social meanings. Buying a brand amounts to sending a message to the world, saying: "I am the kind of person who..." And this message is important to some people. We can imagine a customer who really does not like the seats, dashboard, styling, or handling of a Mercedes but buys one anyhow because she just has to have a Mercedes. Conversely, a multimillionaire might drive a beat-up pickup truck because he "wouldn't be caught dead" in his wife's Roils-Royce. To be sure, the social meanings of brands are particularly pervasive for major items, such as automobiles, homes, and jewelry, but they also operate, on a more modest scale, in the choice of coffee, toilet soap, and tennis racquets. A very special kind of fable comes into being when products are changed. For better or worse, some customers will continue to perceive products the way they were rather than the way they currently are, and they will hold beliefs about them they would not hold if they were unencumbered by associations with the past.

Everything has a price, and some brands have a higher price than others. We expect customers to prefer low prices. But like product and branding, price is individual and can have different value for different people. Upon learning that the price of a wine is five dollars per bottle, a customer asks whether the store carries anything "better," by which she means that she wants to pay more. One customer insists on buying a "real" diamond, even though neither she nor most jewelers (I am assured by a diamond dealer) can tell the difference between a diamond and a zircon with the naked eye. Another customer wants a zircon because she takes pride in making a "rational" choice. There are also choice situations in which no money changes hands -- voting for a candidate, for example. But the primary topics include price because they are intended to be comprehensive. This does not preclude the possibility that a primary topic will vanish in a particular case or will simply become nonapplicable because it has the same value for all brands.

The fourth primary topic, familiarity, is fundamentally different from the others. Beliefs about product, branding, and price may be accurate, inaccurate, or totally fictitious, but they describe the brand. Familiarity, on the other hand, describes the customer, specifically, the customer's history with respect to the brand. Provided this history is not too negative, high familiarity is an asset in its own right. The familiar takes on a positive aura, contributes comfort and security, and finally coalesces into habit. People simply don't respond the same way to things they don't know as to things they know. This became dramatically clear to me when I attempted to get respondents to tell me why they had switched from one brand to another. The sequence of questions was:

* What brand did you buy the time before last? Answer: Bounty.

* What brand did you buy last time? Answer: Viva.

* What brand are you going to buy next time? Answer: Bounty.

* You bought Bounty the time before last, but Viva last time. How come? Answer: It was on sale.

* You bought Viva last time, but you are going to buy Bounty next time. How come?

When the results were tabulated, the EMA project manager reported that this last question had "not worked." The respondents had not given their "real" reasons but had given stereotyped cliché responses instead. In particular, more than 70% had explained their intent to switch back to Bounty by saying, "I will buy it because I always buy Bounty."

I realized at once that this reason was neither a stereotype nor a cliché. The respondents were telling the literal truth. The most important reason for buying a brand is that one "always" buys it. If the decision is made by habit, it entails no effort. The converse is also true. If the brand has low familiarity, a measure of uncertainty, and hence risk, automatically attaches to it. It takes effort to examine the package, read the label, investigate the features. This is most patently obvious in the case of a major purchase. A salesman recommends that a business install a new computer system that will perform better and save money But the very prospect of considering such an installation is so onerous that the decision maker elects to pass, not because he has concluded that the proposed system won't deliver, but because he is not prepared to spend the money, time, effort, and anxiety to find out whether it will or not. Thus high familiarity functions as an additional asset and low familiarity as an additional liability

Taken together, branding, price, and familiarity add a positive or negative increment of value to what would otherwise be deserved by the product alone. This increment represents the value of the brand and will be called the brand's image. I am giving the term image a specific, narrow meaning for the purpose of distinguishing between attributes of the product itself and all other attributes that impact brand choice. Holding price constant, the relative importance of product and image varies from category to category and from customer to customer. As the product attributes of brands become more similar, the role of image increases. When the products become identical, the image becomes the sole determining factor. At the outer limits, we can imagine theoretical product-to-image ratios of 100-to-0 or 0-to-100, but in practice the ratio is usually somewhere in between and the customer almost always buys both product and image attributes. This idea of a product-to-image ratio is not just theoretical talk. It is measured specifically, as described in Chapter 10.

In general, we may say that a brand has many attributes derived from many sources. Some of these attributes have positive value and some have negative value. Consolidating the positive and negative values results in a net value which is called the desirability of the brand for the customer. The way this is done is dealt with in Chapters 16 through 18. And other things being equal, the customer chooses the brand with the highest desirability. But other things are not equal.

