1. Key concepts in marketing
1.1. Match the items in the table with the definitions below:
promotional mix product line marketing mix product life cycle
marketing diversification marketer direct marketing
a fifth and a sixth market sales promotion market niche
prestige pricing the tipping point opt in guerrilla marketing
target market the 4 Ps brand awareness B2B, B2C, B2G
green marketing product range
1. the main factors that influence a customer’s decision to buy a particular product
or service, which a business must consider when it is deciding how to advertise and
sell its products;
2. product, price, promotions and place, which together form the marketing mix, and
which should be carefully planned if a product is to be sold successfully;
3. the act of dividing possible customers into groups according to their age, income,
sex, class, etc.; one of these parts;
4. the business of selling products or services directly to customers by contacting
them by mail or telephone, by visiting their homes or through online computer
5. a group of customers that a company’s products are especially suitable for and
which the company is seen as belonging to; a product, service or company that is
different from or better than others in the same area;
6. a combination of all the elements that make up a company's promotion, including
sales promotions, advertising, public relations, sponsorships etc.;
7. a specialist in marketing; a business that sells goods or services to the public or
that sells in a particular way;
8. to what extent people know about and recognize a particular product;
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9. setting a high price to maintain an image of quality and exclusivity;
10. activities done in order to increase the sales of a product or service, including
special offers (discounts), bonuses ('buy one, get one free), free samples, catalogues,
games and contests etc.;
11. the moment when something such as a cost, the amount of resources, the number
of users, etc. reaches the stage where it begins to have an effect or something
12. the theory that sales of a product pass through four stages: introduction, when
there is a gradual increase in sales; growth, when sales increase rapidly; maturity,
when sales increase slowly; decline, when sales fall;
13. developing a wider range of products, markets, investments, etc. in order to be
more successful or reduce risk;
14. marketing that tries to present a product or company as not harmful to the
15. a type of marketing that uses different and unusual methods to achieve the
greatest effect for the smallest amount of money;
16. when the user of a company’s website gives their email address so that they can be
sent information about particular subjects, products or services;
17. the group of people that you want to sell your products to;
18. a group of related products that are physically similar or intended for the same
19. a business-to-business product; a consumer product aimed at end-users; products
for use in hospital, schools, public transport etc.;
20. the activity of presenting, advertising and selling a company’s products in the best
21. packaging and people;
22. assortment of product lines and individual offerings.
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1.2. Complete the sentences below so that you use some of the terms discussed in Exercise 1.
a. _____________________________ permits firms to tailor products for specific
markets. New software allows much finer ___________________ and better
understanding of customers' needs.
b. We are running a __________________ in October with a 20% discount on our
c. With personal computers and software, the trend is toward shorter and shorter
d. We have abandoned our __________________________ strategy to focus on
e. There are companies that spend millions of dollars maintaining
__________________________, which is the first step towards developing
f. The importance of __________________________ is often underestimated: it
attracts the buyer's attention, it explains the benefits of the product inside, it
describes contents and, of course, it protects the product during handling. And
these days environmentally-friendly package can give your product a
g. They claimed that oil companies had spent more on
_________________________ campaigns than on cleaning up their operations.
h. __________________________ cuts out the costs of supplying shops and
enables customers to buy at lower prices.
i. What is the __________________________ where the higher cost of buying a
new car is justified by the cost of maintaining the old one?
j. Our __________________________ for this drink is teenagers.
k. Our __________________________ consists of an extended TV and radio
l. The company has grown beyond its original _______________________.
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2.1. Which noun on the right do all the words on the left refer to?
p___________ exorbitant fair inflated reasonable retail selling
e___________ healthy depressed sluggish strong flat booming growing
m__________ guerrilla image environmental direct referral (buzz)
a p________ bring out launch discontinue modify withdraw upgrade
q___________ first-rate outstanding poor variable uneven top
b__________ leading consumer store national principal family
2.2.Which noun on the left do all the words on the left refer to? The missing nouns are the
same ones used in 2.1.
m _________ myopia concept campaign plan strategy manager m__________ economy forces control research fragmentation share p__________ leader range tag sensitivity elasticity competition b__________ loyalty insistence association switching name
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3. Reading & writing
Choose two of the tasks below. There are 4 tasks to choose from. Within each task (box) there is a choice of several tasks.