Accessibility

The choice the customer makes takes place in an environment. At the point of choice, situational factors make it easier to choose some brands than others. These enhancers or deterrents are not reflected in the desirability of the brands, but they affect the outcome. They are collectively called accessibility and function as a barrier that must be overcome before desirability can be consummated in choice.

Every choice involves some effort. Accessibility is the complement of that effort. Minimally, the customer must go to the store. If she is buying an automobile, the nearest Peugeot dealer may be twenty miles farther from her home than the nearest Ford dealer, clearly a differential expenditure of effort. In a supermarket, one brand may be on the bottom shelf while another one is within easy reach. In this case too, it takes more effort to choose one brand than another, a very tiny amount of additional effort, but if the brands are otherwise equivalent, this tiny amount may be decisive.

One might ask why I have not simply included this effort as one more attribute associated with a brand. The answer is that this type of effort is different. The confusion can be cleared up by distinguishing between use-effort and choice-effort. Use-effort is indeed a product attribute. If one car is more difficult to drive than another, if one hot cereal is more difficult to cook than another, these attributes are certainly product attributes that contribute to the overall desirability of the brand. Choice-effort, on the other hand, is the effort required at the point of choice. A brand's desirability will not change just because the brand happens to be stacked in an end display one day and unavailable on the shelf the next, but the amount of effort the customer will have to make to buy it will change, and her actual choice will change along with it. If the relative choice-effort (E) required to buy a brand is represented as a number between 0 and 1, then the accessibility (A) of the brand can be defined as the complement of choice-effort, or A = 1 - E.

We can then imagine assigning a score to every brand. At the extremes there is little doubt about this score. A dominant brand with many shelf facings and supplementary end displays gets an accessibility of 1. A brand that is not distributed in the city gets an accessibility of 0. We can imagine intermediate values. A brand that is not available in a particular store might get an accessibility close to 0, but perhaps not quite, since the customer could go to another store. A brand that is not on the shelf but is available in the store might get some low accessibility, say .1 or .2, since the customer could ask for it. At the other end of the spectrum, a brand that is on the shelf but not displayed prominently might get an accessibility of .8 or .7 or .6, depending on the circumstances. Whether measured directly or crudely estimated from known distribution data, accessibility clearly plays an important part in determining what gets bought.

In addition to external accessibility, there is internal accessibility. The word choice actually encompasses two entirely different behaviors. Sometimes the customer chooses by selecting among alternatives. At other times, she chooses by selecting from an internal set. The distinction between these two types of choice is perhaps best exemplified by the customer's experience in a restaurant. She orders beer and the waiter asks, "Which brand do you want?" The customer must reach inside herself and locate a brand. Assuming that not all brands of beer have equal internal accessibility for her, she may be more likely to "find" Budweiser than Beck's and may order Budweiser. On the other hand, if the waiter hands her a menu that contains both Budweiser and Beck's and asks, "Which brand do you want?" the accessibility of all the brands on the list has now been equalized, and she may order Beck's. In this case, external accessibility, whether the brand is on the menu or not, becomes decisive.

Internal accessibility is measured by means of the question, "Please name a brand of beer. Just tell me the first one that comes to your mind." The percent mentioning a brand is defined as the awareness or the internal accessibility of the brand, a number between 0 and 100 percent. Awareness operates in situations in which the menu or shelf is not available. In prescribing a drug, a doctor does not ordinarily consult a list of available brands. She prescribes a brand, writing the prescription on the spot. In that situation, internal accessibility can be of substantial importance, augmented perhaps by the fact that her desk drawer is loaded with free samples of one of the brands. Without pursuing the distinction further, we may note that choice situations usually have both external and internal accessibility components. In the general case, accessibility is a weighted average of the two accessibilities, itself a number between 0 and 1. But though conceptual completeness requires giving equal billing to both accessibilities, external accessibility plays the dominant, if not the exclusive, role in the many practical market situations in which the choice is made from a menu, a catalog, a shelf, or an in-store display

The Choice Process

The entire process can be summarized as follows: The customer examines each brand offered to her. Based on her desires, beliefs, and familiarity, she assigns a value to each brand. That value is defined as the desirability of the brand. Her actual choice then depends on

1. The desirability (D) of the brands; and

2. The accessibility (A) of the brands.

Defining brand strength (S) as S = DA, we can say concisely that she chooses the brand that has the highest brand strength at the moment of her choice.

Once she has bought the brand, she uses it. In the course of that use, she acquires information that may change her beliefs about the brand. She may have believed that the ready-to-eat cereal would stay crunchy but discovers that it gets soggy the instant it touches milk. She may have believed that her senator would vote for gun control but learns that he voted to repeal the ban on assault weapons. She may have believed that the personal computer would be difficult to use, but is pleasantly surprised to discover that it is user-friendly

At the same time, the brand's image undergoes transformations and takes on new positive or negative values. Minimally, the brand becomes more familiar and more positive by virtue of that fact alone. But new fables also come into being. Some terrible thing may happen to her one morning immediately after eating the cereal, and she may thereafter superstitiously associate the brand with "bad luck." Good, bad, or indifferent, experience with the brand changes what she believes about it, and these new beliefs define the desirability of the brand the next time she has to make a choice, which may be after many years in the case of a business system, after two or three years in the case of an automobile, after two weeks in the case of a coffee or paper towel, and after a day or two in the case of a beer or cigarette.

The entire transaction is graphically summarized in Figure 1-1. In this figure, everything that happens inside the head of the customer is shown in circles. Everything that happens in the world outside is shown in rectangles. Thus, we start with the rectangle on top, which represents information reaching the customer from the external world. This information has an effect on her beliefs and on her familiarity, which in turn affects her awareness or the internal accessibility of the brand. The combination of her desires, beliefs, and familiarity produces the desirability of the brand. This desirability, as well as the desirabilities of other brands, passes through the double screens of internal and external accessibility, resulting in a brand choice, which gives rise to experience with the brand, which is transformed into new information input, and the cycle repeats.

This structure does not merely define abstract concepts. Each variable is firmly grounded in the real world, independently measurable, capable of yielding data that can be checked for internal consistency and put to work in solving practical problems. The customer's desires, the values she attaches to various attributes, are directly measurable. Her beliefs about the various attributes of the brands are measurable. The desirabilities of the brands are measurable, either directly, or indirectly by way of their components. Familiarity and internal accessibility (brand awareness) are measurable. External accessibility is measurable, either directly or by inference from relationships in the data. And brand choice is measurable. Thus Figure 1-1 provides a practical map of the major variables at the interface between the marketer and the customer, a map that defines the ground to be covered. In due time, it will help orient us in solving practical marketing problems.

Marketing Strategy

Having looked at the process from the point of view of the customer, we turn the tables to look at it from the point of view of the marketer. If the marketer is playing a game on the "board" we have just described, what must she do to win? Since both she and her competitors are equipped with budgets and must compete for the same customers, her assignment boils down to using her resources efficiently. To do so, she develops a marketing strategy, which usually has three components: customer definition, selling strategy, and accessibility strategy.

First she identifies her prospective customer. This definition is often, though not always, self-evident. It may seem obvious at first glance that the prospective customers for a new brand of decaffeinated coffee should be decaffeinated coffee drinkers. And this may indeed be the most productive customer definition. But there is no intrinsic right or wrong in this matter. A particular new brand may have attributes that will also appeal to regular coffee drinkers, in which case the customer definition could be properly enlarged to include all coffee drinkers. It is also conceivable that the attributes of the new brand will appeal to people who don't drink coffee at all, in which case the customer definition could be enlarged to encompass all adults, perhaps all people. Thus customer definition can range from loose to tight. The trade-off is between the size of the customer base and efficiency in converting prospects into buyers.

The proper balance between these factors is important but a source of much confusion in practice. Some marketers define their customers too broadly and pursue the will-o'-the-wisp that their particular brand of soda pop will convert beer drinkers to soda pop, something that is possible but not probable. Other marketers, having been sensitized to the idea that their brand will probably appeal to a small number of people, are seduced by so-called segmentation studies into defining their prospective customers narrowly, for example, "Successful career women between the ages of twenty-one and thirty-five," a definition that is probably neither appropriate, since the appeal of brands is not likely to drop off sharply when a woman turns thirty-six, nor fully actionable, since efforts to market as selectively as that will inevitably exclude wanted people and include unwanted ones. This is not to condemn all narrowly drawn definitions outright. They may be appropriate in some instances. It is only to note in passing that prevailing fashion makes it more likely that the marketer will err on the side of defining the customer too narrowly than too broadly, at least for talking purposes. Such definitions have a way of looking properly scientific in the marketing plan.