Tasks 1-3 involve reading a text and doing a written assignment. Task 4 is a written assignment only.
Read the interview. Do one of the following assignments:
; Think about the following: which marketing terms covered on pages 1-4 of this
handout are dealt with in the interview with Philip Kotler? Write a short (50
words) paragraph about each of them.
; What are some of the main points Kotler is trying to make regarding the role of
advertising agencies? Does he identify the challenges of promotion? Does he offer
any solutions? Organize your ideas in a table following the model below:
cause (problem): result: solution (if mentioned)
Americans exposed to too try to tune out ?
; Look at the underlined sentences/expressions. Copy them and explain their
meaning by paraphrasing them.
1. Advertising vs. PR: Kotler on Kotler
by Philip Kotler
July 12, 2005
The following article deals with the relative merits of advertising and public relations in the
marketing mix—with some conclusions that are sure to rattle your cage.
Philip Kotler is Distinguished Professor of International Marketing at the Kellogg School of
Management. He is the author of Marketing Management, one of the most widely used
marketing books in graduate business schools worldwide, and numerous other books and articles. Kotler is renowned for pioneering "social marketing," campaigns for nonprofits or
causes as "an alternative to coercion or legal action in solving social problems." His new book, According to Kotler (AMACOM), is a summary of the key principles of marketing and how they relate to current events such as corporate accounting scandals,
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outsourcing, globalization, warehouse shopping and online marketing. It includes
controversial new topics such as "demarketing," "reverse marketing," "body advertising," and other tactics.
What follows is an excerpt of the book, based on the thousands of questions Kotler has been asked over the years by clients, students, business audiences, and journalists. Question: Can you please say something regarding "the need for a new marketing mix"? Kotler: The original marketing mix was not 4Ps but about 14. Neil Borden many years ago used a large list of marketing tools. We can always add to the list. So the question isn't "what tools constitute the marketing mix" but, rather, "what tools are becoming more important in the marketing mix."
For example, I feel that advertising is overdone and public relations is underdone. This is
seconded in Al Ries's book, The Fall of Advertising and the Rise of PR. And direct-
marketing tools are also rising in importance in the marketing mix. Question: TV advertising seems to be losing its effectiveness. What are alternative ways to get attention?
Kotler: The average American is exposed to several hundred ad messages a day and is trying to tune out. TV advertising is losing its effectiveness because of growing advertising clutter, the increasing number of channels, the availability of zapping mechanisms, and
reduced watching of television by certain groups. The result is that marketers must consider other methods of getting consumer attentions.
Here are a number of possibilities:
; Sponsorships. Companies have put their names on stadiums, on whole teams and on
individual athletes in order to gain exposure.
; Mentions on talk shows. During his evening show, David Letterman sent a camera
crew out to buy Snickers candy bars and ended up talking about it on three
subsequent shows, including when Mars sent a whole van of Snickers to feed the
; Product placement. In the movie Die Another Day, James Bond drove an Aston
Martin, used a Sony cell phone and prominently featured an Omega wristwatch.
Products are also mentioned in novels—in fact, Bulgari commissioned a whole
mystery novel to be written called The Bulgari Connection.
; Street-level promotions. Companies have hired actors and actresses to walk in busy
areas and ask passers-by to take a snapshot of them using their new camera phone.
Hopefully the picture takers are impressed and tell others about the new camera
; Celebrity endorsements. Michael Jordon's endorsements gave a boost to Nike shows,
McDonald's, Hanes underwear, and Rayovac batteries. Ex-Senator Bob Dole's
surprising endorsement of Viagra put Viagra on the nation's mind.
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; Body advertising. College kids agreed to paste Dunkin' Donuts logos on their
foreheads during an NCAA basketball tournament.
Question: What is the main communication challenge?
Kotler: The major challenge today is getting people's attention. Consumers are pressed for time, and many work hard to avoid advertising messages. The main challenge is to find new ways to capture attention and position a brand in the consumer's mind. Public relations and word-of-mouth marketing are playing a growing role within the marketing mix to build and maintain brands.
Question: There is a great deal of hype about integrated marketing communications. What
is the status of this subject today?