Having defined the prospective customer, the marketer adopts a selling strategy. This is mandatory and inescapable. The strategy may be developed in a deliberate planning process or may evolve spontaneously. It may or may not be articulated explicitly. Occasionally, it may be incoherent. An incoherent strategy is usually the result of the way the business is organized. If R&D, marketing management, advertising, and promotion are linked to each other in a loose federation of separate fiefdoms, the selling strategy may be pulled in different directions as one or another organizational entity gains temporary ascendancy and compromises are struck, giving each party something and no one everything.

Whatever the circumstances, whether deliberately crafted, intuitively evolved, hammered out in compromise, or careening this way and that, underneath it all there is always a selling strategy, and this selling strategy always consists of three elements.

1. Brand attributes (A, B, C,...).

2. Customer desires (X, Y, Z,...).

3. A syllogism linking them.

Together, these three elements constitute the template embodied in the following principle.

THE SELLING STRATEGY PRINCIPLE

Explicitly or implicitly, every brand has a selling strategy that consists of the same universal syllogism: Because my brand has attributes A,B,C,..., it will satisfy your desires X,Y,Z,...better than any other brand.

A selling strategy is only as strong as its weakest link, so failure of any one of the elements results in failure of the whole. If the customer does not believe that the brand really has attributes A, B, and C, the strategy fails. If the customer believes that the brand has attributes A, B, and C, but does not desire X, Y, and Z, the strategy fails. And even if the customer believes that the brand has attributes A, B, and C and desires X, Y, and Z but does not believe that attributes A, B, and C will satisfy desires X, Y, and Z, or believes that some other brand will satisfy them better, the strategy fails. Keeping this in mind is vita. But marketers and researchers who may disdain to be reminded of the obvious often turn their backs on it, in deeds if not in words.

Finally, the marketer adopts an accessibility strategy. This involves selecting the channels through which the brand will be distributed. Everything else, the judicious definition of the customer and the adoption of an effective selling strategy, comes to naught if the customer who wants to buy the brand cannot get it. To the extent that the selected channels involve wholesalers or retailers, the marketer must induce them to carry, stock, and display the brand. For that purpose, the retailer becomes the customer, and the sale of the brand to the retailer is governed by the same principles that govern the sale of the brand to the user, except for one thing. The "brand" sold to the retailer has entirely different attributes than the brand sold to the user. For the user, the relevant attributes of a ready-to-eat cereal may be that it contains raisins, that it contains vitamin C, that it has no additives, and so on. For the retailer, the relevant attributes of the brand will be that it is easy to ship and stock, that it has a high margin, and that customers will buy it by the carload. Since it is imperative for the marketer to get the brand on the shelves, she may have to offer the retailer major initial incentives in the hope that once customers begin to buy it, more viable margins will become acceptable.

The Eight Tools of Marketing

The marketer has eight tools at her disposal to implement her strategy, or extending the metaphor of the marketing game, eight dials to manipulate in her effort to induce the customer to buy her brand. I shall call these the Eight Tools of Marketing:

1. Product. She makes the physical product, giving it specific, carefully selected attributes: an orange juice with 100 calories per glass, a pungent taste that is both sweet and tart, a container that is easy to open. A laptop computer with a fifteen-hour battery, a user-friendly keyboard, a weight of 1.5 pounds, etc.

2. Label. She develops the label, giving the product a name, package graphics, and a logo, thereby creating the skeleton of what we call the brand.

3. Message. She adopts a selling strategy and implements it with claims, promises, and advertising copy, to communicate information about the product attributes of the brand and to refine and articulate its image. By showing the laptop computer on the beach of a Caribbean island with a couple of beautiful, half-naked people coming out of the water, she may be telling us that the brand is so portable that it can be taken to a Caribbean beach. But she may also hope to attach to the brand the glow of the Caribbean sun. Whether such strategies work is an empirical question. They are cited without prejudice because they are part of the marketer's arsenal.

4. Schedule. She decides on the media through which she will reach and attempt to influence the customer, and on the frequency and patterns of those communications. She may employ personal sales calls, conferences, press releases, point-of-sale displays, direct mail, newspaper ads, magazine ads, television ads, and other means. She may employ different reach-frequency combinations. She may schedule these in continuous or intermittent patterns with flights of various duration.

5. Price. She selects the price at which the product will be offered. Price includes the amount, the pricing structure, and the terms. The price may be $1.99 for a twin pack of paper towels. It may be $11,900 for a computer, including a training seminar, a warranty, and a year's free service. Or it may be an initial fee of $50 plus an interest rate of 18 percent per annum on the unpaid balance of a credit card, with no interest for the first month after the purchase, and with free travel insurance for all tickets purchased through the card.