Kotler: In the past, we taught separate courses on advertising, sales promotion, public relations and other communication tools. Each student became a specialist in one of these areas, remaining ignorant of the other tools and having a tendency to defend the primacy of her tool. Within companies, the advertising person always received the biggest budget for marketing communication (leaving out the sales force), and the others would fight for the crumbs.
Clearly, this is not a good situation, especially considering that the effectiveness of different communication tools changes over time. The decision on how much to allocate to the different promotional tools cannot be left to turf battles. Someone must be put in charge.
Let's call that person the chief communication office (CCO). That person should be responsible for everything that communicates anything about the company—not only the
standard communication tools but also corporate dress, office decor and even the look of the company's trucks.
Today, an increasing number of business schools are teaching marketing communications using an IMC-oriented textbook. First, this prepares the student to understand the role of different communication vehicles. Second, it makes the point that the company's brand and customer message must be communicated consistently through all media. Thus, if a company wants to be known for its high quality, it has to produce high quality and communicate high quality in all of its messages.
Question: Do you see companies as setting their communication budgets optimally? Kotler: Marketers develop a certain mindset concerning the most effective communication mix. They will continue the same mix even when evidence shows diminishing effectiveness. Allocations become frozen, and the chief marketing officer is loath to change the allocation. This would change the power positions of different communication managers in the organization. Also, it will be done at some risk.
Question: Companies continue to spend more money on TV advertising, even as channels proliferate and more channel-switching takes place. Aren't companies being slow to realize TV advertising effectiveness has fallen?
Kotler: Companies are still fairly blind to the cataclysmic changes in the communication marketplace. The days of mass advertising, with its waste and intrusiveness, are passing
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quickly. I have advised clients to reduce their TV advertising budgets, especially mass advertising. Fewer people are watching TV, many are zapping commercials, and most commercials are too brief to be effective.
If a country had only a few TV stations, radio stations, and newspapers, mass marketing would be effective. When a country, such as the United States, has thousands of TV stations and radio stations, reaching a mass audience is very expensive. Among the few mass audience vehicles are the Super Bowl and the Olympics. The growing
fragmentation of media audiences requires marketers to shift to target marketing and even
one-to-one marketing. The good news is that this will reduce wasted media exposures.
What good is it to advertise cat food on national television if only 25% of families own a cat?
Question: What should advertising agencies do in response to the declining effectiveness of mass advertising?
Kotler: Advertising agencies can no longer prosper just by creating ads and choosing media. There are so many new ways to communicate today. Smart ad agencies will
transform themselves into full-service communication agencies. They will work with their clients to choose the best messages and media vehicles, whether these are in the form of ads, press releases, events, sales promotions, sponsorships, direct mail, email or telesales. Some advertising agencies have added these communication capabilities—they have
created them or networked with public relations firms, sales promotion firms and direct-marketing firms in a move to becoming total communications firms.
Ogilvy called its system "Ogilvy Orchestration" and promised to deliver integrated marketing communications. In practice, however, the dominant voice in this comprehensive agency is still that of the agency's advertising group. These agencies still make most of their money from their advertising billings. So how can they be fully objective when advising on the best mix of communication tools?
Yet advertisers are demanding more communication effectiveness. They want to shift more of their promotion dollars into direct marketing, public relations, and newer promotion tools. Advertising agencies would be wise to transform themselves from being narrowly defined advertising agencies into broad communication agencies.
Question: What is advertising's main limitation?
Kotler: Traditional advertising works primarily as a monologue. Today's companies would gain considerably by setting up systems that would enable dialogue to take place between the company and its customers and prospects.
Question: Will the Internet become an effective advertising medium?
Kotler: A few years ago, the CEO of Procter & Gamble said that he would happily switch a large portion of P&G's huge advertising budget to the Internet if he could find effective ways to do Internet advertising. So far, the Internet has not become a full-blown advertising medium like television, radio, newspapers, or magazines.