6. Distribution. She distributes her product to make it easily accessible to the customer. If the product is sold in stores, this may involve sending salespeople to call on the retailers to obtain distribution in as many outlets as possible. Sheer availability alone, however, is only part of it. Brands that are prominently displayed have substantial advantages over brands that are available only in some obscure comer of the store. If the brand (for instance, a business system) is sold to the customer directly through a sales force, she arranges for sales representatives to be within easy reach of the customer, to make the product as accessible to the customer as possible.

7. Promotion. She engages in auxiliary activities, which are usually dumped into the catch-all category of promotion. This includes price-off deals, premiums, coupons, point-of-sale displays, contests, lotteries, gifts with proof of purchase, etc. There are consumer promotions and trade promotions, but promotion really has no separate existence of its own. It all boils down to an indirect, and often not-so-indirect, price reduction or distribution-building mechanism. Putting products "on sale" is obviously only a price reduction. In effect, the marketer seeks the best of both worlds: the higher revenue from those customers to whom the price does not matter much, and the marginal revenue from those customers who insist on a lower price. A premium, self-liquidating or not, amounts to the same thing. With every three boxes of laundry detergent you get a free mug -- in effect, a price reduction equal to the value the customer places on the mug. This value, incidentally, need not have any direct relation to its cost, and in the extreme case can exceed the combined cost of product and premium. If the box of cereal contains a free plastic dinosaur, which costs 5 cents, and if Johnny is determined to have the dinosaur, his mother may buy the $3.50 box of cereal just to satisfy Johnny's craving for the dinosaur. By the same token, a lottery for a free trip to Hawaii is a de facto price reduction to the tune of the psychological value of the lottery ticket, which may be substantially higher than the economic cost of the lottery ticket.

Trade promotions serve to increase accessibility. The retailer receives a so-called trade allowance of several dollars per case in exchange for his promise to build special end displays, giving the brand increased visibility in the store and making it just a trifle easier for the customer to buy it on impulse. If the customer likes Lay's Potato Chips and Wise Potato Chips about equally and is prepared to buy either, passing a huge pyramid of one at the front end of the aisle may be sufficient to induce her to take that one instead of searching for the other one in its usual place on the shelf. Thus, the financial inducements the marketer offers the retailer are designed to obtain extra display space, to make the brand more accessible to the customer.

8. Sampling. All of the other tools operate directly on the choice process of the customer, seeking to maximize the probability that she will choose the brand. Sampling bypasses the choice process by putting the brand directly into the customer's hands. To be sure, she may simply throw out the free sample. But this is not likely. Once in her hands, the product is likely to be used. Once used, it will affect her familiarity with and beliefs about the brand, which will govern her subsequent choices and may translate into long-term business for the marketer. Sampling is not limited to packaged goods. Pharmaceutical firms give samples of drugs to doctors for distribution to their patients. Automobile companies invite customers to take test drives or lend them automobiles, and publications offer money-back trial subscriptions.

Figure 1-2 summarizes the entire process in a single chart. It is possible to consider the eight marketing tools separately and to seek to optimize them independently. Each poses distinct empirical questions. Should I make the product sweet or sour? Should I call it Svelta or Minima? Should I use a package with red stripes or green polka dots? Should my advertising use an attractive model or a cartoon character? Should I advertise in print or on television? Should I try to reach many people occasionally or a few people frequently? Should I sell the brand at $1,250 or at $1,450? Should I sell the brand in supermarkets or in fast food outlets? Should the premium be a bottle opener or a calorie counter? Should I distribute a coupon or a free sample?

In the end, all of these tactics interact and need to be considered and investigated in relation to each other. The different elements of the total strategy need to reinforce each other to create a single, coherent story providing an unambiguous image for the brand. Real intuition in deciding where to start is indispensable. No matter how good the intuition, however, the marketer cannot stop there. There are new pitfalls and new traps at every turn. The customer, more specifically the collection of customers, reacts in strange, often unanticipated ways. And if the marketer wants to improve her chances of being right, she needs to find out which strategies and tactics will work and which won't, which will work better and which will work worse. That is the function of marketing research. To the extent marketing research is asked to answer meaningful questions, and answers them meaningfully, it can help the marketer improve her odds of winning the game. How that is done is the subject of this book.

Copyright © 1997 by Eric Marder

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