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It is true that the Internet carries banner ads, but they are being opened less than 1% of the time. Advertisers are pressuring popular Web sites to carry skyscraper or pop-up ads, but the Web sites see this as risky. Also, consumers can choose to block pop-up ads. Google has developed a system to align paid-for ads next to topics being searched by
consumers. For example, if I type "BMW" on Google, the right side of Google's page will show a BMW ad. BMW will quickly learn whether its ad is leading to sales. All said, it is too early to tell how widespread or effective Internet advertising will become. Question: How can companies effectively reach mass audiences?
Kotler: Advertisers won't see again the glorious days when they could reach millions of people in the evening with the same TV show or mass magazine.
There are three options today: One is to advertise on a number of media channels in the same time slot. Another is to advertise on Super Bowls, the Olympics, and other major worldwide events that attract large audiences. A third is to build a giant database containing the names of people who have the greatest interest in the company's offerings. Question: Some media analysts call for more spending on public relations. Do you agree? Kotler: I agree. Advertising has been overdone in the past, especially mass advertising with its "hit or miss" quality. PR has been underdone. PR consists of many tools, which I call the PENCILS of PR: publications, events, news, community involvement, identity tools, lobbying, and social investments.
When a customer sees an ad, she knows it is an ad, and an increasing number of customers are tuning ads out. PR has a better chance of getting a message through. Furthermore the message can be fresher and more believable. PR is better equipped to create "buzz" about a new product or service. Interest in PR is increasing—witness the title
of the recent book by Al and Laura Ries, The Fall of Advertising and the Rise of PR.
A case study and an opinion essay
Do one of the tasks below.
; Read the text (2.1.) about a famous company whose ‘very survival was at risk
several years ago’. What went wrong? What was the outcome? Did the company
manage to overcome the problem? How? Write 250 words.
; Read both articles. They both deal with the companies’ marketing strategies.
Write a comparison between the problems these two companies face owing to
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diversification. Write 250 words.
; Write a brief comment on each of the following in the context of the articles below:
; Picking up the pieces
; Play is nutrition for the soul.
; "What's good for the country is good for General Motors, and vice versa."
; There are two General Motors.
; Funny how the Corvette's tangential failings, such as uncomfortable seats, are
called crude; on a Porsche or Ferrari, they'd be part of the car's inherent charm.
2.1. Picking up the pieces
The venerable toymaker has recovered after a mistaken over-diversification “PLAY is nutrition for the soul,” begins Lego's description of itself, before going on to
explain the Danish firm's philosophy of learning and development through play. For seven decades Europe's biggest toymaker—its name derived from leg godt, Danish for “play
well”—has prospered with its ethereal corporate philosophy and openly professed disregard for maximising profits. Lego became a national treasure and one of the strongest brands in the toy industry. Its colourful bricks are sold in over 130 countries: everyone on earth has, on average, 52 of them.
Yet a couple of years ago the company's very survival was at risk. After six years of slowing sales and falling profits, Lego's crisis peaked in 2003, when it made a whopping DKr1.6 billion ($240m) operating loss on sales of DKr6.8 billion and was sitting on some DKr5 billion in debts. Rumours abounded that America's Mattel, the biggest toymaker, would take over its long-coveted European rival. Private-equity companies circled what they considered a perfect prey: a mismanaged, medium-sized firm in the hands of a single owner, the family of Ole Kirk Christiansen, a carpenter who founded the company in 1932. Mr Christiansen's heirs decided to stand by the family business. They injected some DKr800m of their own money and appointed Jorgen Vig Knudstorp, a former management consultant at McKinsey, to get the company back on track. After speaking to toy retailers, who told him not to mess with Lego's brand or its core products, he decided to fix rather than reinvent the firm, which had gone astray when it branched out into businesses it did not understand. The logic of diversification was compelling, says Mr Knudstorp, but Lego went about it the wrong way. It tried to become a lifestyle brand with its own lines of clothes, watches and video games. And as it tried to attract more girls, it started to neglect its main customers, boys aged five to nine. “We had become arrogant—we didn't listen to
customers any more,” says Mr Knudstorp. Lego was also hit by the general malaise in the traditional toy industry, which has been shrinking as a result of low-cost copycats, competition from high-tech gadgets, and falling birth rates in many developed countries. Lego's turnaround plan, launched in March 2004, was painful. Around 3,500 of the firm's 8,000 employees were laid off, with more cuts to come: almost half the 2,400 workers in
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